IBM and the Big Data Behind Blockchain and your Supply Chain
Blockchain is being heralded as the next great supply chain revolution but what does that mean and how does it work? Since so few of us have had the opportunity to use a blockchain system, many of the concepts behind it seem rather vague and abstract. How can this technology used for bitcoin be of any value to my supply chain?
To understand that you first have to recognize what blockchain is and what it isn’t. That’s because blockchain is simply a tool. A tool that enables a great deal of customizable visibility and data transfer. As more and more companies embrace big data, the need for tools to capture and align that data has risen to the fore.
Big data is the capture and computation of extremely large data sets that are analyzed to reveal patterns, trends, and associations, especially relating to human behavior and interactions. In the context of a supply chain, when we consider the transactions an item goes through from manufacturing until purchase, it becomes evident that there’s a vast amount of information that’s lost in the process.
So, what if we could harness that information and use it to inform our decision making? That’s where blockchain’s value really begins to shine.
According to Blockchain for Dummies IBM Limited Edition blockchain is defined as follows:
‘Blockchain is a shared, distributed ledger that facilitates the process of recording transactions and tracking assets in a business network. An asset can be tangible — a house, a car, cash, land — or intangible like intellectual property, such as patents, copyrights, or branding. Virtually anything of value can be tracked and traded on a blockchain’
Modern supply chains are inherently complex. Consider the screen that you’re reading this article on. The road that screen traveled to you was paved with numerous transactions. It went from a purchase order, to being packaged and shipped. It’s been loaded and unloaded in multiple trucks, placed on pallets then carried by forklifts, stacked in a shipping container, voyaged over at least one ocean, cleared two countries’ customs agencies, reloaded on a truck, and placed in a warehouse or distribution center. And all of this occurs before it even arrives on the store shelf for purchase.
The way most supply chains work, the company that ordered the monitor will have limited knowledge about what occurs between factory and arrival. Typically, a shipper will receive a bill of lading and a few tracking numbers. Beyond that, their guess is as good as yours as to what occurred at all points in between.
But all these instances that occur are recorded…somewhere and by someone at each point along the way. These physical occurrences are digitized and become records in one of any number of systems. Systems that no external party, including the shipper, can access.
So, what if there was a way for that same shipper to see all of the data points that they wish to see, among numerous parties all using different systems, via one standardized and unified ledger? A ledger that is distributed to all necessary parties and that doesn’t require them to replace their existing systems. How would that work?
Blockchain Now
IBM’s Ramyanshu Datta, program director and blockchain product manager, recently joined us on Consulting Logistics presented by Aborn & Co. to talk about IBM Blockchain.
IBM sees blockchain as the solution to a massive blind spot in nearly all supply chains.
“The problem in today’s supply chain is about clients not having sufficient visibility into the process with multiple intermediaries as well as not having the same version of the truth or record.” said Datta.
In IBM parlance, a founder is anyone who initiates a ledger on their blockchain. That founder can then create blocks on the chain for as few or as many parties as they see fit. That ledger is then distributed to all necessary parties and each one would record whatever specific data the founder requested in their block on the chain. Each exchange of service is a transaction, each movement of a good is an event. Now, that founder can see each exchange and each event in one centralized location on this shared ledger. This blockchain.
“A shared ledger is only one component of blockchain. The other component centers around trust, which is based on the immutability of transactions. As well as an audit trail of every single transaction. Coupled with privacy where you can enable who sees what. As well as smart contract to automate a lot of supply chain process. A combination of these 4 factors is what blockchain provides.”
A smart contract is a way to execute transactions and record information onto the ledger without human intervention. So, if a shipper were to require that all arrival scans at a certain point be entered into the ledger, the system could be set up to automatically record that at the point of scan.
Many of these things may seem similar to what EDI already does. The problem is that EDI is limited in that it is still point-to-point. Data isn’t shared among multiple parties so it’s function in visibility is inherently limited by its form.
“So, why is EDI still relevant? EDI is the result of three or four decades of fights in the supply chain industry to arrive at few standard formats. There still isn’t one standard format”
In fact, blockchain isn’t intended to be, nor should it be thought of as a replacement for systems like EDI. In many ways, for the system to work, it has to play nice with multiple existing systems. That’s because it’s intended to leverage and enhance those existing systems. IBM is developing their solution with backwards compatibility in mind.
“Our approach is to combine the power of blockchain: shared ledgers, trust, transparency, privacy, with the existing advances and standardization of EDI” Datta said. “We are going to provide APIs so you can connect this with your existing systems.”
Visibility isn’t always a good thing, in fact there may be a number of things you don’t want other parties involved in your supply chain to see.
“Blockchain will give you privacy, but it’s privacy at a document level. [A founder] can decide which fields [on a document] are shared with who.”
Your commercial invoice, for example, could be included as a document in the blockchain, but you could decide which parties on the chain would be able to access it.
Shared visibility shines a light on discrepancies.
“Many of those concerns aren’t discovered until the invoicing period, which could be 90 to 120 days out.”
In a blockchain system, those issues would be seen as they occur along the chain and could be addressed in real time. Since all parties involved are using an agreed upon ledger, disputes would be much easier to settle due to this shared version of the truth.
Next Stage
As important as data is, there are barriers to capturing the totality of it. Modern technology is changing that with artificial intelligence (AI) and the Internet of Things (IoT). AI and IoT would enhance blockchain by adding vital data points and by using that information to become smarter.
“AI systems need to be trained. If you could use blockchain to train that data in a system like Watson, you could significantly increase the quality of data that the system receives.”
Watson, IBM’s AI based super computer, teaching aid, weather forecaster, dress designer, and Jeopardy! winner, will be a main driver of their version of blockchain. As the system learns and analyzes the data in your supply chain, it will assist and enhance your existing processes.
“Is AI replacing languages, like English, or Mandarin, or Spanish? No. It may be replacing the translators.”
Internet of Things is the way in which “things”, meaning literally anything and everyone, communicate with one another digitally. Cheap internet connected sensors have been put into everything from pills to people, to TVs, toasters, and even animals. For example, a smart lightbulb that you can turn on via an app is an IoT device. IoT technology could track temperature, barcoding, and damage through a variety of different sensors during the shipping process.
“All of these physical things need to be converted to digital and internet of things is that bridge.”
If a box falls from a shelf, is packaged without care, or is kept in bad environmental conditions a shipper would know where and when that occurred. Accountability, or the lack thereof, has a price tag.
“One technology company pays a retailer about $23 million a year for lost and damage goods simply because it doesn’t want to get into who lost and damaged them.”
The Future
The future of blockchain will always be defined by how the end user utilizes the tool. That could be inventory planning in a much smarter way through big data capture and trend analysis. Transportation cost and time reductions via AI based route development. Product transparency for organic food products. Greater accountability for lost and damaged goods. Or all of the above. IBM’s vision is a smart interconnected supply chain that’s data driven and unified. It’s taking real world values like trust and going digital with them.
Shippers interested in using IBM’s version of blockchain won’t have to wait long.
“Right now, it is still in the pilot program stage. Later this year we’d like to get it into beta and have as many people using it as possible.”
For those shippers, the future may be tomorrow.
Listen to our podcast Consulting Logistics presented by Aborn & Co.
Further reading
- Shipper of Choice: A How To Guide
- The Truck Driver Shortage and the Rising Cost of Everything