With each passing day, the influence of web3 is becoming stronger in several industries worldwide. From the world of finance to virtual realities and asset management - web3 provides solutions for every industry.
Among these web3 solutions, non-fungible tokens (NFTs) are proving to be a force as they unveil several opportunities to improve industrial processes. One industry where NFTs can significantly impact is the supply chain management market.
NFTs are digital pieces of data usually attached to an object that makes it publicly verifiable and traceable on a blockchain network.
But how can NFT improve the supply chain industry with the definition above? Learn more below.
The Supply Chain Industry
Supply chain management is one of the most critical components in the business process of every manufacturing company. Companies are actively exploring new ways to optimise their supply chain to fulfil customers' demands while minimising costs, time, and waste.
Organisations that can accurately meet the needs of their customers within the best possible time will make them loyal. As a result, most companies are heavily investing funds to improve their supply chain management. According to Statista, the global supply chain management market was worth about $15.85 billion in 2020, with the potential to reach $31 billion in 2026.
However, even with such a large market size, many problems rock the supply chain management of companies worldwide.
For one, the supply chain industry involves several stakeholders and their own bulk of information that they need to communicate with other participants in the chain. As such, supply chain data is enormous and most often causes a headache for companies to know the real-time movement of their product.
While legacy systems like ERP (Enterprise Resource Planning) software have helped supply chain management, companies are yet to navigate several challenges arising from visibility, counterfeiting, automation, efficiency, etc.
As a result, companies are focusing on integrating emerging technologies into their supply chain management. And NFTs are one of these technologies that can significantly improve the supply chain industry.
NFTs can defeat supply chain inefficiencies since they take on the transparency and immutability of blockchain technology. All stakeholders can have one single source of truth in blockchains where they update the movement and condition of goods in real-time.
Combining these features with the uniqueness of NFTs eliminates the bottlenecks in the supply chain and hence improves the authenticity and reliability of data.
The uniqueness of each NFT comes from the information within its metadata. For example, the NFT of most pixelated art and collectibles seem worthless at surface level until you explore the information within their metadata.
This information can be an immutable right to a lifetime sales discount, access to exclusive events, and proof of ownership of shares of assets. Such tamper-proof information within an NFT can significantly boost its usability in the supply chain.
The integration of RFID tags and geolocation time-stamping with NFTs can help generate valuable real-time insights about a product's condition all through the supply chain.
This includes information about the product, such as container temperature, humidity, physical location, possession, etc., which automatically reflects on the blockchain when conditions change. As a result, NFTs can significantly boost supply chain management in several ways, especially in reducing delays.
First, all companies dread delays in the supply chain as it can cause poor customer retention rates and, ultimately, loss of revenue. It can even cause an economic breakdown in critical times, like with "The Great Disruption" of 2021 caused by the Covid-19 pandemic.
In construction companies that require several materials to complete buildings, roads, etc., a slight delay in supply can disrupt workflow and significantly increase the completion time of projects.
Finding the weak link causing such delays can be a headache and may cause trust disputes between stakeholders in the chain.
However, with NFTs in the supply chain, all stakeholders can have a real-time tamper-proof overview of all the happenings in the supply chain.
Companies can quickly trace and identify the origin of discrepancies in the supply chain and make necessary adjustments rapidly. Hence, if a delay occurs with any material, project managers can know in real time and either tweak their workflow or quickly order from other sources.
For example, Walmart has used the Hyperledger Fabric blockchain from Linux Foundation to trace the origin of over 25 products from 5 different suppliers. Two key examples were uploading certificates of authenticity for pork sold in its China stores and tracing the source of mangoes in the U.S. For mangoes in the US, the system reduced the time Walmart normally uses to trace their provenance from 7 days to just 2.2 seconds. This means that Walmart can now easily trace sources of food-borne diseases. And, in turn, save lives and safeguard the livelihood of unaffected farmers.
On the side of consumers, there's currently no practical way to prove the authenticity of products they purchase.
The World Health Organisation (WHO) estimates that counterfeit and substandard drugs cause over 1 million deaths annually, causing $21 billion in global financial impact.
The application of NFTs here can help consumers gain visibility on the conditions of drugs throughout the supply chain, which will limit the sale of counterfeit or substandard drugs and improve the quality of life.
This isn't just limited to the healthcare industry.
In the luxury market, several stakeholders have come together to launch a blockchain-based platform that helps consumers not to purchase counterfeit products. For every jewellery, watch, handbag, etc., that customers purchase, they receive an accompanying NFT showing the origins of the product, as well as its production process - materials and techniques employed.
Some major companies already using NFTs for their supply chain include:
The use case of NFTs is growing daily, and the supply chain industry is just one among several other sectors that it's disrupting. Several businesses want to know how to leverage NFTs in their operations to help them unlock new opportunities.
Our experts at SIGNVM can help you get started and launch unique NFTs tailored to your brand's needs.