Ready for Block Chain Supply Chain
Inspired-Search | 9 October 2017
Written by: Annemieke Gelder
With the amount of innovation and digitalization around us, these are probably the most exciting times for Supply Chain professionals. In the next series we will discuss a couple of key Supply Chain trends and considerations for your strategic and organizational needs and to shape your next generation supply chain.
There are still a lot of unknowns about Block Chain technology. The benefits and application for Supply Chain are however very advantageous. Industry leaders, technology partners in cooperation with port & customs authorities could lead the way to mature and accelerate the technology adoption and platform development.
Introduction to Block Chain
If you would like to know a bit more about Block Chain technology itself, I recommend reading the following: “A complete Beginner’s Guide to Block Chain”.
Block Chain technology ideally lends it for multi-party and highly transactional business processes. The benefits of block chain seem to be very straightforward:
- Transaction ledger is updated without delay to all parties and
- Multi-party usage and access to the technology
- Auditability of the transaction allowing for transparency and traceability
- Cost reductions
Block Chain benefits for Supply Chain
In particular for supply chains we could expect increased transparency, high traceability of the goods or shipments, one ledger for relevant shipment documentation and easy sharing across the many parties.
This will not only allow for timely access to any critical documentation; also providing a good history or ‘chain of events’. This traceability is useful for internal or external audit requirements, real-time tracking of shipment but also for more specific causes and building trust with customers or consumers.
Some specific industries, materials and products are subject to a higher compliance scrutiny than others, e.g. to avoid and rule out the trade of ‘blood diamonds’, tracking of rare earth back to it’s source, GM modified crops etc.
Time to start Block Chain
Currently, block chain is still considered as an emerging capability in the Supply Chain arena, as a result of the complex technology, competing platforms, unknown regulatory implications and implementation challenges (see model 1). However, the technology is increasingly and successfully applied in the financial markets and service industries and countries like Japan and Hong Kong endorsing the technology
For the implementation of block chain technology a number of other items need to be considered:
- Readiness of the (high) number of parties involved in the end to end supply chain
Model 1: benefits of block chain are held back by undefined industry consensus and access to plug & play technology
Block Chain Scalability
There are technical limitations to the mining of blocks, their verification is time consuming and the theoretical capacity of each block is limited. Private block chains with a limited number of transacting parties (and nodes) – as would be applicable for supply chain transactions – are however less constrained by some of these issues.
A further consensus among the participants (peers) for simplified validations can help to reduce resource consumption on the block by adopting a model of notification that which requires only further validation in case of transaction conflicts or exceptions.
The technology is yet to root out these issues and continue to put limits to scalability and the pace thereof. Use cases and consensus across various communities, will help establish a mature technology and the necessary consensus platform among supply chain industry partners. It is therefore critical for the supply chain industry to play an active role in maturing the technology.
Some parties may want to avoid playing a leading role in the technology arena and will for readily available and proven ‘plug & play ‘solutions. Taking a leading role can generate a competitive advantage, specifically in your overall customer service offering. Such leading role can help to define the technology standards and solidify partnerships with technology and industry partners as well financial institutions.
Companies’ drive to be a leader or a laggard to adopt block chain, will highly depend on it’s own ambitions, needs and resources. At the same time it can be argued that interest groups too should consider a pro-active participation in order to achieve their sustainability objectives in partnership with the industry.
Adoption of Block Chain in Supply Chain
With the objectives being clarified, the readiness and approach is to be considered. Supply Chain leaders can take a leading role can help driving the adoption through mandating your supply chain partners or else be ‘out’.
An alternative and probably more realistic approach would involve a proof of concept, focusing on a niche area; whether it be a product, a supply route or supply chain partner. The essence is to narrow down the participants to a limited number of partners while establishing the experience and any benefits in a secure and trusted environment. Such trial should involve a technology partner on the learning & adoption feasibility. The recently signed MOU by PIL, IBM and the Port of Singapore Authority would be a leading example.
We would like to start hearing from technology, industry and other interest parties that are yet moving forward with the technology in Supply Chain to voice out their capability and seek out ways to expand the usage and start shaping the consensus platform.
Annemieke Gelder has over 16 years experience in end-to-end supply chains across different industries. She is a certified Procurement Professional (MCIPS), Project Manager (PMP) and holds a MSc Business Administration in Supply Chain of the Rotterdam School of Management. She recently set up www.supplydirection.com to channel her learnings and views on supply chain trends, as well help businesses shaping and improving their supply chains operations.
Reading more blogs of Annemieke?
Consider reading her blog: A Solution Approach to Chaos in the field of Operations and Supply Chain – VUCA3.0