How will blockchains impact supply chains?

10/17/2017

If you work in the supply chain industry, you may be wondering how or when blockchain systems will impact shippers. Blockchain is a great fit for the supply chain because of the huge number of players and transactions involved, so it’s no surprise that it’s now getting attention.

What are the advantages for people in the supply chain?

In my experience working with companies for over 30 years, getting access to the right data is never easy! Right now supply chain managers are often relying on a fragmented system of exchanges that don’t give them great visibility of how goods move through the system. The blockchain would move many separate, exclusive transactions to a central database where they, and other parties they’re working with, could get a much better view of the big picture. It would give them a better understanding of how goods are moving through the system in real time.

The E.coli outbreak that happened with Chipotle is an example of why a central system like this is needed. The HBR article “Global Supply Chains Are About to Get Better, Thanks to Blockchain” explains how because of the inability to monitor suppliers in real time, “Chipotle could neither prevent the contamination nor contain it in a targeted way after it was discovered.” A blockchain ledger could have, for example, enabled them to monitor the sterilization procedures taking place at their suppliers’ facilities, or know which locations had the contaminated meat without delay. 

What are the challenges?

One of the most obvious challenges with blockchain adoption is concern over sharing information with a wider group of people. Although a blockchain can either be open to the public or confined to a group, it means more eyes on data that was previously shared between one or two parties. In a time where data security is a growing concern, people who might have championed this initiative in the past could be hesitant take responsibility for anything that goes wrong.

Another issue is coordination.  If data isn’t exchanged in a consistent way, the central ledgers could easily become a mess of information that causes more harm and misinterpretation than good. Since many partners are involved, it’s not always clear who should lead and who should follow.

What should we expect in the future?

It’s likely that a few larger companies that test out blockchains, like Toyota, will set the standard for others. Toyota has partnered with MIT Media Labs and others to try out blockchains in conjunction with self-driving vehicle technology. IBM is also one of the players trying to lead the way in the supply chain industry and released a platform this July that companies such as Maersk and Everledger are testing.

Will managers and leaders see enough value in these system to make the investments needed to move forward? It’s too soon to tell. Whether the blockchain moves forward for supply chains or a new system leapfrogs this one, it will be interesting to see the research and refining ahead.