The future of blockchain in the supply chain industry
Blockchain is the promised land for lean transactions, they do not require a middleman anymore since trust is established by cryptography. Although it all sounds very realistic, how fast can we actually make use of it on a greater scale? More specifically, how can a modern supply chain make use it the new technology?
I will start with a short explanation of the blockchain technology. It is a decentralized database, which stores a registry of assets and transactions across a peer-to-peer network. These transactions are secured through cryptography, over time a transaction gets history, or time stamped, and is locked in blocks of data. These blocks are thereafter linked together. However, not all blockchains are the same. One should consider permissionless (open, public) and permissioned (closed, private). (Alicke et al., 2017) In this article we only consider closed/private blockchains.
Supply chain has potential benefit from blockchain as it is mostly complex and not transparent. The reliability and integrity that is needed in supply chains is part of the blockchain technology. E.g. to see the chain of ownership of goods (to trace all products to its source), and thereby have the option to eliminate illegal items, items produced with child labour and the like. Moreover, records cannot be deleted from the chain, there is no way wrongdoers can screw the system. (Marr, 2018)
In the supply chain one can think of the following applications. First, slow and manual processes can be substituted. Secondly, traceability can be enhanced. And supply chain related transaction costs can be reduced, e.g. by using blockchain for making payments. But in order to get there a lot needs to change. For example, data accuracy and availability, generating company wide standards that even go beyond your own company (in your supply chain), who will pay and who can do it (highly educated talent is needed). (Alicke et al., 2017) & (Marr, 2018)
In my opinion, blockchain has great potential but should be considered an option, not a must. The complexity and costs that come along with the new technology might not always pay off. Simpler and faster solutions might also very well do the job. Moreover, many companies do not seem to be ready for it yet. Data, knowledge, employees’ mindset and more cooperative IT and business leadership is needed to make blockchain adoption successful in your supply chain. Which is confirmed by my own experience, from working in corporate and scale up companies that want to adopt new technologies as much as possible.
References:
Alicke, K., Davies, A., Leopoldseder, M., & Niemeyer, A. (2017). Blockchain technology for supply chains–A must or a maybe?. Retrieved 6 October 2019, from https://www.mckinsey.com/business-functions/operations/our-insights/blockchain-technology-for-supply-chainsa-must-or-a-maybe
Marr, B. (2018). How Blockchain Will Transform The Supply Chain And Logistics Industry. Retrieved 6 October 2019, from https://www.forbes.com/sites/bernardmarr/2018/03/23/how-blockchain-will-transform-the-supply-chain-and-logistics-industry/#131b03ad5fec
Miller, J. (2019). Microsoft and Intel Believe that Blockchain Technology is Not Upto Scratch. Retrieved 6 October 2019, from https://www.cryptonewsz.com/microsoft-and-intel-believe-that-blockchain-technology-is-not-upto-scratch/19489/
