With the announcement this month of IBM’s joint venture with the container-shipping company Maersk, supply-chain management has fully entered the blockchain era. As an IBM Blockchain video demonstrates, the partnership is “digitizing and simplifying global trade to create trust and transparency in the supply chain using blockchain technology.”
Blockchain is being hailed as “the most disruptive tech in decades” (ComputerWorld). Because blockchain is an open, distributed-ledger technology, it creates transparent, immutable records. The Harvard Business Review calls blockchain “a global system for mediating trust and selective transparency.” And in a multi-trillion-dollar-a-year industry like shipping, realizing savings in the billions is not asking too much.
Blockchain technology is about to graduate from pilot projects and Bitcoin and be poised to introduce the greatest technological disruption since the internet itself. Insiders further predict that blockchain will be the killer app for supply chain management in 2018 (Computerworld)—the latest among vastly disruptive technologies (Forbes).
Blockchain’s first killer app was Bitcoin, and fintech was it’s primary beneficiary. Now blockchain is revolutionizing verticals well beyond fintech:
- Real estate: ShelterZoom went live last month (BusinessWire)
- Mobile payments
- Peer-to-peer managed cloud services and distributed cloud storage such as Storj Labs. Kodak this month launched its own blockchain-based image-sharing platform and cryptocurrency.
- Healthcare presents the gnarliest challenges for blockchain innovation of its supply chain, mainly due to privacy issues. Blockchain is wholly transparent among its users, whether in a public blockchain or a “permissioned” blockchain. If one participant can see a record within the blockchain, every participant can see it.
Blockchain is revolutionizing IoT as well. As Daniel Newman at Forbes wrote, “For the IoT to be truly effective, all members of one’s global supply chain must be connected.” IoT offers many operational efficiencies such as asset tracking, vendor relations, forecasting & inventory, connected fleets, and so on–every one of them eligible for improvement with blockchain technology.
Likewise, with the advancement of analytics in SCM, “Forecast accuracy, demand patterns, product tracking traceability, transportation performance and analysis of product returns are use cases where analytics can close knowledge gaps” according to Forbes. Here too, blockchain enhances supply chain’s digital transformation.
Some analysts, like Forbes’ Steve Banker, recently placed blockchain at the bottom of the maturity curve. As recently as 2016, Gartner placed it at the peak of its Hype Cycle. But blockchain’s coming of age in the SCM space is now. Deloitte recommends that “using blockchain in the supply chain can help participants record price, date, location, quality, certification, and other relevant information to more effectively manage the supply chain.”
And Deloitte goes on to itemize blockchain’s primary and secondary potential beneifts:
Primary potential benefits
- Increase traceability of material supply chain to ensure corporate standards are met
- Lower losses from counterfeit/gray market trading
- Improve visibility and compliance over outsourced contract manufacturing
- Reduce paperwork and administrative costs
Secondary potential benefits
- Strengthen corporate reputation through providing transparency of materials used in products
- Improve credibility and public trust of data shared
- Reduce potential public relations risk from supply chain malpractice
- Engage stakeholders
As you would (and should) expect, some formidable obstacles must still be overcome in the use of blockchain in SCM:
- Development and governance of the technology will likely have to evolve as private, closed ledgers inevitably arise along with open, public blockchains that no entity controls, according to the Harvard Business Review.
- The complex array of international laws, regulations, commercial codes will be difficult to reconcile with the “digitally defined, dematerialized, automated and denationalized nature of blockchains and smart contracts” (HBR).
- Scalability. Widely distributed blockchains used by large numbers of entities place a high demand on CPU power. Some innovators are experimenting with limited-node blockchains as a first approach to this (Computerworld).
Commentators agree that blockchain is still in its “Wild West” stage, and that it could take years or even decades to realize its potential. We at tekMountain recognize the incipient revolution taking place in supply-chain management and its exceptional opportunity. We invite you to consider how blockchain may introduce cost-saving efficiencies to your enterprise, and to speak with us about how we can help.