When new technology arrives on the scene, it is usually accompanied by much hype, fanfare and excitement that wanes over a period of time due to the proposed benefits having yet to be realized. Hype, though, doesn’t always live up to reality. Even when there is a real desire and broad adoption of a new technology takes place, there isn’t always an understanding of how the tech can be integrated.
Blockchain and distributed ledger technologies (DLT) are currently facing this hurdle: business is so far unsure of how to implement and whether adoption is worthwhile. As such, firms are ready to sit back and let others take the risk as first movers to see if the price tag and time is worth the investment. These companies instead wait for the tech to prove its worth and become an industry standard. However, if enterprise leaders neglect new technologies like blockchain, their chances of success over the long-term will diminish significantly.
What if there were a more pragmatic approach to the implementation of DLT, one which did not require the overhaul of entire systems or deep integrations? To resolve this issue, Insolar has its come up with a pragmatic and phased, two-step implementation for blockchain.
As things stand
We usually think of supply chains as the movement of goods from manufacturer to consumer and everything in between, but this a very narrow interpretation. During this process, there is a whole host of activities that facilitate this movement and they are all backed by a legal reason for goods changing hands: by documents. By this we are talking about a chain of related and linked documents containing data which are exchanged by all participants and this is something that has become ubiquitous. However, it isn’t without its issues: according to KPMG, companies worldwide report a lack of data and visibility across supply chains that totals 40% of all activity.
Blockchain has been heralded as the solution that can provide end-to-end visibility and tamper-proof data through secure signing of data on a distributed ledger. This makes the technology a game changer for supply chains and a range of other industries that involve multi-party transactions. However, implementation beyond pilots has so far been lethargic, despite global spend on blockchain totaling 2.7 billion USD in 2019. A survey from Deloitte puts this down to the need to adapt existing (legacy) systems, unclear ROI, lack of skills and understanding, amongst other things.
Insolar has come up with a pragmatic approach to blockchain implementation to overcome the three hindrances listed above as per the Deloitte report. The approach offers enterprise to pilot a blockchain solution so that they can evaluate the ROI value, without costly integration or having to overhaul existing practices. The pragmatism is possible through Insolar’s capability to store documents on chain without clogging up the distributed ledger, while still keeping the data stored in a decentralized manner.
Unlike other blockchains, Insolar is able to keep platform performance high in terms of data processing speeds through innovative data splitting and storage techniques. While, for performance and/or operational cost reasons, other blockchains store only a link to a document on the blockchain (with the actual document saved centrally elsewhere — defeating the objective of DLT), Insolar is able to store the document within the platform cost effectively, keeping the storage decentralized. Moreover, on other platforms, saving data points directly to blockchain requires deep integration.
Insolar’s approach to DLT implementation is staggered and takes place in two stages. The first of the stages is the ledger of documents, transitioning to the second stage — the ledger of data with automation of data transactions where businesses see the value of further blockchain integration. Let’s take a closer look at the stages.
Ledger of documents
In short, the ledger of documents is a blockchain registry of documents. The blockchain presents itself of a single source of truth for all participants of the ecosystem. It simply records electronic copies of the physical or digital documents and, as such, captures each status change and agreement at every step of the data supply chain right on the blockchain. The ledger makes any documents imported to it visible for all ecosystem participants and notifies them of any changes in the status of a particular order.
As such, the ledger of documents significantly increases visibility throughout the entire supply chain. It does this by reducing the amount of communication efforts to understand what the current status of an object is and by capturing all events and agreements in a transparent and immutable manner.
By tapping into existing interface standards such as electronic data interchange (EDI) and/or uploading documents manually, firms can reap the benefits without costly integration. Only after the solution has proven its worth as an effective tool to optimize operations, the client can choose to move to the second step.
Ledger of data
Once the initial integrations are in place, the project can gradually move to the ledger of data, where instead of or (even better) next to the electronic copies of physical documents, the structured data of these documents is captured. This enables digital (smart) contracts to act upon these data points (e.g. prices, delivery/payment dates, etc.), increasing the level of automation. Blockchain in effect becomes the “orchestrating layer” and keeps all systems of record across all participants in constant sync.
The end state is a highly-visible and automated supply chain that only requires human intervention in exceptional situations.
Now let’s consider this two-step approach in an example of a cargo freight supply chain.
According to industry analysis 10,000 containers go missing each day in the freight industry, resulting in worldwide losses which total 55 billion USD per year. Moreover, 36% of deliveries arrive late, with 20% of the total cost of transportation relates to documentation. The price of fraud in the industry is estimated at 600 billion USD per annum globally. The list of issues currently plaguing freight transportation could go on, and the numbers only stand to worsen since shipping is on the rise. This makes the industry an ideal use case for blockchain implementation.
Initial implementation: ledger of documents
An ecosystem of companies involved in the transportation of freight can implement Insolar’s ledger of documents solution, connecting their enterprise resource planning (ERP), transport management systems (TMS) and other instruments to the blockchain through structured interfaces such as EDI software. This provides for secure data exchange in a single environment, ensuring that all actors in a container shipment have identical copies of the same data. In this instance, data is uploaded to the blockchain and made available to each company within the chain. Data is securely stored, with permissioned access meaning actors can only see data relevant to them and their activities within the chain. If something doesn’t go to plan, it is simple to audit exactly what has happened as all data will be saved on the tamper-proof ledger.
Implementation of the ledger of documents can also be split into two phases. At the Proof-of-Concept (PoC) stage, uploading documents can take place manually. When the system moves to production scale, uploads can take place automatically through integrations with ERP, TMS and other systems. If further automation is desired, the enterprise can move to step 2: the ledger of data.
Full implementation: ledger of data
Should the ecosystem participants see improvements in process execution and appreciate the value that Insolar Blockchain Platform offers, they can progress to the ledger of data. This second stage brings full automation to processes via the implementation of smart contracts that are able to self-execute, meaning set conditions specified by the parties are activated automatically. When met, these conditions trigger an operation. In our case, this could be something as simple as issuing an invoice for the delivery of freight, to automatic application of a discount if a cargo arrives late, to triggering a completely new production and delivery cycle from scratch.
The crux of the matter
Disparate record-keeping and reporting systems leading to scattered, incomplete and unreliable manifests, bills of lading, certifications and other documents. While blockchain and other DLT show much promise in resolving supply chain issues such as tracking flawed parts or component failures, tracing the origin and provenance of shipped goods, or settling contract disputes, full-scale introduction has yet to take place across a range of industry. Insolar’s two-step approach makes adoption and pilots more attractive as it doesn’t entail a complete overhaul of existing systems from the offset. It also offers high adaptability for different destinations and products, bringing about a fully automated and touchless system.