Blockchains in Supply Chain Management: A Deeper Look (Part 1)

Blockchains are being explored by many industries, from cloud storage and healthcare to insurance and legal services. The supply chain management industry hasn’t been left behind, and it’s leading the world in research and development of blockchain technology to solve some of the challenges that have plagued this industry for so long. But how exactly will blockchains impact the supply chain industry, and will they finally bring an end to inefficiencies in this sector?

THE HISTORICAL CHALLENGES

To understand why the blockchain is a godsend for supply chain management, one has to understand the challenges faced by the industry. Top among them is insufficient data between the involved parties. This usually stems from the deep-rooted distrust between the parties which hinders them from freely sharing data among themselves. Even when the data is shared, the recipients have little trust that it is accurate and not ill-intended.

Speed is crucial in this industry, and yet the existing systems have crippled the swift movement of goods. Lack of interoperability of systems and disparate and non-standard record keeping are just a few of the contributors to the slow movement of value in supply chains.

The opaqueness of supply chains is also a big problem, especially in industries such as food and drugs. In these sectors, trusting the ingredients used and the process by which everything is put together is an essential part and may even be the defining factor as to whether one gets a license to operate or not. The only way people can have confidence and trust in the process is for them to be able to track and trace ingredients from production to the final process.

ENTER THE BLOCKCHAIN

A blockchain is a decentralized ledger in which all entries are immutable. This makes it ideal for the supply chain management industry. While the application of blockchain technology in this industry is still in pilot stages for most companies, the results so far have been positive, and in the very near future, blockchain application in this industry will go mainstream. From retail to shipping, blockchains are being embraced fully, with some of the companies on the front line being:

Walmart

The world’s largest company by revenue, Walmart demonstrated its intention to employ technology to improve efficiency when it patented its Smart Package application. Smart Package uses a blockchain-based tool to track packaged contents as they move through the supply and distribution chain, keeping track of factors such as environmental conditions and the location of the package. This is done through the recording of unique addresses on the blockchain platform such as the seller’s private key address and the courier’s private key address. Walmart has also continued to partner with IBM in the development of blockchain-powered applications for use in the supply chain industry.

Maersk

Maersk announced earlier this year that it was partnering with IBM to form a company that would be headquartered in New York and whose aim would be to provide more secure and efficient methods for conducting global trade using blockchain technology. The company will develop solutions for shipping companies, port authorities, customs offices, banks and other stakeholders in global supply chains to replace tedious paperwork with a decentralized ledger. The Danish shipping giant has been working with IBM for close to two years now, and it’s already in the pilot phase of a blockchain-based platform for its shipping line.

UPS

The package delivery company, which also provides supply chain management solutions to its clients, joined the Blockchain in Transport Alliance (BiTA) late last year. BiTA is an alliance formed by various supply chain industry titans for the development of blockchain standards for the freight industry. UPS has stated that its goal in exploring blockchain technology is to develop sustainable strategies that enable UPS clients to participate in global trade.

JD.com

China’s largest e-commerce company made the announcement last month that it would partner with Australian startup InterAgri to develop a blockchain platform to track beef imports from overseas suppliers. The platform will record information on such activities as the breeding of cattle, processing, and transportation to final consumers. JD.com is also a founding member of the Blockchain Food Safety Alliance, which seeks to implement blockchain technology to introduce transparency in China’s food supply chain. IBM, Tsinghua University and Walmart are the alliance’s other founding members.

These are just a few of the many companies that are testing blockchain technology in their supply chains. Others include FedEx, Procter & Gamble, Daimler, Bridgestone, and AmerisourceBergen. BiTA alone has 60 members, and it expects to sign many more up before the end of the year. As more development and research in this technology is carried out, the number of interested companies will continue to rise. Who knows, blockchain technology might become a necessity and not a luxury in the supply chain industry in the near future.

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Stay tuned for part two of this three-part series.