Blockchain – Supply Chain Executives: Be Hopeful but Proceed with Caution

Blockchain could have a transformative impact across supply chains in five to seven years, and has the potential to transform and disrupt the supply chain, but we are not there yet.

Although chief supply chain officers (CSCOs) might have heard the term ‘blockchain’, few have a detailed understanding of what is it is, and how it may affect supply chains in the years ahead.

With this in mind, CSCOs must resist the urge to implement a trial run of blockchain without clearly establishing where it will create real business value. More often than not, it will not be the best solution.

What is blockchain?

Blockchains create decentralised, distributed and digital records of transactions that are anonymous, tamperproof and unchangeable. This technology establishes trust among unfamiliar or unknown partners by ensuring that every successful transaction is recorded and stored in multiple locations across the entire distributed network. Complex mechanisms are implemented to validate the accuracy and integrity of transactional information. Finally, in theory, there is no intermediary, although this is not always the case. This greatly eliminates the opportunity for criminal interventions or invalidated transactions.

Do I need blockchain?

Seeing the potential, many tech companies have started to offer blockchain services to support company needs — but CSCOs ought to be cautious. Many mature technologies that already exist can accomplish some of the tasks that vendors may advertise. Supply chain executives should be sure they’re only exploring blockchain technology for problems that actually require this type of solution. For example, many companies have begun to explore the idea of a permissioned blockchain, as opposed to completely decentralised. The permissioned blockchain is utilised by a group of known users who all agree what information will be shared ahead of time. However, in this example — along with others — organisations run the risk of using blockchain when another solution would be equally or even more useful.

Blockchain in the supply chain

The increasing complexity of the supply chain makes blockchain a good potential solution for three key issues: counterfeit, traceability and efficiency play. Raw materials and products in supply chains increasingly travel through multiple suppliers, manufacturers, locations and stakeholders. This means that businesses handling the product or materials might not even be aware of possible issues. The same is true for other enterprises in the supply chain. Theoretically, businesses should know every partner in the supply chain, but that may not be realistic in today’s world.

Though adoption at scale is likely at least 10 years or more away, CSCOs should start considering the potential application of blockchain within their organisation, albeit with a heavy amount of skepticism. Presently, it is very difficult to find any level of “off the shelf” or dedicated blockchain tools, with many of the current technology vendors likely to present offerings alongside or in conjunction with more conventional or innovative technology solutions. Many technology vendors will probably be replaced or superseded as blockchain matures and others may be acquired or will merge into more standardized technology tools and services for which blockchain may be a significant value enabler.  That being said, now is a good time to explore the technology alongside peers and start formalised discussions about its applications.

 

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