Blockchain—The Holy Grail for supply chain transparency or just a technology fad?
As sustainability becomes a greater strategic agenda topic and has reached the boardroom of many organizations, it is only a matter of time before the blockchain’s capabilities will become table stakes.
Blockchain—the technology that underpins the much talked about cryptocurrencies such as Bitcoin—has had a roller coaster ride over the past 18 months. Not too long ago, blockchain was being touted as the newest, most disruptive technology to arrive on the scene. Now, analysts are talking about the failure of blockchain and questioning its long-term viability. So, which is it?
Blockchain is a decentralized, distributed and permissioned digital ledger (database) that records transactions in a way that any record cannot be changed. From a supply chain perspective, blockchain provides a shared, trusted data platform that can increase visibility across the supply network.
Providing end-to-end supply chain visibility for the food ecosystem requires tracking with precision and speed of activities from the source of supply—often a farm—to the final point of purchase—a retail store or restaurant. It’s a complicated matrix, with multiple hand-offs and with each entity keeping its own set of records before the product finally reaches the consumer. In many cases, supply chain activity records are paper-based, and even when these records are managed in software systems, they don’t inter-operate easily from one business to the next without significant human interaction. The end result is a fragile system that fails to provide the transparency and trusted source of information across the network in a timely and accurate way. The impact to the business is cost associated with data duplication, inefficiencies in supply chain operations and inventory management and the effort to reconcile any discrepancies between transaction partners.
Blockchain—part of the answer, not the answer
Given the challenges described above, one can envision that a key requirement would be to store and manage the transactional data in a way that can easily be shared across the members of the supply chain. Additionally, this shared data needs to be trusted, with the confidence that data has not been altered or tampered with to provide gain by one of the participants.
Blockchain can provide this data platform, allowing the sharing of information and ultimately end-to-end supply chain visibility, but given the unique nuances of the cold chain, other technologies and capabilities are needed to truly achieve full supply chain transparency. Internet of Things (IoT) sensors can be used to track and monitor temperatures. Radio frequency identification (RFID) tags and sensors provide an automated way of capturing the movement of goods from point to point, eliminating manual efforts. Finally, analytic software provides dashboards to key performance metrics as well as alerts to anomalies (such as temperature changes) that would negatively impact shelf life or freshness of the shipped product.
Because blockchain is still a new technology, companies need to focus on five requirements:
- Technology—ensure that the solution is built on top of an enterprise-class secure, reliable, scalable blockchain platform and set of components.
- Standards and interoperability—leverage both business and technology standards to enable the simplest and broadest participation across the entire supply network.
- Governance model—define a governance process through the collaboration of industry thought leaders. Make sure that the model ensures trust, fairness and privacy.
- Business value—ensure that every participant in the supply network can see a positive return on investment. The key is not to have data pool just to the large players, but to everyone participating in the process.
- Ecosystem—blockchain is a “team sport.” Success requires adoption across the entire supply network.
The old cliché of “right product to the right place at the right time” is still very much appropriate for blockchain-based solutions, but the value of having this level of visibility extends into areas such as better scheduling, optimized inventory and reduced waste. As sustainability becomes a greater strategic agenda and has reached the boardroom of many organizations, it is only a matter of time before the blockchain’s capabilities will become table stakes. Now is the time to get started while there is the opportunity for marketplace differentiation.