The future of blockchain in the supply chain industry

6

October

2019

5/5 (1)
Source: (Miller, 2019)
Source: (Miller, 2019)

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/

Please rate this

You Think You Can Fake It Till You Make It? VeChain Will Make You Think Again.

12

September

2018

No ratings yet.

Are you tech savvy? Are you a neophile? Perhaps you are, perhaps you are not. But if you are using internet or social media, you have most likely heard of ‘BitCoin’. And if you heard of BitCoin, you heard of ‘Blockchain’, the buzzword of the year 2017. The blockchain technology is believed by some to be capable of disrupting the global financial system. But did you know it is also capable of disrupting the supply chain system?

VeChain Foundation is a non-profit company based in Singapore that leverages the blockchain platform to offer enterprise-level digital solutions. The company has successfully implemented solutions across various industries such as agriculture, liquor, and luxury goods. Recent exciting collaborations, however, show VeChain’s penetration into other industries such as insurance, telecommunication or automotive. The focus of this post will be on the luxury goods industry.

The lucrativeness of the luxury goods industry is the biggest reason why high-end companies became the victims of counterfeiting. Online counterfeiting cost luxury brands more than 30 billion dollars in 2017. However, not only companies are the victims of counterfeiting, but also their customers. To tackle the issue and help both businesses and customers, VeChain establishes a personal connection between luxury brands and customers and enables the traceability and transparency of the supply chain. That is, VeChain enables a user to track a whole journey of a product in real-time. Furthermore, the immutability of blockchain ensures that once data are logged into the platform they become unchangeable and thus, ensures the authenticity of the product.

Luxury brands are one of many partners of VeChain. The company is gaining a support from the public as well as private sectors. For example, the Chinese government partnered up with VeChain to receive a drug and vaccine traceability solution after the vaccine scandal. Other partners include Renault, PwC, Givenchy, BMW, Unilever, Kuehne & Nagel, DB Schenker and many more.

VeChain appears as a promising platform but why is its price dropping? Is it just another hype or will blockchain eventually transform the way businesses operate?

 

Sources:

  • https://www.vechain.com/
  • https://www.tradevigil.com/negative-effects-counterfeiting-brands/
  • http://us.fashionnetwork.com/news/Luxury-brands-lose-30-3-billion-due-to-online-counterfeiting-in-2017,977979.html
  • https://www.straitstimes.com/asia/east-asia/in-china-vaccine-scandal-infuriates-parents-and-tests-government
  • https://coinmarketcap.com/currencies/vechain/
  • https://vechaininsider.com/partnerships/a-complete-list-of-vechain-partnerships/

Please rate this

The End of Warehouses

17

September

2016

5/5 (2)

In the original supply chains products move from supplier to customer meeting a manufacturer, distributor/warehouse and a retailer on the way. Products are produced in places where it can cheaply be produced and are then shipped to a big warehouse. From there it is moved to retailers, which sell it to customers.

Everybody is familiar with this supply chain. Especially when it is about clothing. But, some changes are on their way. The increased IT possibilities are making this a vulnerable market. To become a vulnerable market, the market must become easy to enter due to technological changes (Granados et al. 2008). Where the classic clothing industry was built upon brands which sold their products through retailers (like ‘De Bijenkorf’ or ‘El Corte Inglés’) there are now retailers selling clothes without owning a single B2C retail shop (like ‘Zalando’). This market is attractive to attack, there is a lot of profit to make. And difficult to defend, online shopping is easy and quick. And thus a vulnerable market.

Because of the shift from offline retailers to online retailers already one step in the supply chain is doomed to disappear. However, that is not where it stops. A new IT improvement can change this market again. At this moment the online retailers are struggling to give customers the right product. Lots of products are returned because it cannot be fitted as customers can in the offline shops.

Start-ups are creating solutions to solve this problem. Apps are being developed where customers can identify their exact sizes so this app can give you an advice about which size you should order. Regardless the sizing method. They even make it possible to order tailor made suits without being in a shop.

In my opinion this new development will change the market again. Another step in the supply chain becomes obsolete, the warehouses. Why store a thousand black ‘M’ size shirts in a warehouse when those shirts can be tailor made and send to the customer directly. This development even creates the opportunity for brands to sell their clothes directly to customers and skip the online retailers like Zalando.

What do you think? Is this development the end of warehousing? And can this already mean the end of newly fast-growing online retailers? Is this a vulnerable market again?

 

(1) Granados, N.F., Kauffman, R.J. & King, B., 2008. How Has Electronic Travel Distribution Been Transformed? A Test of the Theory of Newly Vulnerable Markets. Journal of Management Information Systems, 25(2), pp.73–96.

Please rate this