An article published earlier this year in Supply & Demand Chain Executive carried the headline: “3 Reasons Why Blockchain is the Future of Supply Chain.” That’s a pretty bold statement considering the fact that numerous challenges lie ahead for a fuller utilization of blockchain technology in the supply chain. Journalist Akhilesh Prabhugaonkar, author of the article, insists this bold prediction is based on the basic features of blockchain technology, namely: a decentralized approach, enhanced security, and immutable ledgers. He adds, “Supply chain management is one such sector that can truly harness the blockchain technology to its fullest potential. Apart from helping to improve the transparency in supply chains, blockchain has the potential to increase a business’s profitability by reducing the associated administrative costs.”
Supply chain expert Mike Mortson (@mmortson) asks, “What is all the fuss about? [Blockchain is] a word that was rarely used or even heard of in Supply Chain not that long ago. But now it is very common to hear about Blockchain. Further it is often used in the context of being a necessary and integral part of any Digital Supply Chain Strategy.”[2] Why? Because blockchain technology holds great promise for increasing tracking and traceability in the supply chain. Mortson explains, “In Supply Chain, now and in the future, the need for electronic connectivity is central to any strategy. Material Suppliers, Manufacturers, Distributors, Shippers, Carriers, Logistics companies, and Customers all want to know where goods are in the Supply Chain. This knowledge is needed to inform planning, decision-making, financial analysis, Customer commitments and more.”
Where Lies the Truth?
Not everyone is a true believer when it comes to blockchain technology. Kai Stinchcombe, CEO of True Link Financial, has stated, “Don’t believe the hype. There are no good uses for blockchain. After 10 years of development, nobody has come up with a use for blockchain that has been widely adopted.”[3] On the other hand, Sam Daley, SEO Strategist at Builtin.com, insists, “Blockchain is becoming a legitimate disruptor in a myriad of industries. … The technology can revolutionize government, finance, insurance and personal identity security, among hundreds of other fields.”[4] These differing views have Dick Weisinger (@DickAtFormtek), Senior Vice President and Chief Technologist at Formtek, asking, “Which is it? The greatest disruptor and spark that will enable positive revolution for all industries, or is it destined to be an accursed failure?”[5] His honest answer, “It’s too early to say, but one thing that is certain is that blockchain mindshare is growing rapidly.”
John Walker, President at Holo Sail Holdings Incorporated, asks in a headline, “Is blockchain’s role in supply chain logistics overhyped?”[5] In answer to that question, my first thought was: All new technologies are overhyped? 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.”
Blockchain’s Future in the Supply Chain
There is no shortage of skepticism when it comes to fuller blockchain implementation, so why do proponents of the technology believe its the future of the supply chain? As noted above, Prabhugaonkar believes technology holds great promise in the areas of transparency and traceability. He explains, “Traceability is a key component of standard supply chain management. This is mainly because, any issue with respect to any error or lapse or delay in the end delivery of the concerned product needs to be traced immediately. Tracing the error is the first step in solving it, which makes it very critical part of problem-solving mechanism. However, in order to trace the lapse, the supply chain should be transparent enough. Blockchain technology mandates that all the relevant information regarding the product or service that needs to be delivered is continuously updated by all stakeholders.”
Babak Tosarkani, an assistant professor of Manufacturing Engineering at the University of British Columbia Okanagan School of Engineering, also sees potential for blockchain solutions in the supply chain. He has researched “how new technology could improve the sustainability and efficiency of supply chains” and he indicates “his latest modelling shows focusing on digital transformation and adopting blockchain technology could reduce shipping bottlenecks.”[7] Tosarkani insists, “Blockchain technology can have a paradigm-shifting impact on the supply chain by addressing the sustainability challenges currently being faced, but also challenges we might come across in the future.”
The staff at Arateg is equally optimistic. They write, “Blockchain is poised to disrupt the logistics and transportation industry. Providing supply chain traceability, decentralized data storage, and removing intermediaries from operations, this innovative technology allows companies to protect from counterfeit, prevent data corruption, and significantly reduce costs.”[8] They add, “The global blockchain market in the logistics and transportation sector is poised to increase by nearly $889 million between 2021–2025, at a CAGR of 49.93% during the indicated period, according to the report by Research and Markets. Blockchain software solutions can address various challenges in the logistics industry, from counterfeit protection to documentation maintenance. Logistics companies employ distributed ledger technology to track shipments in real-time, provide stakeholders with shared data access, and establish trust.”
Concluding Thoughts
There is little doubt that blockchain has potential in the supply chain sector; however, there are numerous challenges that must be overcome. Scott Buchholz, emerging technology research managing director at Deloitte, insists blockchain will only fulfill its potential when it is widely used by all stakeholders. He explains, “If you think of supply chain today, and the volume of paper and faxes and email and data exchanges and phone calls that actually support the process, it seems pretty obvious that if you could get enough people to streamline those things using a common system and a common application, you could get a whole lot of value out of that process.”[9] To make that happen, all stakeholders have to agree on blockchain protocols, agree to a single solution, and overcome scalability challenges. Those are all big asks.
Footnotes
[1] Akhilesh Prabhugaonkar, “3 Reasons Why Blockchain is the Future of Supply Chain,” Supply & Demand Chain Executive, 13 February 2022.
[2] Mike Mortson, “What is Blockchain? And How Does it Work?” Supply Chain Game Changer, 4 September 2018.
[3] Kai Stinchcombe, “Don’t believe the hype: There are no good uses for blockchain,” Information Management, 2 January 2018 (out of print).
[4] Dick Weisinger, “Blockchain: Ledger for Data Trust, Security, Transparency, and Traceability,” Formtek Blog, 16 February 2022.
[5] Ibid.
[6] John Walker, “Is Blockchain’s Role in Supply Chain Logistics Overhyped?” gCaptain, 22 January 2021.
[7] Rob Gibson, “Blockchain technology improves supply chain performance: UBCO,” Castanet, 27 February 2022.
[8] Arateg, “Blockchain technology in logistics: how can you gain a competitive advantage?” Nutbox, 10 November 2021.
[9] Jen A. Miller, “Blockchain drives transparency in the supply chain,” Supply Chain Dive, 22 March 2022.
