The Supply Chain has Big Aspirations for Blockchain

Stephen DeAngelis

November 27, 2019

An aspiration is a hope or an ambition of achieving something. Another way of stating that is aspiration is desire mixed with reality. At the moment, blockchain technology seems to fit into the aspirational category. Roberto Torres (@TorresLuzardo) reports, “In its 2019 Hype Cycle for Blockchain Technologies, Gartner found most blockchain technologies remain stuck in an ‘experimentation mode.’ The analyst firm said most applications are yet to live up to their hype, and that interest in them has waned as applications failed to deliver on their expected outcomes.”[1] Despite the current disillusionment with the technology, Gartner notes, “Unique use cases for blockchain applications continue to roll out.” The firm predicts, “By 2021 the technology will begin to evolve past this phase. But the ‘digital business revolution’ promised by blockchain will need even more time. By 2028, Gartner projects blockchain will become fully scalable technically and operationally.” Torres adds, “The immaturity of blockchain technology has been delaying its application in enterprise settings, as the majority of applications have either stalled at the experimentation space or will be in need of replacement in the near future.”

Blockchain’s potential

By the number of articles written about blockchain, a person might find it surprising that interest in blockchain technology is waning. I suspect interest remains high but companies are waiting for more mature blockchain solutions to emerge. Hailey Lynne McKeefry (@HaileyMcK) writes, “Supply chain professionals are talking a lot about blockchain, and how it can be applied to address the increasingly global and complex nature of the supply chain. However, we are still in early days, with only about three in ten companies actively implementing the technology.”[1] McKeefry goes on to note some of the areas where blockchain shows promise. They are:

  • Tracking products moving through the supply chain
  • Sharing information with suppliers
  • Tracking payment information, such as purchase orders
  • Sharing information with customers
  • Managing trade documentation
  • Verifying and monitoring suppliers
  • Managing supply chain risk
  • Managing demand and supply planning
  • Managing inventory
  • Managing freight transportation
  • Managing product returns

McKeefry’s list demonstrates why so many analysts believe blockchain technology has great potential. In fact, former IBM executive Irving Wladawsky-Berger, states, “Supply chain is the killer app of Blockchain.”[3] He adds, “As a shared digital ledger that creates an immutable record of transactions, Blockchain is ideal for tracking the movement and transfer of goods. It enables trustworthy shared information among suppliers that may not trust each other.”

Blockchain’s challenges

In spite of all the potential benefits blockchain technology could provide to the supply chain, there are challenges that must be overcome before blockchain solutions can be widely leveraged. Gregory Barber (@GregoryJBarber) observes, “Not long ago, blockchain technology was touted as a way to track tuna, bypass banks, and preserve property records. Reality has proved a much tougher challenge.”[4] He adds, “Blockchain has offered a wilder ride than most new technologies.” Emin Gün Sirer (@el33th4xor), a professor of computer science at Cornell and founder of Ava Labs, told Barber, “The current technologies fall really short.” In order to take advantage of blockchain’s potential, all stakeholders must agree to follow identical protocols. Aleks Larsen (@_alekslarsen), an investments & research expert at Blockchain Capital, explains, “There is no one-size-fits-all solution for blockchains and each distinct combination of designs offers differences in security, privacy, efficiency, flexibility, platform complexity, developer ease-of-use and even political values.”[5] The editorial staff at Supply Chain Digest notes, “Companies struggle to identify how Blockchain will be a better offering and provide higher value over conventional technology.”[6]

Mark van Rijmenam (@VanRijmenam), founder of Datafloq, explains, “Blockchain is still a new technology [and] how organizations adopt this technology also depends on how existing and related challenges are resolved.”[7] He goes on to discuss seven issues he believes are preventing blockchain technologies from moving forward. They are:

1. Scalability.
2. Transaction speed.
3. Decentralization.
4. Lack of Talent.
5. The Ecosystem.
6. Energy consumption.
7. Resilience, irreversibility, quantum computing and lack of standards.

Those challenges are not trivial, which is why Gartner predicts it will take a decade for blockchain to become fully scalable technically and operationally. Gary Gensler, a professor at MIT’s Sloan School of Management, suggests companies looking to apply a blockchain solution should start by asking two key strategic questions.[8] They are: What’s the value proposition? What problem will this solve, and how will Blockchain be better than other solutions? Other questions Gensler suggests companies should ask include: Blockchain is by design immutable — meaning once it’s been added, data in the Blockchain cannot be altered. Does your application need that? What data will be written to the ledger? Who (within a company) will be allowed to write to the ledger? Who (within a company) will be allowed to see the ledger? How will the parties preserve confidentiality of data and comply with privacy laws?

Concluding thoughts

In spite of myriad questions and challenges, many analysts remain optimistic about blockchain’s future in supply chain processes. Avivah Litan, a research Vice President at Gartner, asserts, “As more stable blockchain platforms achieve portability and cross-chain functionality — and begin supporting private transactions with data confidentiality — the advances will move industry closer to mainstream blockchain adoption”[9] Futurist Jack Shaw (@jackshaw) lays out the aspirations many supply chain professionals have for blockchain. He writes, “Blockchain eliminates huge amounts of time and effort spent continuously reconciling internal records — for instance, matching up invoices, receipts, and purchase orders to determine whether your business needs to pay a particular invoice. In a blockchain-based environment, if you’ve agreed on a price as well as the terms and conditions, all this information can be stored in the blockchain for easy reference by all parties — making an invoice altogether unnecessary. This is one of the most exciting aspects of blockchain technology: It enables smart contracts that are in essence self-executable. Blockchain allows you to replace the vast majority of human intervention with relatively simple AI capabilities. Most of the analysis required to fill out forms, make sure information is valid, and confirm that suppliers are legitimate can be done by AI — and done within seconds or minutes, not weeks.”[10] He writes as if those capabilities are a reality — in truth, they remain aspirational.

Footnotes
[1] Roberto Torres, “Most blockchain applications sunk in the ‘trough of disillusionment,’ Gartner says,” CIO Dive, 9 October 2019.
[2] Hailey Lynne McKeefry, “Blockchain & Supply Chain: Early But Promising,” EBN, 29 May 2017.
[3] Staff, “Blockchain will Eventually Take Off in Supply Chain, MIT Academic Says,” Supply Chain Digest, 23 October 2019.
[4] Gregory Barber, “What’s Blockchain Actually Good for, Anyway? For Now, Not Much,” Wired, 28 October 2019.
[5] Aleks Larsen, “A Primer on Blockchain Interoperability,” Blockchain Capital Blog, 20 December 2018.
[6] Supply Chain Digest Editorial Staff, op. cit.
[7] Mark van Rijmenam, “7 Blockchain Challenges to be Solved before Large-Scale Deployment,” Medium, 25 September 2019.
[8] Supply Chain Digest Editorial Staff, op. cit.
[9] Torres, op. cit.
[10] Jack Shaw, “How Blockchain Will Help Create the Supply Chain of the Future,” Oracle Supply Chain Management Blog, 1 October 2019.