Any new day, there is a new technology you have to consider while thinking of enterprise adoption. This time, it may be blockchain, which is a technology meant to support bitcoin transactions, as many know about it. As per the cheerleaders of bitcoin, blockchain has a gigantic potential to turbocharge the performance and profitability of businesses of all kinds. In fact, at this early adoption stage, it seems that many businesses tend to maintain a watchful wait on blockchain to see its perils too.
There are many questions about whether blockchain technology can solve the mysteries of supply chain management and ensure better profitability? These types of doubts are very relevant now, and the answer is ‘Yes. In this article, we will have a deeper look into understanding blockchain technology in light of the challenges it needs to meet on deploying to the supply chain.
What is the buzz about blockchain?
We can say blockchain is a technology known for its unique capabilities in the public record, validate, and distribute the transactions in an encrypted way. As we read above, this technology came into the picture to assist in bitcointransactions. In bitcoin, which is created and traded from a centralized repository, blockchain technology acts as a platform to create and distribute the ledger or a record of each bitcoin transaction. In contrast, millions of such simultaneous transactions happen every minute across the globe.
“Blockchain” is coned from two terms as “blocks” of immutable and validated transactions and how they combine together like a chain in chronological order. As all these ledgers and transactions are encrypted, blockchain can ensure the most secured trading model. It makes instantaneous transmissionsthrough the internet and eliminates the tedious 2-3 days of clearing process that banks used to follow traditionally. It can also reduce the accompanying costs of money transfer from one account to another.
Blockchain used to come in two types as
- Permissionless – These are used for distributed ledgers like bitcoin in the domain, and
- Permissioned – Ledgers that are centrally managed by nodes,actors, or miners and held outside the public domain.
Blockchain in supply chains
In many cases, modern-day supply chains operate on a large scale without the assistance of blockchain types of technologies. Even though blockchain does have the scope of exciting supply chain strategists in many ways, even though it is true, blockchain does have the scope of exciting supply chain strategists. You can see many articles out there written by the inspired supply chain specialists as the scope and use cases of blockchain in the supply chain.
Here are some very promising real-time examples of blockchain in the supply chain by renowned industry players.
- Walmart had tested their blockchain applications to authenticate the transactions and analyzing the efficiency and accuracy of record keeping.
- IBM works with Maersk on cross-border and cross-party transactions to use blockchain technology to see how it helps in enhancing the efficiency of the process.
- BHP had introduced some blockchain solutions, which now replace the use of spreadsheets to track the samples from the providers.
- Provenance is a startup that raised $800000 funds to build a blockchain-based food tracing application.
However, we are not aware of any at-scale applications being experimented with blockchain in the supply chain to date.
A reality check
Many modern-day supply chains now have a good volume of data, which they tend to transfer across their network tiers in real-time. To evaluate the capability of blockchain in supply chain transactions, we have to look at three vital key areas.
- Replace the manual processes to increase speed. Even though supply chains are now handling complex data sets in huge volume, many of the supply chain processes, especially those in the lower tiers, are still very slow and largely rely on paper and spreadsheets. You can see this largely in the shipping industry.
- Improve traceability. As there is an increase in consumer demand and regulatory compliance, the supply chain is already changing in a big way.It may help to simplify the otherwise complex supply base to ensure more value addition and better opportunities. The capability of blockchain to improve traceability may also add value to the supply chain by mitigating the quality issues and high incurred costs by avoiding recalls or the chance of black-market products etc.
- Reduce the cost in supply chain IT transactions. This is now more of a theoretical benefit than proven. Bitcoin now pays the users to validate blocks or transactions and needs them to propose another block to include a fee in the proposal. However, this type of cost structure will be a hindrance in supply chains as the scale may be staggering.
Considering all these variants and use cases of blockchain, an enterprise must first decide what blockchain type they need to build. As we saw, the bitcoin approach of blockchain is permissionless, but in many cases, it may not be applicable.
In a supply chain transaction, mostly the parties involved are known to each other and trusted. Also, the supply chain world may not be willing to accept open access as the users may not want to reveal proprietary details like capacities, demand, prices, orders, margins, etc., to unknown participants in the chain. This further means that blockchains needed to be more permission for supply chains for supply chains with the access being centrally governed and restricted to only the known parties and kept limited to some data segments.
Theoretically, this approach will let private or public verification of each block. However, it may be unlikely that we may ever see the public verification of the blocks in the supply chain when the parties involved are known. In the case of shipping, there can only be limited known parties like haulers, customs, ports, shipping lines, etc., which are responsible for validating each block. If the number of trusted parties in the chain is small, then the need is to validate them independently.
Even though there are some proven benefits for blockchain in the supply chain, it is advisable to measure the suitability of blockchain in this industry against other less costly and simpler technologies.
