The term blockchain refers to a database infrastructure that is distributed and shared among network participants. Data entry and transaction blocks are concatenated and stored in an immutable format, allowing authorized network users to view and add information while preventing changes to existing records. Data integrity and participant authentication are guaranteed by a high degree of encryption and key management. There are several ways in which blockchain benefits enterprise value in the context of such functional elements as transaction systems, management control, and decision analysis.
Using blockchain technology makes transaction history more transparent. Because the blockchain is a distributed ledger, all network participants can access the same information instead of owning a separate copy of the document. This general version can only be updated by consensus, which means that it can be achieved only with mutual agreement. In order to modify a single transaction record, all future records must be modified, and the entire network must agree. As a result, the data stored on the blockchain is more accurate, consistent, and transparent than the data stored on paper-based systems (Bowersox, 2001). It is also accessible to all authorized participants.
From the perspective of management control, blockchains are also beneficial since it helps to manage costs and productivity of the enterprise. Transactions using traditional paper techniques are a time-consuming process, prone to human error, and often require third-party mediation. By streamlining and automating these steps using blockchain, transactions can be made faster and more efficiently (Tijan, 2019). Keeping records in a single digital ledger shared by all participants eliminates the need to coordinate multiple ledgers and reduces complexity. Having access to the same information for everyone makes it easier to trust each other without the need for many intermediaries. Cost reduction is one of the biggest goals for most businesses. Implementing blockchain reduces costs as it eliminates the need for any third parties or intermediaries to hold logistic processes (Osmani et al., 2020). Instead, the enterprise has legal access to a single immutable blockchain, so it does not have to go through a lot of documentation to close a deal.
Decision analysis is also influenced by blockchain since it changes the traditional way of making decisions among stakeholders. The traditional general ledger is managed by a designated administrator and is owned by a single entity (for example, a company, organization, or group) (for example, an accountant). This administrator has the authority to make changes to the ledger without the involvement of all ledger stakeholders. Blockchain, on the other hand, is a network of stakeholder shared distributed ledgers that cannot be modified by a single administrator (Tijan, 2019). It t can only be changed with the consent of network participants, and all changes to the distributed ledger can be audited.
Similar mechanisms can be used to track different types of asset transfers, push new data to the blockchain, and update the data in the blockchain. Public and unauthorized blockchains have the potential to facilitate faster innovation, as they are used by many stakeholders and can achieve network effects. Private permission blockchain, on the other hand, is increasingly being adopted by enterprises to support a closed ecosystem of users with enterprise features such as strict access control and privacy. Therefore, the decision to use a public or private blockchain should be based on the specific needs of each blockchain implementation. When stakeholder acceptance reaches its limits, it can have a significant net impact on the supply chain (Osmani et al., 2020). As more stakeholders get involved in the supply chain, blockchain becomes more profitable and eventually becomes the industry standard.
Blockchain also has multiple advantages for consumers from the perspective of such functional elements as transaction systems, strategic planning, and management control. Blockchain eliminates the hassle of warranty management for consumers. The enterprise can also predict future costs by providing consumer goods companies with a record of each item for which a warranty is provided (Osmani et al., 2020). Consumers can use blockchain to easily and efficiently track, maintain, transfer, and enforce the warranty. Blockchain increases the transparency of logistics, which might be beneficial for consumers (Bowersox, 2001). The vast majority of consumers want as much information as possible about their products, from how to grow meat to the working conditions of a garment-sewn factory. Thanks to blockchain, consumers can get the transparency they need at the time of purchase. Consumers can inspect the entire life cycle of a product, and businesses have no way of manipulating it.
Management control is improved by the implementation of blockchain. The company can provide customers with a complete product history from the production line to the time of purchase to ensure its reliability. In addition, the goods can be verified, making it easier to report stolen goods. In addition, many consumers make purchasing decisions based on the company’s ecological and social responsibilities. Blockchain provides producers with real-time images of their supply chain networks, enabling them to track products from the moment they join the supply chain until the finished product reaches the consumer.
References
Bowersox, D. J. (2001). Supply Chain Logistics Management. Michigan State University.
Osmani, M., El-Haddadeh, R., Hindi, N., Janssen, M., & Weerakkody, V. (2020). Blockchain for next generation services in banking and finance: cost, benefit, risk and opportunity analysis. Journal of Enterprise Information Management. Web.
Tijan, E., Aksentijević, S., Ivanić, K., & Jardas, M. (2019). Blockchain technology implementation in logistics. Sustainability, 11(4), 1185. Web.