The Perfect Connection: Why Blockchain and Supply Chain Are Made for Each Other
Thinking of the key tenets of blockchain, immutability, transparency, security, and universality, one topic comes to mind as a sort of perfect fit application: supply chain. Just as a supply chain is a transfer of products or data from one participant to another, a blockchain represents a transfer of data from one peer to another.
Current supply chain mechanisms rely on trust. Each participant in the chain is responsible for uploading accurate information and sending it to the next participant, but there is no one actually ensuring the legitimacy of the data. Data sent from one member of the supply chain to another could be modified accidentally or even maliciously. Blockchain’s immutability fixes this problem. If a manufacturer claims to have sent a shipment to a customer at midnight, no trust is needed to verify the claim. The customer can simply look on chain at the data and check the timestamp of the block that represented the shipment being sent.
Blockchain existing purely digitally also brings benefits of its own. For one, costs of creating and storing information about supply chains on paper such as shipment numbers, locations, times, and so much more can be completely removed. Theoretically infinite amounts of data can be stored on a blockchain allowing for records that span back years. If a manufacturer wants to check the amount of items in a shipment from 28 years ago on a Tuesday, it will be there. File cabinets overflowing with mislabeled documents will soon be obsolete.
Transparency is another benefit that blockchain implementation can bring to supply chain, and the fact that all blocks in a blockchain are interconnected is to thank. The block that represents a product being delivered to a store refers back to the block of it being transported which refers on and on back to the block that represents the genesis of the product and the raw materials for it. The labels at grocery stores reading “ethically-sourced” can be verified by following the trail of blocks that led to the product sitting on the store shelf. Eventually companies will be forced by public pressure to be transparent and therefore truthful in their claims about their products creating a broadband win for consumers who can be sure they are buying what they think they are.
A key component of implementing blockchain into supply chain is coupling it with the Internet of Things (IoT). For those unfamiliar with the concept, IoT is the idea of creating a network of smart devices able to send and receive data autonomously. Common examples of IoT include in-home devices like Nest Thermostats, Philips Hue Lights, and of course Amazon Alexa. These devices collect data about users and alter their state, turning on or off when most convenient, to save power and improve the experience for consumers. Combining IoT with blockchain can create an extremely secure system. For example, rather than having items being shipped be manually weighed so the information can be uploaded on chain, a smart device could measure the weight of a product and automatically upload it to eliminate the potential for human error. IoT can remove the possibility of data being incorrect and Blockchain’s immutability further ensures the data’s security.
To cover how blockchain is a universal technology, the distinction between public and private blockchains must be understood. Public blockchain’s, such as Bitcoin’s, are accessible by all people. Any transaction from any time is visible to all who desire to see it. Private blockchain’s are different because they, as the name suggests, are private. Access to the full ledger is restricted to only permitted users. It is likely that there will be a mix of public and private blockchain implementations with supply chain based on the needs of the users. In instances where consumers can benefit from having access to the trail of data, like with tracing ethically grown food, a public blockchain is the most suitable tool. For more valuable data like the sourcing of chips for military equipment, a private blockchain is more applicable. Despite the difference in accessibility between private and public, universality still exists in both instances. The technology is only an internet capable device away from being accessible by all permitted users no matter the location of the user or operating system utilized.
To give merit to the idea of blockchain being highly useful for supply chain, one needs to look no further than the packages being delivered to their front door. Since 2018, FedEx has been a member of the Blockchain in Transport Alliance (BiTA), an organization aiming to “continuously improve and transform systems that automate the efficient movement of goods and simplify global cross-border trade” (FedEx). Shifts in technology at massive companies like FedEx require millions of dollars in research and a strong confidence in the new technology’s utility to occur. The same goes for other companies who have already started the shift to using blockchain like the US’s largest retailers, Walmart and Amazon, and the diamond company, DeBeers.
I can say almost for certain that increased public interest in blockchain, public pressure, and subsequently new government mandates will make the list of companies using blockchain and the list of companies in the S&P 500 indistinguishable.
References:
Higgins, Michael. “Council Post: Blockchain in Supply Chain.” Forbes, Forbes Magazine, 21 Apr. 2022, https://www.forbes.com/sites/forbestechcouncil/2021/11/08/blockchain-in-supply-chain/?sh=67df816f4e1a.
Hirsh, Sandra, and Susan Webreck Alman. “Blockchain.” Amazon, ALA Neal-Schuman, 2020, https://aws.amazon.com/blockchain/blockchain-for-supply-chain-track-and-trace/.
Morley, Mark. “Top 5 Use Cases of Blockchain in the Supply Chain in 2021.” OpenText Blogs, 28 Sept. 2020, https://blogs.opentext.com/blockchain-in-the-supply-chain/.
