Is Blockchain a Hit or Miss for Supply Chain?

Earlier this month I participated in an interesting show on the topic of “Blockchain Technology: A Hit or A Miss for Supply Chain Networks?” with Irfan Khan, CEO and President of Bristlecone.

The discussion was based on Blockchains’ ability to drive end-to-end value, eliminate inefficiencies, and improve customer experience. Blockchain – a decentralized, distributed ledger payment system using cryptocurrency – is powering digital transformation for companies around the world.

“It’s difficult to make predictions, especially about the future.”

I set the stage by using this quote that has been attributed to several people, from Nostradamus to Mark Twain (who is attributed almost every quote known to man). It works perfectly for Blockchain, which, according to Gartner's latest “Hype Cycle for Supply Chain Execution (July 2017), was rated “transformational” but with a market penetration of “less than 1 percent”. The key is to predict and identify use cases to improve transparency, traceability and performance and that can benefit from secured transactions.

Where can Blockchain benefit Supply Chain Processes?

During our discussions, a few areas of opportunity emerged.

Logistics Processes

It has been estimated that 90 percent of global trade is carried out by ocean shipping industry, and the cost of trade related documents and administration is estimated to represent up to 20 percent of the actual transportation cost. And this process relies on a web of disparate systems across freight forwarders, customer’s brokers, port authorities, ocean carriers and trucking companies. Imagine if we could digitize the process to collaborate across companies and authorities, reduce the paperwork, streamline cross boarder movements, and reduce fraud and errors. Blockchain has the potential to help enable us to manage and track a “digital twin” of shipping containers across the world.

Track and Trace and Genealogy Processes

In many industries, we are continually pushing for improved traceability by both regulatory bodies, and consumers. For example, in the food and beverage industries, we are seeing an increased demand for local and organic products with a clear proof of origin and sustainability. Let’s look at the simple coffee bean as an example. This starts literally, at the source, in remote farms in Africa where 70 – 80 percent of the worlds coffee beans are grown. Imagine if we could have mobile machines that could capture the grade, color, size and quality the coffee cherries at source, and by leveraging AI and Machine Learning, determine a fair-trade price for the specific lot. This could be transmitted to the buyers who could agree a purchase with the farmer and perform an electronic transfer of funds immediately. Imagine also that the quality information and price paid is tracked throughout the harvesting, logistics, roasting and consumption of those beans all over the world. A consumer could have an app that would tell them, where the coffee came from, the journey from farm to cup and even if the farmer was compensated fairly. This example is not too farfetched. Check out what a company called Bext360 are doing as a proof of concept today.

Asset Lifecycle Management

Many industries have capital intensive, business critical assets (think airplanes, mining equipment, trucks, tractors) which are expected to be in use for 10 to even 30 years. Each asset, over its lifespan will go through numerous upgrades, repairs and refurbishments and may also go through numerous owners. This ensures that all the parts used to perform these activities are of high quality, from reliable, legitimate sources and are critical for end user or passenger safety and security. We can now put IoT enabled sensors on every part within an asset and track (big) data at a level never imagined a few short years ago. Ensuring the traceability and security of this data is critical to ensure the history and provenance of parts, the or the maintenance and repair history of a capital-intensive piece of equipment.

Blockchain, along with other technologies such as IoT, predictive analytics, and machine learning has the potential to manage assets from the design of the product, through manufacturing and throughout its active life and keep a secure, digital twin that can be tracked and analyzed for a complete history of that asset.

Blockchain is a key part of a Digital Supply Chain

Blockchain, although relatively early in its existence, has the potential to help digitize our supply chains. However, as we discussed, it is not the solution by itself. We see several technologies coming together to enable the digital supply chain. The Internet of Things enables smarter and connected products and assets that are generating amazing amounts of data from all areas of the supply chain. This “Big Data” is the catalyst for predictive analytics and machine learning adds intelligence to this data, and drives automation and artificial intelligence through physical devices. Blockchains’ role is to automate transactions, ensure traceability and address cybersecurity.