How Blockchain will Revolutionize your Supply Chain


So you’ve heard about “Blockchain”, and you might have an idea of what it is, but do you know what it could mean for your supply chain? Blockchain has gained notoriety in recent years as the technology behind Bitcoin, but its potential impact is starting to be seen in industries beyond the realm of finance, and many experts see the supply chain as the next fertile area of application. From medical records to music royalties, blockchain is showing that it has the potential to create a full-scale disruption in the world of transactions and record-keeping.


What is blockchain?

Simply put, a blockchain is a public ledger, a method for recording transactions in a transparent and accessible way. Here’s an example of how it works:

blockchain works.jpg
Because blockchain information is maintained by volunteer computers using encrypted data, it’s considered incredibly protected, and is nearly impossible to alter or hack once a transaction is encoded. For the less tech savvy among us (myself included), this video from the World Economic Forum offers a helpful explanation of how it all works.


How can blockchain improve your supply chain process?

Supply chain management is all about transparency and trust, and knowing the source of your products is crucial to controlling the process. Blockchain technology isn’t likely to replace your current system, but will instead serve to augment and improve it. Whether you already use an established B2B integration system like EDI, XML or an API, blockchain can provide a shared visibility overlay for transaction and information flows. It can also be used in tandem with barcodes or RFIDs, that can be configured to include information that is relayed and encoded to the blockchain. One use case for this type of tech can be to weed out counterfeit or knock-off products, because the tamper-proof nature of the chain allows every stakeholder to verify the authenticity of the product at any stage.

shared visibility ledger
Having a shared ledger will enable improved efficiencies, better collaboration and faster dispute resolution when problems arise. According to Shari Diaz, the ecosystem and Innovation leader for Watson Supply Chain, the impact on supply chains will be seen because of four factors:

  1. Shared Ledger: A distributed, append-only system across networks
  2. Privacy: Secure: verifiable transactions visible only to relevant stakeholders
  3. Smart Contract: Business rules and terms are embedded in the blockchain
  4. Consensus: All parties agree to network verified transaction.

Currently, companies maintain their records and communications in isolation of one another, which makes reconciliation messy and time-consuming. A shared flow of information can streamline many of these processes and massively improve efficiency.

Blockchain’s presence has been gaining momentum amongst established corporate entities, as companies like Microsoft, IBM, Maersk and Walmart have begun piloting blockchain systems in the hopes of truly modernizing their supply chain operations. The potential of this technology is currently being explored in many domains, and new risks and opportunities have continued to surface for early adopters as testing continues. Ultimately, finding the right application for blockchain that is operable and economically feasible could lead to a mass adoption, while failing to do so could lead to a loss of momentum and decreased investments.

blockchain announcement

Blockchain in Action – Walmart

Let’s take a look at what the future of this technology might look like in a supply chain, with an eye on the retail giant, Walmart. Walmart has been running pilot tests of blockchain for almost a year now in the hopes of improving their processes around food safety and shipping efficiency. For example, they were recently issued a patent that involves the use of blockchain to automate the logistics of delivery drones. Yes, I think we can safely say that we’re living in the future!

When it comes to food safety, Walmart’s use of blockchain could be a game changer, and they are teaming up with IBM to make this a reality. At an IBM Watson IoT conference earlier this year, Frank Yiannas, VP of Food Safety for Walmart, explained that they were inspired to test this technology by an E. Coli outbreak in the US in 2006, which was caused by one day’s worth of spinach from one farm, and distributed by one supplier. But it ultimately took the FDA two weeks to find the source of the contaminated spinach. During that time there were 200 reported cases of E. Coli and 3 deaths, and spinach was pulled from retail shelves nationwide. This is exactly the kind of problem blockchain could have solved!

Blockchain is a completely transparent system that offers the ability to reliably and affordably track every step of a product’s journey from farm to fork, and, in addition to details about locations and handlers, more detailed information like temperature and shipping conditions can be included. Rather than waiting two weeks to trace a contaminated food product back to its source, a simple barcode or RFID scan will show you where it was grown and who handled it throughout the process. This type of efficiency can not only avert a major crisis and save the company money, but for Walmart, who feeds around 240 million customers per week, it can save lives.

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