Blockchain for Supply Chain Traceability Market Trends

Growth Drivers

• Advancement in blockchain technology: The increased innovation in blockchain technology is significantly embraced and adopted in the supply chain traceability for its unique features. This includes scalable blockchain networks, improved interoperability among platforms, and the adoption of Layer 2 solutions that make blockchain more efficient and cost-effective for business. This innovation enables faster transaction processing and reduces energy consumption, thus allowing it to be integrated much better into enterprise systems, improve scalability, and reduce operational hurdles.
  
  Furthermore, blockchain-enabled smart contracts have also streamlined processes by automating payment and compliance verification, enhancing efficiency, and reducing delays. The transparent record of transactions and movements along the supply chain due to the ongoing advancements is projected to further boost the blockchain for supply chain traceability market growth. The AI-powered analytics, combined with blockchain’s secure data, help businesses predict demand, prevent shortages, and respond to disruptions more efficiently.
• Rising awareness for transparency: Demand for transparency in supply chain operations is significantly driving the adoption of blockchain for supply chain traceability market. Consumers, and regulatory authorities’ demand for transparency on product origination, production processes, and sustainability practices, is witnessing an upward trend. Companies are hence adopting blockchain technology to meet such expectations. The decentralized and immutable nature of blockchain provides an auditable trail of information about products, which fosters trust and accountability across the supply chain.
  
  For instance, in February 2021, end-to-end product visibility was made possible by IBM Food Trust and Carrefour's strategic partnership, which benefits customers by enhancing food safety, quality, and credibility. Additionally, to effectively record and locate products during the manufacturing, processing, distribution, and handling phases, a product's complete history, was made easily accessible to customers in retail locations. This included the manufacturing process, halal and hygiene certifications, date of birth, nutrition information, and temperature data as well.
• Prevalence for sustainable sourcing practices: The use of blockchain in supply chain traceability is predominantly due to the growing importance of sustainable sourcing practices. Investors, customers, and regulatory agencies compel companies to act more socially and ecologically responsibly. Consequently, it turns into one of the primary ways that blockchain is applied. Namely, it makes the sourcing process transparent and verifiable by making the resources and products traceable in real time. From the outset of the supply chain, these materials and products can truly be sourced ethically and sustainably.
  
  For instance, in March 2022, Unilever collaborated with Provenance, whereby blockchain technology was employed to enhance the traceability of sourcing palm oil by Unilever. This was aimed at ascertaining the ultimate products containing palm oil sourced from producers who have ensured sustainable sourcing and good labor practices. These commitments also assure consumers that the firm tracks its supply chain and maintains records regarding sourcing practices as clear and unaltered.

Challenges

• Scalability and performance: Blockchain for supply chain traceability has major limitations in terms of scalability and performance considering that complex and global chains cause a high rate of transactions and data volume. Blockchain networks suffer from low throughput and high latency problems as the number of participants and data points on a chain grows, the eventual experience of performance-related issues such as slow transaction speeds as well as long processing times can render the tracking of products impossible in real-time. Moreover, energy consumption and computational power consumed in running and sustaining these blockchain networks make an important challenge for large-scale supply chains with many participants. As a result, it severely limits the scalability of blockchain in response to the increasing need for traceability in the supply chain.
• Cost and resource allocation: Blockchain technology is a cost-intensive technology since it consumes heavy investments and resources in the form of infrastructure, software, and skilled personnel. These monetary drawbacks make it less likely to have a broad-based adoption, restricting the incorporation of blockchain technologies into their existing systems. For instance, in November 2022, in a partnership between IBM, Maersk, and Tradelens, a significant financial and technological investment was necessary to build up the platform named Tradelens platform, to have more transparent transactions and an efficient process flow which ultimately led to Maersk's announcement of discontinuation, demonstrating how cost prevents a wider adoption of blockchain solutions.