NFT and Supply Chain

What are NFTs? 

An NFT (non-fungible token) is a digital document that is registered using blockchain technology. NFTs are the perfect way to represent digital assets because they benefit from blockchain technology, these are incorruptible, publically available, and any modifications are preserved. What really sets NFTs apart from other forms of currency is their non-fungibility. In other words, no two NFTs are exactly alike. This is what gives them their unique value. For example, a single bitcoin is worth the same as any other bitcoin. But with NFTs, each one is completely unique and has its own value.

Why NFTs for a Supply Chain Solution?

NFTs produce digital footprints or a "token ID" connected to the item throughout its life rather than the vast, lengthy, and complex paper trails that accompany transactional ownership and activity of a range of goods. The metadata for each NFT contains information that is constantly updated on the blockchain, making each NFT unique. NFTs can help to reduce or even completely eliminate information flow inconsistencies in the supply chain by allowing the participants to access the same immutable record on the ledger. The blockchain's immutability and transparency ensure the validity and dependability of the supply chain data. NFTs can help a firm to be efficient and reduce costs by sourcing and acquiring the goods and services it requires. NFTs in an end-to-end view is likewise responsible for producing the position, quantity, and other important information about a part.

NFT Use Cases for Supply Chains

Supply chains are a series of processes that move goods from producer to consumer. The use of tokens and NFTs can help to improve the efficiency and security of these chains. Here are a few examples of how they can be used:

1. Unique physical products (product Authenticity):

With the help of tokens, the trade and movement of products can be tracked. By establishing an individual digital twin for each physical good, using unique identifiers, product batches can be assigned NFTs.

2. Unique physical assets (Asset tracking):

NFTs can represent goods beyond just assets. For example, they can also represent real estate transactions and investments. This is done by creating unique and distinct assets that specifically relate to revenue generation. Another example is factory machinery, which can be financed in other ways by tokenization.

3. Unique digital business documents:

Business papers such as invoices, certifications, and sales orders always have a unique identity. NFTs can also be used to represent this kind of document.

Application of NFTs in the Supply Chain

Few people are aware of the advantages of using NFTs in supply chains as they are a relatively new idea. NFTs are irreplaceable tokens with more substantial uses, but the industry is aware of Blockchain's potential as a problem-solver.

1. Traceability of the Product

The system is heavily influenced by globalization. The journey of a product begins long before the retail or market shop actually makes the sale. Every service is outsourced to the point where firms or retailers are unaware of the source of a particular product component. NFTs will demonstrate their value at that point. A corporation may identify the owner of the asset by performing scans and generating reports thanks to the tokenization system's capacity to track the product's movement in real-time. This would provide an added layer of security for the owner and the corporation. Knowing the distribution nodes for perishables is crucial for businesses. This information determines the shelf life and the selling window for perishables. Every product in the system has unique metadata created by NFTs, and managers are always aware of the current location of every product. With the tokenization method, businesses can maintain accurate, real-time inventories and avoid costly stock-outs. NFT technology has the potential to help eradicate malpractices around the globe by increasing customers' awareness of the complete supply chain. This includes the producer or name of the good, where the owner stores it, and how viable the good is.

2. Data Sharing

Customers are the real winners of this application because businesses are unwilling to provide them with useful information. Consider a mobile phone as an example.

We choose a mobile phone based on its features and the manufacturer; we have no idea where it is made when it is made, or how long its batteries will last. By creating a transparent platform between the business and the customer, NFTs can foster a sense of mutual trust.

3. Better Supply Chain Collaborations

NFTs offer a unique and valuable source of reality. By starting with a single, verified fact from the seller to the buyer, the cycle of creating improved supply chain cooperation can be started. Establishing supply chain collaboration (SCC) and enabling businesses to share resources and data in order to benefit from collaboration requires trust. NFTs (Non-Fungible Tokens) could play a big role in product supply chains. For example, Gillette razors might have a scannable code that reveals the supplier of the raw materials, the shelf life, the pallet size, the financials, the trucking companies involved, the facilities involved, who is the final retailer, and any other stakeholders involved, like Walmart. This would provide a complete view of the product's viability. The technologies that are being developed will help to foster trust between the parties involved in the collaboration.

4. Streamlining Procurement Operations

A streamlined procurement process is one in which both the buyer and supplier sides are completely open and honest with each other. This allows for a more efficient exchange of goods and services, as well as a more fluid relationship between the two parties.

Developing a supplier management plan is a critical part of any organization, but it can be especially challenging for larger ones. In order to ensure that the supplier management process is effective, it is important to have a clear understanding of the organization's needs and expectations for its suppliers. The supplier management process should also be aligned with the organization's overall business strategy.

New suppliers can be onboarded quickly and easily with the help of NFT, establishing a common procurement platform for all enablers. This can help to prevent any inconsistencies in the system. Data cannot be changed, ensuring that the platform remains reliable and trustworthy.

NFT's blockchain technology allows for the identification of low-risk suppliers, the provision of a single platform for comparisons, the forecasting and management of risks, and the matching of supplier requirements with industry norms.

5. Production, Transportation, and Warehousing

NFTs can play a critical role in reducing product recalls for businesses. By time-stamping and geo-positioning each component that is a part of a system, NFTs can automatically update data. This will help businesses detect defects more quickly and prevent costly recalls. Smart contracts can also be used to manage the entire product life-cycle, from ordering and quality control to shipping and delivery. This would ensure that products are tracked and verified at every stage, helping to reduce the chances of a product recall.

NFTs are set to revolutionize the trucking industry by making it easier to track the entire supply chain. By identifying the product line and production batch more quickly than before, it will be easier to keep track of everything. Even when trucks are undergoing repairs and maintenance.

In this case, non-fungible tokens (NFTs) are used in the warehouse management system to keep track of all the fixes done to the truck since the beginning and watch for any potential future breakouts. Consequently, the lead time goal was met. NFTs and blockchain are expected to significantly alter the shipping sector, lowering the overall landed cost.

Blockchain technology offers a broad overview of the logistics and supply chain, whereas NFTs provide a more detailed view of each individual transaction. This makes it an ideal solution for managing and tracking the movement of goods and materials.

Challenges of NFT in the Supply Chain

1. The tokens are vulnerable to cyberattacks and online fraud. Hackers can potentially steal or duplicate the data stored on the tokens, which could disrupt the automotive supply chain ecosystem.

2. NFTs are a new technology that can be difficult to adopt for companies in the supply chain system. Not every company has the knowledge or authority to adopt this new technology, which can be time-consuming and expensive.

To implement the NFT program, all supply chain partners need to be on the same page. For instance, P&G and Walmart should share similar knowledge, viewpoints on cost adjustments, and an understanding of the implications of the program. This will ensure that everyone is on the same wavelength and can work together to make the program a success.

NFTs (non-fungible tokens) are becoming an increasingly popular way for businesses to demonstrate their transparency to clients across the globe. Unlike other technologies such as blockchain, IoT, and digitization, NFTs offer a unique advantage in that they provide a sophisticated and easily verifiable paper-trail. In the future, it is likely that businesses will seek out NFTs as a way to represent unique assets digitally.

NFTs could play a crucial role in improving supply chains by providing a source of uniform information for all participants. This could help organizations establish better value chains from the start.