BlockChain — Implications in Global Supply Chain and Logistics

Blockchain — something which has been shaking in particular the finance sector for a while. But what is Blockchain, and which role will it play in logistics or Supply Chain Management?

Benefits for Supply Chain Management

Traceability

Particularly — but not exclusively — in the food sector, the valid traceability of the origin of ingredients and goods is a prerequisite for operating a trustworthy business, or may even represent a license to operate. This difficult and challenging process of traceability can be automated, simplified and accelerated by efficient use of Blockchain technology and corresponding electronic tracking technology (such as WiFi, BLE or RFID). In a not-so-far-away future, it could be possible to trace back every product to the origin of raw material used. Potential cases of application in logistics are manifold: Tracking of quantity and transfers of material between Supply Chain partners or thinking of ‘smart tendering’ (containers equipped with tags publish a request to get from A to B on a platform; freight forwarders will subsequently place bids to win the order) are just some exemplary use cases.

Smart Contracts

Another promising application for Blockchain lies in Smart Contracts, which are ‘electronic’ contracts based on automated actions that are triggered through predefined events. Such contracts can be used e.g. for automated execution of payments in case of an in-quality and on-time delivery. In a bigger picture, this scenario is an essential foundation for fully automated order calls, particularly in multi-stakeholder contracting. The Blockchain smart contracting approach is also interesting in light of the inhomogeneity of used IT infrastructure — Large corporations typically use ERP based, private clouds, while suppliers (often Small and Medium-sized Enterprises) are frequently using cost efficient cloud-services. Blockchain technology can offer a public cloud service as an integration platform.

Safe Transactions

A third potential usage for Blockchain technology lies in its capabilities for validating data: Blockchain allows one to follow and track the ‘journey’ of data, including a valid timestamp. This is useful in a wide variety of processes such as: Exchange of confidential business documents, transfer of shipping documents or orders and order confirmations. In combination with Smart Contracts, the potential is even larger; automation of order books is just one of many opportunities.

The blockchain has the potential to transform the supply chain and disrupt the way we produce, market, purchase and consume our goods.

In logistics, the best known blockchain pilot program involved Maersk and IBM. It centered on creating a digital distributed ledger to create a single electronic place where all the myriad documents related to a shipment could be housed. (http://www-03.ibm.com/press/us/en/pressrelease/51712.wss)

Finnish startup Kuovola Innovation is working on a blockchain solution that enables smart tendering across the supply chain. Pallets equipped with RFID tags publish their need to get from point A to point B on the ledger. Carrier mining applications will then place bids to win the move. The RFID will then award the job to the bidder with the most suitable conditions and the transaction will be registered on the blockchain. The shipment will be progressively tracked as the tag moves down the supply chain.

In summary, blockchain is an interesting technology. But it may be the least mature of all the technologies described in this report. On the other hand, because blockchain is a back-end technology, most companies don’t need to proactively invest in exploring its value. We will know the technology is mature when people don’t even use the term “blockchain,” much as people don’t use the term TCP/IP when talking about their use of the Internet. If the technology does mature, the providers of Public Cloud supply chain solutions will be adversely impacted.