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Ultimate Guide To Blockchain In Supply Chain

  • 3 February 2020
  • Disruptor Daily

The business supply chain doesn’t get enough attention from the consumer public.

Supply chain management specifically refers to the business of supervising all the materials, information, and finances for a certain project as its parts, components, and accessories make their way around the ecosystem, from supplier to manufacturer to wholesaler to retailer to consumer.

Building and maintaining a supply chain is a highly technical, specialized pursuit. Present-day Apple CEO Tim Cook was making his name exactly here within Apple before ultimately ascending to his current position. Supply chain wonks don’t depend on knowing just one business well, but on knowing many aspects of many different businesses well. It takes a process-oriented person with deep focus to make data useful for supply chain optimizations.

Spread across different climates, time zones, and cultures, individual businesses contributing to the same supply chain clearly benefit when they can share more data and be more in sync with each other. Blockchain provides a connective bridge for making it happen, even if the resulting supply chain is very large and complex. It can store supply chain data in a cryptographic way that makes the data virtually impervious to manipulation. At the same time, it simultaneously makes that data more shareable and accessible for those already on the same privileged network. Someone with technical skills can get a blockchain up and running without much effort at all, and many of these open-source databases are designed to be deployable quite out-of-the-box.

But all this blockchain-powered capability does little to connect to the human side of product marketing. The software needs to be useful and advantageous over any other contenders. It needs to present businesses with an edge. And taming the complex and distributed data spilling out of supply chain operations with a single graceful tool called a blockchain.

Blockchain these days largely remains an arena of contemplation and experimentation, especially if you’re looking for someone dabbling with the blockchain to some specific business end. But that’s all blockchain needs to be for now — it has enough attention from enough people that it doesn’t seem like it’s about to disappear any time soon

Savvy developers will tell you it’s no major feat to get a blockchain up and running, there’s only the question of what you do with it after that. Don’t let any specialists make you feel bad or strange if they are especially skilled here and you are not. Blockchains are digital information technology that happen to come with a bunch of new tricks attached to them.

You (probably) don’t talk in a braggadocious fashion for hours about how beautiful and important Microsoft Excel is. When you use Excel to successfully solve a problem, you (probably) don’t spend the following week talking about it and work mentions of your success into conversation. You simply see an opportunity, seize it, and see what you can learn for next time.

This is the quiet status quo that has slowly driven supply chain players toward dabbling with disruptive tools in search of a new normal. As supply chains exist across a variety of businesses and industries, It’s clear to everyone involved that there’s a lot of exciting potential for blockchain to change a little bit of everything.

Sometimes a blockchain use case feels forced — suppose a car wash starts keeping meticulous records of its water usage on the blockchain. This is a perfectly serviceable goal to pursue, but it seems not to satisfactorily answer the bigger question of why do it in the first place. Yes, everyone’s on the hunt for new advantages they might be able to harness at work, but too many large companies have too many unwieldy supply chain concerns for there not to be true, transformative potential in the medium- or long-term here.

It would appear that a lot of the market it still educating itself on what blockchains are and where they came from, and this means it might be a good idea for you to familiarize yourself with exactly the same topics.

Chapter 1: Blockchain 101 

Blockchain in supply chain 101

If you ever want to solve questions of trust on the internet, use blockchain to do it.

Human history tells us that the world is full of unknown, unpredictable people. Many of them might be our close friends or family who are fundamentally on our side. But just as many might be malicious tricksters looking for a sucker to con. A number of technological solutions, particularly those that are blockchain-enabled, work to push back against those companies and individuals who’d otherwise be taking advantage of us. (Go ahead, we’ll wait while you send your banking details to an anonymous emailer who says he’ll give you a gold deposit.)

But if trust is the problem, then decentralization is the technologically enabled solution. This idea drives the entire blockchain concept, and in simplest terms, it says that you don’t store all your data in one place. You let other people store fractions of the whole, and before anyone changes anything on their fraction, they all have to agree to it.

Malicious cyberattacks ultimately depend on gaining access to information that the attacker shouldn’t have, but blockchain changes this paradigm forever as a decentralized database technology. Rather than store use a single computer to store information in a single database, blockchain uses a network of computers scattered around the world that work together to maintain one database. When authorized users change the data stored there, other nodes on the network monitor it to confirm a legitimate update, then broadcast this updated information to the rest of the network.

Preserving a decentralized ledger requires participation from the community of users that depend on it — the two people in the transaction aren’t necessarily involved in confirming it. That check gets outsourced to the community, who supervises the transaction to make sure it’s valid.

For cryptocurrency transactions, this means unknown third parties can confirm your receipt of some amount of Bitcoin and update your wallet balance for you, just as you might do for them. For blockchain applications in the insurance industry, this means validated, verified data can be transmitted as easily and securely as a large insurance premium might be paid on the same network.

Every piece of data represented on a blockchain comes with a figurative “seal of approval.” Insurance agents might see a blockchain-validated death certificate in order to confirm they needed to start paying life insurance. Patients can see an itemized, validated tab of everything they’re paying for when they send money to the insurance company.

Wherever information and financial transactions are involved, blockchain technology will emerge as a difference-maker. Read on to learn the four major benefits this technology stands to bring to the supply chain industry.

Benefits of blockchain in the supply chain Industry

1. Uniting disparate organizations and making their data shareable on a blockchain helps a business operate as a single cohesive unit

If you’re running an elaborate supply chain, then you want to establish a live window into each point of it (or else have partners close enough for you to visit their office on occasion). A blockchain-validated heads-up display on the health of supply chain will make it easy to know which partners are delivering or are behind. The more information that supply chain stakeholders have about each unit of their associated businesses (and how close to real-time that data is), then the fuller a picture they have about their unknown future.

2. Closer integration with collaborators and key suppliers

A business unit must think as one thing, even if it’s actually several. Blockchain technology makes it easier, not harder, to play along nicely with partner businesses. It’s already possible to send information to the other side of the world nearly instantaneously, but blockchain technology makes it easier to validate the data is real. There’s no progress without agreement, and the blockchain presents a record of financial tractions in which everyone agrees.

3. Improved process automation

Beyond getting different components of a business process to simply be compatible across different organizations, blockchain opens the door to data automation. This kind of automation is a key competitive advantage for any business seeking to shake up supply chain thinking and get ahead. Automation can reduce costs and make things a little more automatic for those trying to make complicated decisions within the supply chain.

4. Paperwork becomes highly more processable and efficient

Imagine if filling out a stack of paperwork at the doctor’s office wasn’t actually a time-consuming pain, but something more closely related to instant settlement. This sets the stage for blockchain-enabled lending, financing, and tracking finer details of a business interaction of other transactions. 

5. It effectively solves provenance issues for good

Those people working on a modern blockchain solution for supply chain needs will be able to track and trace any ingredient or component within the chain in order to deliver highly modern use cases. Take the case Alpha Acid Brewing, for example. They brought all their malt, yeast, and hops suppliers into a blockchain in order to track how ingredients are sourced from harvest to the beer production process to the paying customer. These people gain a window into the harvest conditions, the route a particular ingredient may have traveled, or what ingredients are in a specific batch of product. This kind of blockchain is tough to beat for provenance because it tells people exactly what they’re getting, it verifies the quality of ingredients they receive, and even gives them the ability to conduct recalls if needed.

Blockchain is a new, specific technology inspiring large and small teams to use it for solving different data processing problems across industries. While supply chain thinking is such an established part of the process for a certain number of businesses, “blockchain” has only been a word for about ten years or so. All the same, a large population of people inside and outside of the business world have banded together to kick the tires on this new technology and start getting use cases up and running.

While a number of supply chain business processes might execute exactly the way they always have without any regard for the latest fashions or conveniences, blockchain sticks around like beckoning finger urging all who see it take a closer look. At the end of the day, successful businesses depend on access objective data in order to manage the future and plan for the next success. Supply chain success isn’t likely to come from adopting the dead-latest technologies for their own sake. If anything that’s a distraction that gets your eye off of the ball.

Supply chain processes don’t need to be especially innovative in order to generate strong attention or interest from the blockchain pros. These people are likely eager to see niche technology bump up against narrow deployments in a way that makes an unignorable difference in how businesses track their finished and unfinished goods as they move around the world. These blockchain-powered use cases only need work as described, juggling incoming data and making it accessible to the human user, in order to deliver new value to supply chain thinking.

Chapter 2: State of blockchain in supply chain

State of blockchain in supply chain

Momentum seems to be gaining, but no one’s sure where we’re going. Or at least that’s how it feels.

The state of blockchain in the supply chain today is highly experimental and highly promising at the same time. As an increased number of large companies get their own blockchain initiatives up and running (particularly with respect to supply chain), the proven use cases will begin to mount, industries will collectively take notice. This sets the stage for a slow switch from old and existing business data systems totally new blockchain systems in the process of becoming mature today.

Barely even 10 years old, this immature and underdeveloped technology has been growing rapidly as people use it to solve tasks whether blockchain’s characteristics call for it or not. Some of them are pure novelty that serve no deeper purpose, hyped technology for hyped technology’s sake.

And this is to be expected. Before any new technology can become proven, mainstream, and normal, it has to begin life as a weird outlier that came out of nowhere. This time of theories and experimentation on how blockchain capabilities might be related to supply chain problems might feel strange or slow, but the technology’s capabilities as they pertain to supply chain are a little too compelling to ignore. Though there is some distance left to cover before it becomes reality, we seem due to see developers releasing breakthrough solutions and that catch on within this niche market.

Supply chains call for blockchain-powered solutions that can make audits more transparent, costing information more accurate, shipping data more accurate, and company operations more compliant overall. Making it happen only calls for technical ability and deep domain expertise within supply chain. People who will be successful making an impact here will be those who approach questions of technology and capability before they ponder things like company goals and values. Supply chain is basically about a business knowing the full state of its affairs on a group project to build some new product. And a business leader having a full, accurate understanding of his or her company’s position is always a worthwhile goal and value.

The development of blockchain within supply chain management today is hampered only by the rate at which blockchain-minded people get involved to help build. Their whole job descriptions will be about finding connections and drawing parallels between new technology and any chronic problems within their business.

Blockchain is largely about bringing new levels of transparency to business operations, and supply chain is one such operation that’s rather especially concerned with transparency. Someone maintaining a supply chain should be able to easily pinpoint when different pieces of the chain start to falter, get bottlenecked, or otherwise operate at less than 100%.

Transparency is the ultimate diagnostic tool for troubleshooting a company’s supply chain. It ensures you’re getting an accurate picture of an overall situation, and it helps make very clear what course of action seems likely to solve any problems.

A number of companies have already opened up their eyes to developing their own supply chain solutions that happen to be driven by blockchain. Here’s what happened most recently.

Here are some of the top blockchain milestones from supply chain in recent history:

✔ Italy’s Sicilian government legalized blockchain for use in maintaining the food supply chain (September 2019).

✔ A company called Farmer Connect develops farm-to-client traceability tools for the supply chain, and it has teamed up with a number of major coffee companies in order to track their coffee on IBM’s Food Trust platform (September 2019).

✔ Chinese tech giant Tencent led a $20 million investment round for a supply chain startup called Everledger (September 2019).

✔ There is a groundswell of blockchain activity within the airline industry, primarily aimed at bringing its supply chain under better control (August 2019).

✔ SAP says that blockchain was one of the key issues covered the Gartner Supply Chain Executive Conference in Phoenix, AZ this year (July 2019).

✔ Siemens made it known that they were interested in using blockchain technology to manage supply for a carsharing program (July 2019).

✔ Nestle announced surprising plans for a fully transparent supply chain, and detailed its plans to use the blockchain to get there (July 2019).

✔ McDonalds is one of three big food brands to join a blockchain project that’s aimed at bringing transparency to ad spending and supply chain management (July 2019).

✔ An Italian frozen food company announced its plans to build a blockchain-powered supply chain management system for more fully wrangling its inventory (June 2019).

On an individual basis, these events probably don’t mean much to laypeople who don’t enjoy thinking about business logistics. But to those who do have some interest, the aggregate picture is clear: supply chain uses are mounting within blockchain, and it’s going to be to the advantage of smaller, nimbler companies who aren’t afraid to experiment.

Supply chain is surely still in its first wave of blockchain innovation. But as companies begin to look at who’s enjoying new business advantages and improving their position within an industry, “blockchain” is sure to be a word that comes up often.

There is a cautious, conservative tone to how most businesses think about their own supply chain concerns, which are usually large and unchanging for long time. But blockchain methodologies within a well-designed piece of software will make a company’s supply chain operations more effective.

Yes, this database technology is well-hyped for its close link to Bitcoin, but the high-value, unignorable use cases that businesses are looking in blockchain-powered supply chain management are well on their way. And many of them are already here in their earliest forms.

But it’s not always smooth sailing here. The future is bright but the present is hazy. As it is a rather specific, narrow concern, the call for blockchain adoption within supply chain operations hasn’t exactly been overwhelming. There are already a variety of supply chain solutions that seem to work perfectly well at managing inventory and assembly for now. Why should anything have to change?

Being early to a space isn’t necessarily a bad thing, it just requires a different pioneering mindset. Here are the challenges to blockchain adoption within supply chain.

Challenges to blockchain adoption in supply chain 

1. Inertia

Kelly MarcheseThings are already working the way they are. It’s true — the smallest retail shop to giants like Apple and Google, companies of any size and complexity are already successfully managing their own supply chains. The incentives to alter any widely accepted business-as-usual practices with new software or processes aren’t totally clear right now. Unless you adopt a hard “disruption for disruption’s sake is good” stance, it will be hard to find the business-motivating bottom line to move someone to bring blockchain to supply chain. It’s already happening slowly anyway. Just as supply chain is a piece of underlying business infrastructure, blockchain purports to be a useful tool for reimagining and recontextualizing the process of keeping everyone on the same page in business. “Knowing what aspects of the supply chain need to be improved and establishing a baseline of performance will be essential to understand how blockchain can solve issues,” said Kelly Marchese, principal of supply chain and network operations at Deloitte Consulting. “Blockchain is the holy grail of logistics; achieving total supply chain visibility is now possible. Organizations that embrace the shift from linear supply chains to digital networks are poised to leverage blockchain and other technologies.”

2. It requires at least some education or technical skill

Charlie WilgusAs a step-change in terms of what a database can accomplish, the blockchain is a rare wholly new category of technology. There’s not much like it that came before it, and there’s no telling where it will take us. But that potentially unlimited promise for the future comes with at least some expense: the time it takes you to gain familiarity or competency with it. Yes, it’s not only possible but probable that some organizations that might benefit from blockchain opportunities are looking the other way because they’re either telling themselves it’s impossible to understand as outsiders, or they’re such technology outsiders that they haven’t even heard the word “blockchain” yet. “You can’t think or talk about the future of supply chain management without going straight to technology,” said Charlie Wilgus, general manager of manufacturing and supply chain executive of Lucas Group. “While the advancements in technology affect every business in some way, the best supply chains will have cutting edge technology at their core. Specific to this is digital analytics and the innovations around robotics and artificial intelligence.”

3. Something better is going to come along eventually

Chris GordonClosely related to the above rationale of shunning complicated technology products, the thinking and feeling consumer today is especially accustomed to economic cycles of planned obsolescence, whether that’s this year’s iPhone making last year’s outdated or clothing going out of style in due time. There is enough of a false narrative going around that blockchain will one day be superseded by something even better we haven’t thought of yet, and we’ll just have to learn the new-new thing instead of the new thing, so why bother? This damaging rationalization dissuades people from engaging with the real world using the most modern tools they have. Just because a new improved blockchain-style technology may (or may not) eventually come along doesn’t mean companies shouldn’t learn about the full extent of options available to them. “When it comes to supply chain management, change is the only constant,” said Chris Gordon, VP of product management at AIMMS. “Supply chain professionals will need to rely on more digital technologies to keep pace with disruptions and meet the challenges of this volatile age. In the future, the entire supply chain will be digitally represented.”

4. A lot of people have to want it to happen before it actually happens

Manav GargWhere are the protests or demonstrations advocating for blockchain solutions within the supply chain space? The topic doesn’t exactly bring fire to people’s hearts as a moral or political issue might because it is extremely niche. There are only so many people in the world who care about blockchain in supply chain operations in the first place. Of those people, only so many of them will actually be in favor of ever implementing anything. “The future growth and success of supply chain management lie with innovation and faster adoption of new technology,” said Manav Garg, CEO and founder of Eka Software.

None of these known challenges are insurmountable. As time passes, as the conversation continues, and as use cases mount across industries, it’s going to become increasingly normal for unsexy legacy industries to find new internet-style convenience for their complicated, paper-bound processes. A number of realities, both within these businesses and about blockchain technology itself, call for widespread implementation and disruption.

Supply chain is in a category of industry that is rather resistant to change, but that hasn’t stopped a number of companies from rallying around the blockchain for it. Here are the trends shaping blockchain development in supply chain.

Trends shaping blockchain in supply chain in 2020

1. Fraud and risk management

There is huge potential to use and abuse company resources if you are in a position to monitor (and maybe even control) what’s going on at different pieces of a company’s overall supply chain. It wouldn’t take a lot of creative energy to find ways to skim money off the top, alter data to be more flattering (or more damaging) to the company, and more. Any internet-using person today has had his or her experience with cybercriminals attempting to compromise or defraud them. “People will be looking for software systems that keep supply chain data secure and identify suppliers whose ability to deliver is at risk,” said Bill Leedale, senior advisor at IFS. “Robotics and other automation that help with the flow of goods and services will see a surge of interest as executive teams seek ways to make their operations more autonomous.”

2. The general digitization of everything

When was the last time you listened to a proper compact disc in a CD player? How much is your digital subscription to your favorite magazine? Don’t you love audiobooks? With the proliferation of the modern internet over the past 25 years, the trend is clearly that human information wants to be digital for the sake of being highly portable and convenient. But why shouldn’t supply chain workers expect this same consumer-grade level of innovation brought to much bigger problems? If blockchain is some kind of new “iPhone for business data,” then let companies build digital apps for it! “One big trend is a rapid move to a digital future,” said Andy Borchers DBA, professor and associate dean for undergraduate programs at Lipscomb University. “Utilizing IoT (the Internet of Things), firms can know exactly where their inventory is all of the time.  New software systems will replace older legacy systems and generally improve efficiency.”

3. A changed understanding of supply chain management

Supply chain management isn’t the grimy internal company process it used to be, but there’s been a slow-burning philosophical shift in process. Businesses understand the value of tactics like personalization and customer experience, and many of them furthermore understand how the holistic connection across all business departments contributes to a satisfying or unsatisfying user experience overall. And those companies seeking to maximize user experience might be willing to take the step of switching away from tried-and-true supply chain management solutions in order to break away in a new direction. “Supply chain management has shifted from being an operational necessity to being a key component in customer experience,” said Olivia Montgomery, senior supply chain management analyst for Software Advice. “Consumer demands for quick delivery and transparency in product sourcing are forcing major industry innovations. Supply chain leaders are now assuming integral strategic business roles, partnering with IT and marketing executives, to find solutions. They’re no longer seen as just an operational necessity, businesses are now relying on their supply chains to keep them competitive.”

4. Improved transparency

A business without a clear window into the world of its supply chain is a bit like a person who doesn’t know where his hands and feet are. Transparency makes it easier for businesses to be stronger when they broadcast their own (honest) results to themselves in order to establish a certain pace or goal around a given metric. “The trends that we see more and more within supply chain are the need for transparency and traceability, and an increased appetite and willingness of adopting new technology, such as Blockchain, Machine Learning and AI,” said Colin Hayard, CEO of Chinsay. The need for data extraction and aggregation is also a very important new trend within the industry.”

These positive developmental trends are only possible because intelligent people see a bright future by bringing blockchain technology to supply chain operations, then they work hard to actually make it happen. Blockchain’s waterline rises rather slowly across the board, its progress is won an inch at a time as workers across industries wake up to its potential.

But blockchain’s potential is clear within the world of supply chain. The technology provokes the metaphysical question “why are things the way they are?” in supply chain, then suggests itself as the answer. A company’s data operations are so close to the heart of how the company operates as a whole, and blockchain implementations can easily call for a company to design a totally new set of data ops as they come back online.

Chapter 3: How Supply Chain Can Benefit From Blockchain

How Supply Chain Can Benefit From Blockchain

If you’re reading this, you’ve surely also read the zealots online who sing blockchain technology’s praises without end. Maybe it’s because of the technology’s close association with Bitcoin and other well-hyped cryptocurrencies, but there is a population of people out there who seem to turn into professional sports fans at the mention of the blockchain, and want to go on for as long as they can about its transformative potential across industries.

There’s nothing wrong with being a fan of new database technology, especially when that database technology is sufficiently strong to make the US financial sector react and has seen other jurisdictions criminalize it entirely. The precedent is well-established by now that blockchain technology is dogged technology that keeps going no matter what you or the president have to say about it.

There are lots of industries worth examining with a blockchain lens, but the supply chain operations that drive large and small companies around the world are especially interesting. Supply chain management is about keeping a bunch of smaller partners properly sequenced and working together on a larger project. Doing this effectively calls for having access to shared data that is perpetually reconciled across everyone else’s copy of that shared data. And the blockchain is a shared information reconciliation machine.

It’s an exciting business arena to explore because it’s a situation where need meets ability. Robust supply chain operations call for managing lots of information on the fly very effectively, updating it, and distributing those updates. But this is almost exactly the same data process taking place on a decentralized network of computers when you send Bitcoin to someone and have the transaction confirmed. The blockchain was seemingly designed for use in supply chain management.

There are at least four major benefits that supply chain workers can look forward to as blockchain implementations work their way toward mainstream deployment.

1. It improves trust between suppliers and production

Business goes more smoothly when collaborators trust each other or have easy access to a trusted, recent update. Getting members of a supply chain together into the same blockchain means everyone can browse through everyone else’s data — they build a shared understanding not just of an individual company’s status (whether they’re behind on fulfillment or hungry for new orders, for example), but the status of the larger business organism that the supply chain forms.

Blockchain methodology is all about transparency and making things auditable. It’s important that supply chain managers be able to clearly monitor how materials and information move through their organizations and ultimately land in the hands of the end user. It gives people a way to learn details that have otherwise been hidden in their supply chains. But when it’s easy to learn certain data points about a business partner, it easier to confirm that relationship is as productive as it should be.

Distributed ledgers eliminate the opportunity for people to manipulate or fake your copy of the data. Everyone can see everyone else’s stuff, and it engenders trust between organizations that might not otherwise trust each other.

2. Faster delivery and turnaround times

Would you like two-day shipping? 24 hours? How about same-day or two-hour express? Businesses know the faster they can get their product into a paying customer’s hands, the higher they will drive their overall user experience. Blockchain can automate certain data processes that used to be really complex, and that means it can help customers receive their products more quickly.

The race gets a purchased product into a customer’s hand ASAP is changing everything about how businesses and customers interact. Call it a lesson learned from Amazon: people love seeing things they pay for rather shortly after they pay for them. As businesses warm up to this reality, they start tweaking their operations to be friendlier on delivery or turnaround time.

This changes the standard customer journey, it changes the retail industry’s service level agreements in distribution, and it surely changes the couriers you work with on actually getting it there. The customer’s inevitable urge for companies to more quickly deliver our products is going to call for a system that can keep pace with these changes as they happen, and that system is surely blockchain.

3. They are sufficiently versatile to grow in size and complexity with a company

You can think of a blockchain as a highly modular engine for data. Blockchains are perfectly happy to store small or large amounts of data, whether they’re coming from few or many sources. By comparison to existing supply chain networks, blockchain will make it far easier get business partners connected and on the same page.

A blockchain is an interoperable piece of technology, which means it can exchange and make use of a wide variety of information and interact compatibly with other software platforms. Supply chain networks needs this capability desperately because their constituent companies can be widely fragmented from each other, from where their data comes down to the currency they do business in.

The supply chain networks that enable these business operations today grow slowly and expensively, and only as the result of complicated technical negotiations and implementations. But a blockchain-driven supply chain environment offers virtually instantaneous consensus and technical oomph to make businesses more agile by an order of magnitude. The agile businesses nowadays are focused on gaining and maintaining an advantage. Those that aren’t agile just focus on survival instead.

4. It changes a company’s relationship with paper

Supply chain isn’t exactly the most digital of a company’s overall operations. A lot of validations and verifications will still appear and be processed on paper, and that paper has to be stored somewhere.

Supply chains don’t need to be sexy on the level of a new iPhone, but in 2019 the public evolved certain expectations about technology from their private consumer lives. We want our gadgets to do the heavy lifting for us, and not long after we’re forced into using an inelegant tool to fulfill a job function, we start wondering about better ways to get things done.

Not only can blockchain successfully not inject more paperwork into a situation, but it can effectively handle the paperwork that already exists pertaining to a given supply chain. And as any more documents are produced in a business organization’s march toward its goals, blockchain can of course handle those as well.

Getting this tight a grip on supply chain’s obsession with paperwork can enable instant settlement of funds or data between supply chain partners on a blockchain. The trend for companies to go “paperless” was real throughout the 2000s, yet supply chains around the world consistently missed the message.

Now blockchain presents them with a way to keep a database thoroughly represented online, without adding any new paper to the process, and even if an individual existing processes definitely depend on paper.

It’s seemingly paradoxical how fragmented supply chains can partner up across geography and culture to achieve something greater than the sum of their parts. Strong supply chains take their data seriously, and they want to store as much of it as they can digitally in order to make it usable and computable. But other parts of a supply chain might be decades behind the times.

This is the skill of supply chain management: building strong bridges that connect these disparate entities and reminding them that they’ve all got to work together. And that’s a broad use case that blockchain technology seems perfect to fill.

Chapter 4: Problems Blockchain Can Solve in Supply Chain (And Who Is Solving Them)

Problems Blockchain Can Solve in Supply Chain (And Who Is Solving Them)

It’s slightly complicated to talk about solving problems for the supply chain because the supply chain is supposed to be a solution all its own.

The name of the supply chain game is to actively manage the business activities that maximize customer value and earn your company a good competitive edge. Supply chain management is generally obsessed with developing and running different supply chains in the most efficient ways possible. This means every step of product development is not only designed and monitored, but optimized over time. From product development, sourcing, production, and logistics to customer experience, it takes some robust information systems to coordinate these steps.

Problem 1: Provenance is easier said than done

Before we ever pick something up in a retail store or open our latest Amazon delivery, that item only arrived there after completing a long and complicated journey involving a number of parties before reaching its destination.

We see evidence of these third parties by the time we receive our product. We’ve heard all the claims before, or seen them printed on the packaging, whether we think much about it or now: companies claim their products are handmade or free range or ethical or organic. It’s a nice story to tell a paying customer, but how can we actually trust that the labels on our products actually mean what they say?

The Organization for Economic Cooperation and Development reported in 2016 that counterfeit goods account for 2.5% of all imports. That’s approximately half a trillion dollars lost per year, all while other scandals happen in parallel. Europe’s 2013 horse meat scandal saw undeclared equine meat sneaking into foods advertising as containing beef. Companies may misprint expiration dates by accident or by design.

It’s clear that the most effective supply chain processes involve being able to catch fakes and frauds.

How blockchain could solve supply chain provenance

The blockchain doesn’t exactly catch fakes and frauds, but it does operate in a way that makes it technically difficult veering on impossible for them to “hack a blockchain.” The bad guys simply aren’t allowed to participate in the first place because the system catches that their information doesn’t line up with what it already understands to be valid data, and therefore less than true.

This becomes a “go directly to jail, do not pass Go and collect $200” situation. Blockchain networks are sufficiently designed so that they simply don’t interact with invalid information. The would-be “hacker” is instantly identified as someone providing less than perfect information, and is therefore not listened to.

List of companies using blockchain to tackle this problem

Company 1: Zego 

zegoCEO: Colleen Kavanagh

Location: San Francisco, California, United States

What they do: Zego is a snack food company that offers oats and energy bars to people who live an active lifestyle or otherwise want healthy snacks. The company prides itself on the health and purity of its foods, and developed an ingredient test called T-CODE to check for pesticides, allergens, metals, and other unpleasant things that have no business in food.

How they use blockchain: T-CODE’s results are blockchain validated. You can scan a QR code appearing on the package to instantly read verified facts about the food you are eating.

Company 2: Fr8 Network

fr8-networkCEO: Sloane Brakeville

Location: San Francisco, California, United States

What they do: Establishing itself at the intersection of “logistics, technology, and design,” Fr8 Network is a blockchain-focused company aimed at reducing waste in the global industry, a key consideration for any supply chain of a certain large size. The network offers a solution that keeps verified track of each leg of a shipment’s journey from the manufacturer to the consumer at global scale.

How they use blockchain: Trucks (and their shipments) are logged where and when they arrive somewhere as they move a trailer from one place to another. That data is stored in a blockchain where it can later be teased apart to troubleshoot shipping problems, design new routes, and maintain the overall health and stability of the logistics industry.

Company 3: TBSx3

tbsx3Founder and Director: Mark Toohey

Location: Sydney NSW

What they do: TBSx3 is an international trade platform aimed at combating fake products. The company’s own product allows for tracking shipment movement and any logistics with enhanced confidence. Having that data on hand makes it easier to identify when anomalies take place that can be associated with smuggling contraband or other foul play.

How they use blockchain: The data on how shipments come and go is entered and stored in a blockchain in conventional trustless fashion. Whether or not people trust each other in real life, they can trust that they all have the same access to the same accurate data. From there, they can transact data and money amongst each other without and third party interference or assistance involved.

Problem 2: Food safety needs to improve

If the blockchain can help you confirm that the banana you’re eating today arrived in the grocery store yesterday, then it should also be able to confirm that the banana met a high standard for cleanliness and food safety on the way to the grocery store. The situation is probably worse than you think.

The Centers for Disease Control and Prevention investigated 17 different instances of foodborne illness in 2018. This included salmonella appearing in melons as well as the notorious E.coli in romaine lettuce craze. And this still happens even though the US clears a high bar for food safety. So what exactly is going on?

That’s a multilayered question to pick apart, but blockchain helps change the conversation if you were actually going to do so.

How blockchain could solve food safety

Just as other data about food might be stored on the blockchain — the farm where it originated and when, for example — that data might also confirm with high confidence that the food was grown, handled, and transported on terms that cleared a high standard for cleanliness.

This part of the supply chain process for food is largely invisible, at least to the American consumer. But it is highly dependent on people meeting certain regulations and doing what they say they’re going to do, in terms of how food might be gathered or prepared for sale.

Blockchain can’t exactly “solve for food safety,” but it can help humans establish a spectrum of trust and confidence in where food comes from and how it got to the grocery store.

List of companies using blockchain to tackle this problem

Company 1: Walmart

WalmartCEO:  Doug McMillon

Location: Southern, United States

What they do: The retail giant is American legend at this point. Walmart sells everything you can think of under one roof, and this absolutely includes food and produce.

How they use blockchain: Together with sister retail company Sam’s Club, Walmart has taken a stab into blockchain-powered food provenance. The company gave themselves a one-year deadline in September last year to achieve this, and have only been running for a month or so. There are two different blockchain projects afoot here, one tracking the origins mangoes sold from Walmart’s various US stores, and another one tracking the pork that’s sold via the company’s different Chinese outlets. There’s no long-term data to examine yet, but the initial signs are great: the new systems shrink the time necessary to trace food origins and shipping provenance has dropped from seven days to just 2.2 seconds.

Company 2: IBM Food Trust

IBM logoCEO: Arvind Krishna

Location: Southern, United States

What they do: Computing giant IBM is rolling out an enterprise-scale blockchain for food provenance that helps stakeholders find new supply chain efficiencies, maintain reputation and brand trust, and ensure a certified level of food safety.

How they use blockchain: Food traceability methods are outdated and incompatible with modern times. Regulators want state-of-the-art best practices and modern technologies to ensure food safety, and IBM’s (perhaps unlikely) foray into food provenance uses blockchain validation to disclose in trustless fashion where that food came from. If there is a serious food problem — let’s say a bad crop of potatoes was 100 percent guaranteed to make you puke if you ate one — the system makes recalls vastly simpler and more effective by identifying the specific locations a batch of food was delivered to or sold to a customer.

Company 3: Carrefour Group

carrefourCEO: Alexandre Bompard

Location: Boulogne-billancourt, Ile-de-France, France

What they do: This European food brand is known for its frozen chickens, but sells eggs, cheese, milk, and more to hungry grocery shoppers. A number of these products might be advertised as “free-range” or “organic.”

How they use the blockchain: A code on each individual food package lets you read blockchain-validated provenance information about your food and where it came from. Carrefour is using blockchain technology confirm its famous free-range Carrefour Quality Line Auvergne chicken was actually raised in free-range fashion.

Problem 3: Transaction settlements take too long

It can be a highly expensive and logistically complex undertaking to get a bunch of segmented individual organizations to come together and form something as ambitious as a supply chain. As you get things up and running, tune your processes, and dial things in, you’re definitely going to have to pay some money to people, and they might be very far away and use a different currency.

Large corporations like Apple have gone multinational in their effort to design and manufacture fancy gadgets for consumers to enjoy. It requires that they interface with China rather a lot, as that’s where manufacturing partner FoxConn is based. It isn’t exactly a frictionless process to send international payments around a supply chain when that chain reaches around the world.

There are lots of middlemen and bureaucrats happy to waste your time and money on your simple journey to move money from one place to another. Transaction settlements at the supply chain level, especially when it’s multinational, are complex and take too long.

How blockchain could solve transaction settlements

Blockchain methodology thrives on automating payments with smart contract technology, and validating that the transaction took place exactly as expected with no foul play detected. This is what is already happening at wide scale among Bitcoin and popular cryptocurrencies today. By rendering these complicated financial transactions as nothing more than a valid blockchain entry, virtually any company in the connected world can team up with each other, conduct commerce, and effectively collaborate.

Decentralized payments without a middleman involved are effectively the first use case that blockchain technology presented to the world. Moving value from one place to another, regardless of the currency used there, is easy now.

List of companies using blockchain to tackle this problem

Company 1: SecurCapital

SecureCapitalCEO: Steve Russell

Location: Sherman Oaks, California, United States

What they do: SecurCapital Corp is a supply chain and financial services company in California that recently announced the acquisition of small business lender BreakoutCapital Finance’s lending business. With assets under management, the company offers different entities online access to cash in order to maintain sales momentum and keep business running when collection might be going a little more slowly than usual.

How they use blockchain: Outside of its lending business, SecurCapital offers a variety of fintech services and blockchain consulting to those who may need it. 

Let the existence and activity of blockchain businesses specifically focused on supply chain matters come as a great relief to you, if you are any kind of long-term blockchain advocate. Already making the largest banking institutions in the world flinch, blockchain now has its sights set on a new collection of industries. Or more accurately, the domain experts in these industries see the potential promise blockchain has for taming a wild and unpredictable blockchain.

Talk of blockchain is rather consistently filled with mention of transparency, security and Bitcoin. But the finished version of this emergent blockchain paradigm is one in which blockchain isn’t mentioned at all. These software products, whether they interface with the real world or not, will just happen to be blockchain products. This distinction between that which is blockchain-enabled and that which is not definitely isn’t very interesting to the average person. People only want to talk about things that they either already understand or are genuinely curious about, and the blockchain doesn’t do an especially good job with either of these.

But no matter: there is a strong initial swell of business activity where blockchain deployments meet supply chain needs. Now let’s talk about where blockchain can take the supply chain in the future.

Chapter 5: What’s the future of blockchain in supply chain?

What’s the future of blockchain in supply chain?

Supply chain is perhaps the perfect niche for blockchain to take over because it is rather widespread and confusing, yet there is lots of room to demonstrate major improvement, for example: 

1. Blockchain-enabled data visibility will improve supply chain operations at large

“Logistics managers will be able to see their specific order from the time it’s assembled on the factory floor, through distribution, and onto the retail shelf (even beyond),” said Rob DeStefano, senior product marketing manager for Ivanti Supply Chain. “Riding on the blockchain wave, traceability will be real-time and comprehensive, which will be critical in areas like the cold chain. Businesses will be able to deepen relationships with customers, offering information about sourcing, labor and environmental practices, all of which are increasingly influencing consumer purchasing decisions.”

2. Automation

Supply chain was dependent on human labor (and still mostly is) in order to fulfill its business purpose. It isn’t always easy to get disparate manufacturing partners working together when they are separated by time zones or language, so automating the interaction as much as possible with help from data will help everything. “ Trends show that we are moving into the digital supply chain age, however, there are critical components of supply chain management that require human labor,” said Ryan Chan, CEO and founder of UpKeep Maintenance Management. A [computerized maintenance management system] improves productivity by digitally tracking asset depreciation and availability, so that a supply chain manager can better make data-driven decisions for supply chain planning and determining cost strategies.”

3. High integration

Piggybacking on rising automation as blockchain becomes the supply chain norm, these systems are also going to become highly integrated with each other and compatible with a wide variety of data sources. “In the coming years, supply chain management systems will enable closer integration and collaboration with key suppliers,” said Bill Leedale, senior advisor at IFS. “This may take the form of portals and extended software systems, or it could involve using the type of software historically used for customer-relationship management for supplier-relationship management.”

4. The technology will continue to be developed and improved

Increased integration means everything will start being compatible as a data source for blockchain networks managing a supply chain. As this trend unlocks new efficiencies and wins new attention for the space, the technical people who were there from the early days will continue tinkering around for ways to improve the underlying technology rather than make it more compatible with existing data sources. “As supply chains advance into the future seeking better efficiency and more streamlined automation, I see AI and real-time video surveillance as two major factors that will ensure supply chain accountability and success,” said Charlie Wilgus, general manager of manufacturing and supply chain executive for Lucas Group.

Supply chains can be complex, fussy business entities that don’t want to coordinate with their constituents. They can be separated by vast distance or language that makes it less than totally easy to tell them what you expect (and then get it).

Although there’s loads of positive blockchain-driven potential waiting just over the horizon for supply chain, there is a shoulder’s-length attitude here for many. They may be skeptical of new technology, they may be perfectly happy with the complicated system they depend on now. But these lone opinions aren’t about to stop or slow the work of the other people already building and running companies in this niche.

As blockchain implementations in the supply chain space start changing the conversation about how complicated and messy this part of business is, market participants stand to notice a variety of positive changes throughout the entire shopping or purchasing experience.

Supply chain touches a little bit of everything about a business, from how it sources its parts to what standards those parts need to meet as they come together in a product for sale. Small positive changes at this deep-rooted level can end up paying dividends by the time there’s real customers involved.

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Disruptor Daily's Podcast dedicated to interviewing the world's top thought leaders on practical use cases for blockchain technology.