Unveiling the blockchain use cases in supply chain with Darina from Evertrace
If you’re interested in the industrial applications of blockchain, chances are you’ve already heard of the use cases in the supply chain. With Walmart reducing the time to access tracing data from six days to 2.2 seconds and Maersk deploying the first blockchain-based marine insurance these use cases promise obvious time and money savings.
Since these use cases are often described on a somewhat general level it’s really interesting to dive in and discuss what are the benefits and barriers of the real world adoption of blockchain in the supply chain. Fortunately, we got Darina from Evertrace (venture of the company builder Next Big Thing AG) to discuss this topic and her approach on solving the supply chain problems.
Hi Darina, could you specify today’s challenges in the supply chain?
Today, data exchange in supply chain management is fragmented. It creates a lot of frictions and inefficiencies: information inconsistency among partners, delays and business interruptions, additional costs or even litigation. I can give you many examples:
- A truck is running late, but there are no real-time updates about its location. The warehouse is waiting for it to arrive for hours and keeps the space available. Goods are not going into sales immediately; indirect costs are rising.
- Recorded temperatures were lower than the allowed threshold during transportation, but it’s not clear for how long. Lab tests only can show if the product was affected. These tests are costly and take approximately 2-weeks time, in the case of pharmaceuticals or chemical products.
- Goods were damaged, but it’s not clear when it happened and who is responsible. Claims management takes ages, starting from obtaining all the historical information about a shipment and documents to settlement of the claim and reclamation.
Why do we need blockchain to solve the problems in supply chain?
We can’t solve all the problems in the supply chain with blockchain (laughing). But we can definitely address some of them. I will just say that the entire market is moving towards transparency. Most important, blockchain can bring transparency and accountability. In the context of marketplaces, it will bring trust.
Is the current state of the blockchains sufficient for processing the supply chain data in terms of scalability and security?
Generally speaking, blockchains are currently not there where we need them to be, but there is a lot going on to develop the technology further. Blockchain is a promising technology that can solve a number of problems, for instance in the finance industry or trade, is still relatively new. For that kind of use cases, it was never deployed at scale. There are known challenges and there will be future challenges to face and solve. For example, current public networks like Ethereum showed scaling and security issues, but there are promising solutions too. Private blockchains, for instance supply chain consortium networks, meet more the needs in terms of scalability and security, because of faster transaction validation and increased control over who is participating. We believe it is going to improve fast.
Which companies should get into adopting a blockchain solution right now?
It’s difficult to say. Many should, as blockchain-enabled processes will bring efficiency. Right now I can definitely see very high interest of pharmaceutical companies to adopt blockchain. They are driven by the needs to ensure drugs safety, comply with legislation regarding serialization and responsibilities to report on integrity of cold chain. Others might be mining, electronics producers, food producers. There is a strong interest from the freight forwarders and logistics providers side, their business will change drastically with decentralization.
The better question to ask is “How companies can get into adopting blockchain solutions right now”? Here we’d better ask Kathleen, general manager at +D Consortium. The collaborative approach she develops with +D is something unique; something which was definitely missing in the industry. Blockchain solutions can’t be introduced by one company alone and can’t be developed without common standards. +D can be understood as an open platform powered by an open source transaction protocol for decentralised data exchange. The protocol provides specifications for automated multi-party contracting along the Supply Chain and decentralised applications comprise clients and smart contracts.
It’s often discussed how important the quality and quantity of data becomes for every business and every industry, yet this challenge remains somewhat abstract and not tangible for most companies. Could you explain what issues your clients should address and why it’s urgent to address these issues?
Well, I think large players in supply chain (eg. freight forwarders) are relatively data savvy. And they of course understand the importance of collecting the data, in quality and quantity. I see the problem more in the sharing of data among parties. Unfortunately, it’s challenging to onboard carriers, using their own systems or integrate into shippers’ ERP (Enterprise Resource Planning systems). There are no technology standards in the industry, for tracking solutions.
Automation in the supply chain can only occur with transparent communication and trusted data
That’s why industry professionals learned to live with inconsistency and make the decisions. I would even say, that’s unfortunately a part of the job — making decisions in the situation of information uncertainty. For course, automation in the supply chain can only occur with transparent communication and trusted data.
Ultimately, the quality of device data is critical for smart contracts to work; simple track and trace is insufficient. If we want to automate the processes in supply chain, we need to make sure that data used by smart contracts is trustworthy. This is exactly where Evertrace comes into play. We see ourselves as data validator, or player, who ensures compliance of the tracking devices, security of data transfer, and development of machine learning algorithms to analyze usage patterns.
Can you provide an example how the data on your platform is exchanged?
At Evertrace, we provide a single platform for all participants of the logistics process — cargo owners, freight forwarders, brokers, insurers and others — where all data is accessible and documented in real-time. We believe this is a way to go. We focus on “bringing all the parties to the same page”, from initial order placement to invoicing:
- The shipper contracts the freight forwarder and insurance company directly on the platform, and smart contracts are generated based on the conditions they agreed on.
- Data on the location of the cargo and conditions of goods was used to automatically trigger actions such as payments, ratings, and bonuses.
- We also include functionality related to document storage and exchange as well as task management and notifications.
What led you personally to the idea to start Evertrace?
I already have 5 years of professional experience in international logistics, so I know the nitty gritty of the industry — at least a little bit. At Next Big Thing AG we’ve been considering supply chain as one of the strategic areas for IoT and blockchain technologies. So I drew on my past experience and just went for it.
Recently you announced a pilot project with +D Consortium. Could you describe this pilot?
+D Consortium and the decentralized transaction protocol +D defines collaborative use cases along the supply chain and lays the foundation for automated contracting on the blockchain. In July 2018, together with +D Consortium members, Evertrace completed the first pilot project. The test case focused on track & trace of inner-country truck transportation and automatization of transport and insurance contracts.
Our guiding question was: “How can conditions of the transport & insurance contract (e.g. required quality of the goods) be used to automatically trigger actions such as payments and ratings?” I believe we’ve answered it. In close collaboration with partners, Evertrace developed a tracking device, blockchain integration and visualization of tracking data and status updates on the Evertrace web app. Transport and insurance conditions were modelled as smart contracts.
Are you looking for new partners or contributors to your pilot project?
At the moment we are actively looking for partners among freight forwarders, insurance companies, supply chain financing companies. Moreover, +D Consortium is also looking for members to join their activities. Feel free to get in touch!
