How do you reinvent something when it’s always on the move?
That’s the question facing supply chain managers as they consider the benefits of blockchain adoption.
A supply chain is dynamic and it never sleeps. It’s easy to point to the perks that this technology brings, but a complete supply chain overhaul is tougher to envision. It’s like asking a runner to change their shoes without losing ground in a race.
Even if supply chain managers can create a parallel infrastructure without hurting productivity, there are still challenges. The cost of installing blockchain-powered supply chain management tools will scare away most small and medium-sized business owners. Even larger businesses that can afford to refurbish their supply chains will want a compelling answer to questions of why they shou;d “fix” what isn’t broken. Why spend big money on a technology that’s yet to prove its worth?
Consider the time before the internet proved its worth. Don’t forget that the automobile was basically a more dangerous alternative to the horse-drawn carriage. Businesses and individuals alike had to take a leap of faith, abandon the old way of doing things, and start an unignorable trend.
Supply chain managers will have to embrace this pioneering mentality if they want to use blockchain technology to rid the industry of product loss and disorganization.
The following industry insiders offer their two cents on the challenges facing blockchain in supply chain management, and how to overcome them.
1. Bhagat Nainani, Group Vice President of IoT and Blockchain Applications Development, Oracle
“The biggest challenge with blockchain is on-boarding suppliers and convincing them of the benefits of transparent operations. In Alpha Acid Brewing’s case, suppliers were happy to get involved because they saw the value of receiving quality validation of their products. With the high cost of product recalls and issues related to contaminated products (including negative press), I think we are going to see many organizations in manufacturing, logistics, and food and beverage demanding that suppliers agree to join blockchain networks in their ERP and supply chain applications as a requirement of doing business.”
2. Kelly Marchese, Principal, Supply Chain & Network Operations at Deloitte Consulting
“Blockchain adoption has been sporadic at best; there’s much learning that needs to happen and the bitcoin headlines have not helped. However, there are proof of concept efforts being launched in many industries and some are successfully partnering with regulators and founders that could shape how blockchain will be adopted. Because of the highly customized nature of blockchain technology, understanding its technical structure, data schemas, and security protocols is a challenge across all industries. A secondary aspect that prevents blockchain adoption is the security issues experienced by some organizations and the publicity that comes with them. There are many myths that have slowed adoption, and this can only be solved with training and experimentation.”
3. Sylvie Thompson, Associate Partner for Supply Chain Optimization with Infosys Consulting
“The focus on private standalone blockchain networks vs public networks within supply chain management is the biggest challenge, with early stages of learning causing private blockchains to emerge as frontrunners in enterprise use cases. As companies, trading partners, and other organizations experiment with blockchains, private networks provide a more secure environment to test these solutions and potentially limit the impacts of early setbacks. However, if private chains continue post-trials, they will create a major barrier to widespread adoption. As we progress beyond experimentation, the industry goal is to achieve integration and interoperability on an open source platform on which an endless set of supply chain networks can connect.”
4. Ken Evans, CEO of Konexial
“The number one challenge for deploying blockchain in the supply chain is the lack or enterprise (ERP) tools and support within existing systems. Most companies still operate rigid, structured ERP systems that do not support blockchain technology.
An exciting development in this area is the announcement of Amazon Web Services (AWS) Blockchain as a service. Using AWS, developers should be able to quickly deploy blockchain in many different use cases.”
5. Marc Degen, Co-founder of Modum
“The ecosystem is not yet ready, as many pilots are run but critical paths like real world connection (=broad digitalization of assets with IoT) or financial transactions (=which corporate allows crypto on their consolidated statement?) are not yet or with only with great effort ready to be used in production – hence many optimization promises cannot be delivered due to ecosystem inefficiencies. On the other side are the optimizations too high yielded: New technologies are put on the most complex issues instead of small areas from where they can improve – Amazon did also not crush Barnes & Noble in their very first year.”
6. Gert Sylvest, CTO and Co-founder and GM of Tradeshift Frontiers
“Blockchain needs scale. Big companies like IBM and Maersk have launched initiatives, but they can’t attract enough partners because no one wants their biggest competitor to be managing the network they depend on. The best way to do blockchain is to first get companies connected digitally to a large network they all trust, then layer blockchain services on top of that. Otherwise, it’s very hard to build scale and get competing firms to join together.”
7. Steve Treagust, Global Industry Director at IFS
“The number one challenge to blockchain adoption is trust. It is somewhat ironic that a lack of trust in the banking industry after the 2008 financial crisis was the incentive for blockchain. In fact, blockchain was born as the channel to deliver Bitcoin, allowing organizations to avoid banks.
Now, a lack of trust in these same digital assets is the main hurdle to mainstream use. There are two addressable elements to improving trust in blockchain. First is education around the value of cryptography and blockchain technology. Second, when others begin to successfully use blockchain, this will also provide a platform for trust.”
8. Grant Blaisdell, Co Founder of Coinfirm
“The number one challenge for any company adopting blockchain would be digital presence. It is convenient for any digitally transformed company to start blockchain journey and for companies that are not digitally compliant the evaluation criteria really depends on each company’s internal policy around their nature of business, operations, IT infrastructure, regulations. We always recommend our blockchain enthusiastic clients to start with pilot project irrespective of any industry as it helps us to understand, measure and adapt methodologies based on pilot project results and also provide insights into new discoveries and opportunities.”
9. John Thielens, CTO of Cleo
“Blockchain solutions are necessarily founded around a shared community of interest and a corresponding standard view of a set of business processes and their associated data. So, while the newness of blockchain technologies and IT’s lack of familiarity with it – especially beyond its traditional applications in financial instruments – seems an obvious impediment, the larger obstacle is more likely to be recruitment of an ecosystem and agreement on standards. Even EDI, after decades of use, has limitations in its standardization. And the newer API-based approach shows only a glimmer of a drift towards standardization, and bespoke point-to-point integrations remain the norm.”
10. Ian Kane, COO and Founder of Ternio
“It’s going to be a combination of education and participation of supply chain members. Supply chains can be made up of hundreds of intermediaries. The only way to get everyone to participate is if both the buyer and seller understand blockchain’s value prop and then require it to be used by their partners.”
11. Ralph Rio, Vice President at ARC Advisory Group
“The challenge is not technical. It is recruiting members to obtain the “network effect” and gain traction (when only one person has an email address, it's not useful. However, when nearly everyone does, an email address becomes indispensable).”
12. Scott Carlson, Head of Blockchain Security at Kudelski Security
“The biggest challenge adopting blockchain into the supply chain is the expected return on investment (ROI). Proving that the conversion cost to blockchain warrants the investment is always hard when adopting new technology. In this case, the ROI must show that any IoT integration, paperwork savings, process savings, sourcing proof or economic advantages are worth transforming a supply chain to blockchain. In addition, multiple parties must agree on the methods and formats for storing data on a shared blockchain/ledger and doing so without open consortiums or industry standards increases the challenges facing the industry.”
13. David Rajakovich, Managing Partner at Supply Chain Academy
“In theory, blockchain, in conjunction with the Internet of Things, can be a great enabler of supply chain visibility, since all transactions throughout the supply chain can be recorded in a single digital ledger, and can be made visible to all stakeholders in real time. However, other cheaper technologies already exist to make this happen. The big challenge for both blockchain as well as existing technologies is the same – how much of their confidential data do different members of the supply chain really want to share with each other? Do all of them really see the value in investing in this technology for the sake of ensuring visibility? It might be more useful for some supply chain members than for others, but needs the participation of all.”
14. Daniel Stanton, President of SecureMarking, Inc.
“I think the big challenge is finding opportunities where a blockchain solution can get critical mass quickly. I think that a lot of the niche applications that have come onto the market with only a few users are likely to run out of steam before they can make it big. But there are a few applications emerging with deep pockets, and with a large base of users to start with. Blockchain applications that are able to hit the market with a large customer sponsor, or a large user base, have a huge advantage.”
15. Christiaan Sluijs, CFO of T-Mining
“Challenges like interoperability, scalability, performance should not be underestimated: blockchain is still a nascent technology. Especially for supply chain, with many competing stakeholders, the “coopetition” paradox is a tough one. Will companies trust a solution that is shared with their competitors? Initiatives that start small and grow step by step, will have the highest chance to succeed.”
16. William Crane, CEO and Founder of IndustryStar
“Blockchain, as with any new technology, is still working through the best use cases and supporting value proposition messaging. Most technologies are not adopted overnight but over a series of years, blockchain is no different. It will take a few early adopters to realize significant returns on investment to pull the rest of the supply chain market to adopt blockchain.”
17. Kevin McMahon, Executive Director of Emerging Technologies at SPR
“The main challenge to blockchain adoption in supply chain scenarios is finding situations in which blockchain-based solutions provide tangible benefits over existing (and less costly) solutions and systems. Blockchain-based solutions promise improved traceability up and down the supply chain and business transaction effectiveness, but there are too few examples of these benefits actually being put into practice at this time. Introducing new technologies is risky, and the supply chain industry already processes huge amounts of transactions and data in real-time today. For blockchain to see a widespread adoption in this industry, we’d need to see a clear advantage of the tech over existing technologies or approaches, and that simply hasn't materialized yet.”
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