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The current COVID-19 pandemic will forever shift procurement supply chains, and the impact can already be seen:
- The National Association of Manufacturers (NAM) found that 53.1% of manufacturers experienced changes in operations because of COVID-19.
- The Institute of Supply Management (ISM) indicated that 75% of U.S. companies enountering supply chain disruptions forecasted that after the first quarter these disruptions would likely increase in severity.
- Deloitte’s recent “COVID-19: Managing supply chain risk and disruption” report states, “Formulating alternative plans will be critical to minimizing the supply chain impact on your company.”
Many machine shops are unable to attain essential parts and raw materials for manufacturing. Subsequently, finished projects are being shipped much later than expected. The responses to these limitations have so far been clumsy and unorganized. The crisis has exposed cracks in the current supply chain infrastructure and has disrupted the entire industry. To ensure accurate and swift transportation of parts in a time of crisis demands a redesign of the antiquated system.
Blockchain opens up possibilities to expedite and streamline business processes. Blockchain for supply chain management not only simplifies procurement and the precision parts selling process, but it also makes the method safer, faster, and cheaper.
Benefits of Blockchain to Supply Chains
Companies that have already implemented blockchain into their supply chain have fared much better over the past few months. They have experienced better knowledge of their supply chain organization. There is no need for last-minute stress as possible disruption is recorded by the blockchain network for better exception handling. At-risk components are known by the system which allows procurement to be assigned to different sites to attain limited supply items.
Immediate benefits of blockchain include:
- cuts procurement costs and production time
- offers real-time traceability of production data
- can automate RFQ and PO processes
- alleviates risk through KYC member verification
- speeds up payments and incentivizes new business.
Identifying the right suppliers with available capacity that can create the correct precision parts can be a slow manual process of data filtering and phone calls. It is nearly instantaneously done through blockchain technologies. Human error is, additionally, eliminated through this procedure. Costs are reduced by automatically identifying which suppliers in the blockchain network have the technical expertise, nearest location, compatible machinery, and available capacity.
In the past couple of months, many businesses have not been able to maintain profitability due to the COVID-19 pandemic, and it is hard to predict how long this will last. Therefore, every dollar saved by switching operations over to a blockchain network will help avoid downsizes of personnel and performance cuts. Additionally, the time saved through the network will help deliver essential finished products to consumers in this time of uncertainty.
Blockchain technologies enable automated tasks and secure data storage. This helps provide teams improved exception handling that can help during unforeseeable circumstances, such as COVID-19. These technologies can:
- enable automated recurring custom part quote requests
- delegate purchasers and parts manufacturers to begin working immediately on order fulfillment
- instantly review qualifications and equipment without wasting time on background and credit checks.
- protect quality control by comparing, reviewing, and approving qualified CNC machine shops and precision parts suppliers.
How Blockchain Works
Users of the blockchain-enabled supply chain can view real-time information regarding their parts fabrication, production, and delivery. Each individual precision part is given an ID code and can be tracked on the network.
Orders are backed by virtual verification protocols which can confirm authenticity and trust among buyers and sellers. A permanent record is created of the order. Orders are dynamic with the option to alter individual components in real-time. Supply chain efficiencies are improved with automated RFQ management, platform notification of quotes, and smart contract approvals for payment.
The Advantages of Cryptocurrency
Suppliers would benefit greatly from the cryptocurrency-accelerated smart contract payments. This would reduce payment cycles from net-weeks to the time it takes to confirm delivery and quality inspection.
In addition, machine shops quoting RFQs can be rewarded through the distribution of cryptocurrency for their response time. This is a big plus for machine shops that currently wouldn’t necessarily receive recognition for their time and efforts if they didn’t manage to win the job.
Blockchain Technologies Invaluable to Industry 4.0
Implementing a new management system can be seen as expensive and work-intensive. However, fusing the supply chain with blockchain technologies is unavoidable if firms want to stay ahead of the next crisis.
A platform built with blockchain technology has the ability to streamline the way buyers procure, manage, and securely track precision parts production. Suppliers, subsequently, are afforded the flexibility to redirect workflow to maintain supply chains without disruption. These blockchain-based features are invaluable to this generation of industry 4.0 supply chains. Facilities will have the tools available to avoid closures in the face of immense obstacles such as COVID-19.
Image Credit: whiteMocca/Shutterstock.com
