Looking Beyond Blockchain/Supply Chain Hype

Stephen DeAngelis

June 18, 2019

Discussions about blockchain technology generally fall into one of two categories: cryptocurrency or supply chain. Because the technology remains in its infancy, most discussions about blockchain in the supply chain are filled with hype and hope. Even so, most pundits believe there is substance to be found and that blockchain will find a natural home in supply chain activities. Anna Kucirkova writes, “Blockchain technology has the power to change everything. One of the first things it looks to disrupt is supply chain management.”[1] Although that statement is a bit hyperbolic, she explains, “Supply chains can span over hundreds of stages and dozens of geographical locations, which makes it very hard to trace events or investigate incidents. The blockchain has the potential to transform the supply chain and disrupt the way we produce, market, purchase and consume our goods. As a distributed ledger that ensures both transparency and security, the blockchain is showing promise to fix the current problems of the supply chain.” Kucirkova isn’t alone in the belief that blockchain technology will change how supply chains function. Chao Cheng-Shorland (@ChaoShorland), Co-Founder and CEO of ShelterZoom, writes, “There are many impactful blockchain business use cases for industries like real estate, legal, government and financial services. While all of these are in various stages of maturity (with most still early stage), I am keeping a close eye on supply chain in particular — and I think anyone with more than a passing interest in blockchain should as well.”[2]

Beyond the hype

The reason most subject matter experts believe blockchain technology will find a natural home in the supply chain arena is because blockchain is a ledger that tracks transactions — and the supply chain is all about transactions. Cheng-Shorland explains, “Supply chain is driven in large part by the procurement process. Moving any product or service through a supply chain starts with a procurement contract, which initiates the tendering or bidding process via an RFI, RFP or other type of formal request. This process is often long, inefficient and frustrating. Talk about a great use case for blockchain! Once the procurement contract is executed, the supply chain process kicks into gear, and your materials (or whatever you’ve ordered) begin their journey to your company’s — or third-party vendor’s — door. Everything moves through the process based on the procurement contract.” Each stop on the supply journey — from procurement through final sale — involves some sort of transaction. All of these transactions make global supply chains very complex and too often opaque. Analysts from Omnitude believe blockchain technology can help clear the picture.[3] They explain:

“Supply Chains have grown in scope and scale alongside the globalization of marketplaces. The manufacture, assembly and shipping of goods and raw materials are now complex operations that span continents. … The modern-day supply chain is a vast ecosystem with many product variants and contract manufacturers cutting through a supplier network and diverging to different distribution models — traditional retail and online consignment. … The technology powering supply chain management is due for an update. The good news is that supply chains are one of the key areas where blockchain comes into its own. Blockchain technology ensures provenance, offers visibility across the full supply chain, boosts safety, and provides a holistic view of the value chain.”

Michael Wilson, AFFLINK’S Vice President of Marketing and Communications, insists, “Blockchain is well on its way to be the next big thing in supply chain innovation.”[4] Because blockchain remains in its growing stage, supply chain professionals need to exercise a little imagination to see beyond the hype to real business benefits of the technology.

Potential blockchain use cases

Wilson suggests four ways blockchain technology can improve supply chain operations:

  • Building a global supply chain. “Supply chains must now work seamlessly around the world,” Wilson writes. “By creating a decentralized database through which all transactions can be tracked, the blockchain makes supply chain management visible and consistent across the globe.”
  • Improving transparency. “In the blockchain,” Wilson explains, “all transactions are visible, which can help with tracking commodities. … Blockchains can be used to ensure that products are ethically sourced, and that they have been acquired from safe, certified sources.”
  • Increasing visibility. He writes, “Anyone can view the transactions on the blockchain at any time. Vendors and suppliers will see transactions simultaneously resolve, making it possible for them to secure valuable transactions. When used for shipping and logistics, the blockchain can make it easy to track large-scale shipments and individual packages.”
  • Fostering sustainability. According to Wilson, “Blockchain technology is scalable, making it possible to run extensive logistics and supply chain networks on a decentralized network of technology. More importantly, blockchain naturally supports an environmentally-friendly, eco-conscious globalization. … Through the technology provided by blockchain technology, it is now easier for companies and individuals alike to implement ethical procurement practices.”

Randy Woods suggests tracking perishable items is one specific way blockchain technology can help both suppliers and consumers. He explains, “Blockchain can instantly identify older shipments and make it easier to pull food off store shelves before it goes bad. Also, if a customer is sickened by spoiled food, the perfect records maintained in the blockchain can instantly narrow down the source of the expired product — a formerly painstaking process that used to take days.”[5] These few examples should convince you that blockchain technology is a good match for supply chain operations. Shelly Madden (@ShellyMadden) observes, “[Blockchain] can target specific pain points in supply chain processes, such as traceability, compliance, flexibility and stakeholder management. This can lead to better performance when it comes to monitoring products, ensuring high standards are met, keeping costs down and reducing risk. Indeed, blockchain has a myriad of capabilities, including auditability, immutability, smart contracts and disintermediation, making it an attractive option for many an organization.”[6] Nevertheless, she advises organizations to do their homework. She explains, “Blockchain technology is not suitable for every supply chain.”

Concluding thoughts

Although blockchain technology remains mostly in the experimental stage in supply chain operations, a number of blockchain schemes are being offered. Wilson reports, “Blockchain technology is already being integrated into a number of different industries. 2019 is likely to see the supply chain and logistics industry swiftly adopt blockchain technology as a means to keep up with growing demand. Blockchain technology makes it possible for suppliers and purchasers to communicate with each other on a global scale in a consolidated, transparent system. Not only does that make it easier to ethically source products, but it also makes the process of tracking more reliable.” Challenges remain and they must be overcome if blockchain is going to have the impact pundits predict.

Footnotes
[1] Anna Kucirkova, “How Blockchain Is Improving the Global Supply Chain,” IQS Directory, 17 December 2018.
[2] Chao Cheng-Shorland, “Is Blockchain The Perfect Match For Supply Chain?Forbes, 15 May 2019.
[3] Staff, “How will Blockchain technology transform the Supply Chain?” Omnitude, 2018.
[4] Michael Wilson, “Why is Blockchain the Next Big Thing in Supply Chain Innovation?” AFFLINK, 10 May 2019.
[5] Randy Woods, “5 ways blockchain can be used to enhance the supply chain,” Air Cargo World, 27 April 2017.
[6] Shelly Madden, “What happens when supply chain meets blockchain?SiliconRepublic, 23 November 2017.