How Blockchain Can Help Increase Inventory Data Accuracy

Before seeing how blockchain can help increase inventory data accuracy for manufacturers and distributors, we need to first understand how data inaccuracies hurts business and what causes these inaccuracies.

How Inventory Data Errors Hurt Business

Inventory data accuracy is of utmost importance to the manufacturing industry, warehouse management, and distribution centers in the supply chain. Errors in inventory data has cumulative effects downstream into the entire supply chain. Three things occur as a result:


  • Poor customer service
  • Poor planning
  • Cost inefficiencies


Bad inventory can be very costly and if not regularly counted, inefficiencies result in sunk costs and reduced worker productivity. If data accuracy falls well below 95%, too many inventory errors can cause in shipping delays resulting in increased customer dissatisfaction. For example, scenarios may include not having the proper parts in order to ship the full product due to failure to check inventory. Businesses need to track inventory accurately so they can fulfill customer orders on time, all the time. They also need to plan ahead in order to accommodate either unexpected increases in demand or periods of low demand resulting in overstock. Failing to plan for these contingencies may cost businesses money.

Typical Causes of Inventory Data Errors

So what causes all these inventory data errors? There are many causes at many points along the supply chain. Some of these include the following:


  • Product damage: May go unreported so inventory data could be off as a result.
  • Errors in the receiving dock: Breaks the process from the very start.
  • Labeling and ID errors: Items not correctly marked or entered into information systems.
  • Manual inventory management: Paper-based processes are prone to errors.
  • Human error in order picking: Lack of training, incorrect pick locations, and confusion.
  • Flawed putaway: Lack of proper safeguards to insure correct quantities of products.
  • Lack of cycle counting: Often plagued with timeouts where transactions get stuck.


These errors make it clear why inventory and supply chain management truly need solutions that eliminates most or all of these errors. One such solution is blockchain technology. A blockchain is a distributed ledger that permanently stores data about transactions in a timestamped and tamper-proof manner.

Automation of Inventory Data Collection Using Blockchain

Given the characteristics and properties of blockchain technology, it is an ideal solution for businesses involved with inventory management to streamline their work flows and maintain an accurate record keeping system. Throughout the inventory management process, all data is checked and verified at every step. Data can also be encrypted on the blockchain via barcode scanners, preventing forgery.


Blockchain also increases data security while boosting transparency, which is crucial for supply chain management. Inventory data would also not be controlled by a single entity as data storage is not centralized at a single point of failure.


Blockchain technology also helps companies settle transactions faster at less cost, increase transparency for data audits, prevent compliance violations, reduces counterfeits in the supply chain, and reduces human error in processes involving receiving, put-away, picking, and shipping. With IoT and RFID technologies along with smart contracts, blockchain also enables automation of many data collection and transaction processes, resulting in highly accurate inventory data.


In sum, the benefits of using blockchain technology in inventory data collection are as follows:


  • Near 100% Data Accuracy
  • Increased Security
  • Server Decentralization
  • Higher Transparency
  • Automatic Tracking and Reporting

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