Blockchain Hype and Reality in the Supply Chain

Stephen DeAngelis

February 25, 2021

The term “blockchain” is bandied about so often one tends to forget, when it comes to supply chain applications, the technology remains in its infancy. With so much be discussed and written about blockchain, John Walker, President at Holo Sail Holdings Incorporated, asks in a headline, “Is blockchain’s role in supply chain logistics overhyped?”[1] In answer to that question, my first thought was: All new technologies are hyped? It’s one reason Gartner continues to promote its hype cycle for emerging technologies. The Gartner hype cycle has five stages: 1) an innovation trigger, which rapidly ramps to 2) the peak of inflated expectations. From the acme of hype, the only way forward is down into the 3) trough of despair. Once the dust settles and the technology proves it usefulness, it climbs the 4) slope of enlightenment, until it finally reaches the 5) plateau of productivity. From Walker’s perspective, blockchain is near or at the peak of inflated expectations.

Walker admits there are challenges that need addressing. He explains, “After years of discussions on the need of data sharing and autonomous digital processing of data into actions, we are still searching for better answers and fitting solutions. The key obstacle was, and still remains, the data. Our basic understanding of what should be in the data, who can use it and for what, how it can be updated and read, and when it should be available is all there. But once we attempt to put that understanding into execution, we run into compatibilities, roadblocks, misunderstandings, and distrust.” He’s just not sure blockchain is the answer to those challenges. Like others, he was hopeful when blockchain came along. “We saw blockchain as a perfect solution for the world of supply chain logistics,” he writes, “long perceived by the outsiders as full of distrust, skullduggery, and scheming parties vehemently aiming to maximize their own benefits.” Currently, he believes computing costs and scalability limit blockchain’s usefulness. He concludes, “While the increasing computing costs can be shifted from the owners of the platforms to the shippers whose cargo is processed within those platforms, the scalability problem can’t be solved.”

Overhyped or becoming mainstream?

While Walker places blockchain at the peak of inflated expectations, tech writer Jelani Harper believes it’s already passed through the trough of despair and is on the slope of enlightenment. He writes, “Blockchain arose at the end of the previous decade as a highly anticipated technological upstart whose applicability — far from limited to cryptocurrencies — had far-reaching consequences for every organization struggling to manage their data, both internally and externally between parties. It offered indisputable traceability, distributed collaboration capabilities, and rapid updates to support the low latent data powering a sundry of use cases, from the Internet of Things to cognitive computing.”[2]

Harper admits blockchain has shortcomings; however, he believes some of those shortcomings are being addressed. “Numerous developments in this space are well on their way to redressing blockchain’s shortcomings,” he writes. “Cloud paradigms are evolving to curtail its latency, novel solutions are addressing its data privacy limitations, and numerous use cases clearly detail its expanding horizontal business value.” Whereas Walker insists the scalability problem can’t be solved, Harper insists, “The most emergent Blockchain trend of the year is the motion towards solving its scalability issues via the cloud.” The conundrum presented by these opposing views can only be resolved by admitting blockchain isn’t the answer for every situation. It isn’t a silver bullet.

Where can blockchain prove useful in the supply chain?

According to Faisal Saeed, Founder and CEO at TeqXS Inc., product traceability is one area where blockchain holds great promise. He explains, “Today’s supply chain process is very complex, nontransparent, costly and inefficient due to many intermediaries involved in a process to take a product from its source to a merchant. The lack of collaborative systems between all the intermediary parties involved makes this process even less transparent and difficult to trace. By the time an item reaches the end user, its traceability is almost lost.”[3] He believes end users are becoming much more sensitive about product origin. Without good traceability, he notes, “The end user has no idea of the origin of the item and can only go back to its last source. Without knowing if an item is original or counterfeit, healthy or contaminated, and from the source that it claims, there’s no simple and trusted way to verify the authenticity of the item. The lack of a system to verify the health and transparency of a supply chain prevents consumers from having confidence in the goods they are buying.” He insists blockchain is the answer. Business consultant Dave Food (@davefood) points out that blockchain is also useful in the diamond industry. This is essential in order to be compliant with various international laws restricting the sale of so-called conflict diamonds. They explain, “Stones [are traced] from the instant they are extracted out, to the moment consumers buy them. The target is to ensure that any firm could evade ‘blood or conflict’ diamond standards, and making sure clients are acquiring an authentic piece.”

The mineral and consumer finished goods sectors are not the only areas where traceability is a challenge. The food supply chain also has a traceability problem which is being addressed by blockchain technology. Robert J. Bowman, managing editor of SupplyChainBrain, writes, “As the fog of hype that accompanied the early days of blockchain begins to lift, the technology is beginning to yield tangible results in a variety of industries, most notably worldwide agribusiness.”[5] Kieren James-Lubin (@kjameslubin), President and CEO at BlockApps, told Bowman agriculture is especially well-suited to blockchain technology. It allows traceability without disclosing proprietary information. “Transactional data in the system is shared on a need-to-know basis, as opposed to [displaying] exactly the same data for everyone,” says James-Lubin. “The parties involved in the transaction are the ones sharing the data.”

Concluding thoughts

Food believes blockchain will eventually find a home in supply chain operations. He writes, “Blockchain has a lot to put forward, but also a long way to go before it becomes entirely accepted. … Blockchain tech might be the solution you are looking. Before you embrace any technology project considering the use of Blockchain, start first by detecting the pros and cons of your company potential. Corporations must begin analyzing when to initiate the Blockchain strategy, at what stage and segments first.” If blockchain isn’t the right solution today — but looks promising if challenges can be overcome — keep checking back until the time is right. As Harper notes, “Mainstream adoption of blockchain is surely coming.”

Footnotes
[1] John Walker, “Is Blockchain’s Role in Supply Chain Logistics Overhyped?” gCaptain, 22 January 2021.
[2] Jelani Harper, “2021 Trends in Blockchain: Mainstream Adoption at Last,” insideBIGDATA, 18 January 2021.
[3] Faisal Saeed, “How Blockchain Can Provide Transparent And Efficient Supply Chain Management,” Forbes, 21 December 2020.
[4] Dave Food, “The many uses of Blockchain in Supply Chains today,” Prophetic Technology Blog, 26 November 2020.
[5] Robert J. Bowman, “Blockchain Gets a Boost in the Ag Supply Chain,” SupplyChainBrain, 28 December 2020.