Blockchain’s Big Promises. What will it take to deliver on them?
As supply chain complexity intensifies, industry leaders are turning to emerging technologies to share data about goods and services with integrity and security. In today’s global economy, accuracy in supply chain traceability is becoming critically important as organizations look for better ways to track both raw materials and finished products—from sourcing to distribution. Blockchain continues to gain traction in supply chain applications, promising a better way to verify transactions among multiple stakeholders about the origin and pedigree of goods and transparently record and track those verifications.
The idea of having an immutable ledger for managing supply chain data is attractive, especially across dynamic, multi-level supply chains—increasingly the reality of today’s global networks. However, companies seeking to implement blockchain into their SCM platforms face a significant challenge: used at scale, blockchain becomes increasingly complex. Every transaction adds another block to the chain, carrying the history of every past block with it. When an organization wants to manage large volumes of supply chain transactions—and the information about those transactions—costs can escalate rapidly, particularly at peak times. Worst case, the transactional speed required to support a complex supply chain can be a barrier to long-term adoption.
Delivering on the promise: first steps
Though challenges exist, the benefits of using blockchain to build a more transparent and secure supply chain are significant, potentially solving costly inefficiencies and building trust among global partners. Of course, not every problem can be solved using blockchain. To implement this emerging technology successfully into your supply chains, organizations should first identify what problems they are trying to solve to build a solid business case. Target a specific problem and build a roadmap for solving that problem.
Involve trading partners early and review your business processes and data sharing requirements together to develop a common understanding of workflows across the ecosystem. What are the rules of participation? How are you governing risk and control? Distributing costs? For a blockchain project to be successful, you will need to communicate the benefits of using blockchain as a secure processing option to every partner.
As with any emerging technology project, starting small—either with a pilot project or with a simplified workflow—is a good way to demonstrate value and grow confidence. As you design a roadmap, consider how this blockchain project will fit into your transactional ecosystem. How can you ensure that integrating blockchain into standard process flows will actually reduce complexity and not create additional steps?
Technology convergence
Once the partner ecosystem and the transactions onboarding and data flow have been defined, companies can then start to look at the best technologies to use to make their transition to a blockchain-enabled supply chain. Combining blockchain with AI and IoT will be critical for building “smart contracts” that capture data that can be verified by any partner at any time. And using these technologies together will help organizations optimize their supply chains, build consumer trust, and reduce inefficiencies.
As you scale your blockchain projects, consider how you will manage volume. One of the more interesting technologies we’re seeing comes from CryptoWerk, who have designed a way to put a hashed representation of one or many supply chain transactions onto any blockchain. This means that critical transactional information such as certificates of origin, contracts, and the like, can be collected in a single hash and sealed to create the immutable record that blockchain promises. This hashed data can then be shared with trading partners through the use of public or private blockchains. This methodology solves many of the scalability issues that companies are struggling with while still allowing secure blockchain transactions to be accessed by any authorized user.
Blockchain holds great promise for supply chain transformation. Start small, secure buy-in from your partner ecosystem, and explore how proven and emerging technologies can help you deliver on those promises with confidence.