What are some potential applications of blockchain to the supply chain? How realistic and imminent are these applications? What should 3PLs be doing about blockchain?
The essence of blockchain is the replacement of “middlemen” or institutions, with online technology that enables accurate, direct, safe, secure, and instant peer-to-peer transactions of any sort. An additional benefit is a permanent, unchangeable record of provenance for any thing. Therefore, blockchain holds theoretical long term potential to completely disrupt and even replace institutions from large businesses to entire governments. However, the bitcoin currency story is the perfect example of the tailwinds–and headwinds–such massive changes encounter. Threats and opportunities exist simultaneously with human inertia and idealism. Disruptors and pioneers are in the midst of years-long investments to exploit the technology. The technical challenges are one headwind. Convincing individuals to move their trust from familiar, proven systems to a fundamentally different model is another years-long endeavor.
Blockchain and 3PLs
For supply chains, blockchain has tremendous potential for unprecedented transparency. An unchangeable record, or provenance, for any part or material can be available, tracing the object back to its first true source. Every object’s every touch point–including everything that was added or removed, and how it became part of a larger object could be included.
Spend Matter’s Jason Busch explains blockchain’s application to the supply chain this way: “It has implications far beyond payments via bitcoin. The ability to truly externalize a ledger with n-tier participants is incredible. For example, think about the ability for cascading POs, invoices, change orders, receipts, ship notifications, other trade-related documents and inventory data across a supply chain to move beyond basic matching to trigger threshold-based payments, replenishment, aggregation programs and more based on codified rules in a specific blockchain. What makes this possible is a new, externalized platform — a radical new type of system of record that brings with it shared rules, understanding and more.”
As blockchain exists today, anyone online would have access to this information–total transparency. Some brands and buyers will view this as a leveling of the playing field. Others will see this as a limitation of the technology, an intrusion into their ‘secret recipe’ or their competitive advantage.
On the other hand, a shared, unchangeable and permanent ledger with codified rules potentially could replace internal audits of systems and processes. Perhaps later, external audits like ISO could be completely automated, or even replaced with a set of rules that automatically checks blockchain records as objects develop and move through the manufacturing and distribution processes.
For the moment, blockchain technology shows more potential than active application to the supply chain world. There is great promise; the hype is not science fiction. Yet technological challenges, plus human trust and inertia are factors that will requires years of additional development or evolution before blockchain realizes its full potential as a disruptive force.