Blockchain, the solution to disrupt a broken Supply Chain industry? (Part II)

Part 1 of this article described the current issues in the supply chain industrty and how Blockchain can solve some of these issues. The second part of this article is designed to provide a practical overview of how Blockchain is implemented in actual business scenarios by IBM Hyperledger.

Bridget van Kralingen, senior vice president, IBM Global Industries, Solutions and Blockchain recently stated:

The major advances IBM has made in blockchain have shown that the technology can foster new business models and play an important role in how the world works by building smarter businesses.

This article focusses on two specific industries: retail and container shipping.

Increasing food security with Blockchain

Walmart and IBM recently partnered on a supply chain project in the food industry. Walmart contracted IBM to trace the production of two goods: mango and pork. The advantages of using Blockchain in the food industry are twofold: increase transparency and monitoring capability. Blockchain leads to better inventory management by recording food flows among key stakeholders. Greater transparency reduces inventory and compliance cost. The following two flow charts illustrate information flows in traditional and Blockchain-powered supply chains.

Figure 1: Information flow in the traditional supply chain industry
Figure 2: Information flow in a Blockchain-powered industry

As shown in Figure 1, information in the traditional supply chain industry flows one way, which means it takes a significant amount of time to share the information among all stakeholders. As shown in Figure 2, a Blockchain platform could considerably facilitate the flow of information in the supply chain industry. It would allow information to be shared in real time among all relevant stakeholders.

Blockchain is used to record information including farming conditions, packing method, transportation methods and conditions, border crossing method and compliance with local laws and regulation. IBM also makes sure to include information concerning the product processing, distribution center, and store where the product is purchased. Eventually, Walmart and IBM allow the customer to access relevant information via a mobile application and QR code.

Innovative use of technology presents many advantages for Walmart. It allows the company to increase the trust of customers as they can trace the product from farm to store. It drives up the company revenues by reducing waste and improving inventory management. Finally, Blockchain improves decision making process for managers by recording high-quality data in real time.

Figure 3: Supply Chain of Walmart mangos; source: IBM.com “Using Blockchain for Food Safety”

Facilitating international trade with Blockchain

Another project led by IBM aims to disrupt the shipping industry using Blockchain technology. In March 2017, IBM announced it partnered with Maersk, the world’s largest container shipping company. Their main goals are to:

1. Reduce unnecessary paperwork, fraud, errors, and transit time;

2. Improve the monitoring of containers and inventory management;

3. Increase cooperation and communication between companies and government entities to develop a better supply chain and ensure products are delivered in a timely manner.

Although the amount of data processed is extremely large, there is little data sharing to avoid leaks of industrial secrets. Another important issue with the current model of international trade is that it requires an overwhelming amount of paperwork. For each container, hundreds if not thousands of paper documents need to be produced and printed. This causes a large number of inefficiencies including small errors, which can translate into important delays and increased cost. Blockchain allows real-time recording of transport information such as mean of transport, departure time, delays, owner and transport conditions. This information can be used to optimize business operations.

Blockchain data can be used to forecast consumption patterns, issues and related business activities. Facilitating access to shared information also allows companies to draw better forecasts and better understand the customer needs while protecting their privacy.

Conclusion

Blockchain remains a young technology and more research is required to facilitate its use at scale. In order for the technology to be implemented successfully in the supply chain industry, Blockchain must work and operate with other technologies such as artificial intelligence, machine learning, Internet of Things, digital identity, etc. The purpose of these two articles was to provide a brief overview of supply chain and Blockchain technology.