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The Supply Chain Management Blog covers the latest in SCM strategy, technology, and innovation.

How Blockchain Will Help Create the Supply Chain of the Future

Guest Author

By Jack ShawWorld's Top 5 Technology Futurist Speaker 

One of the challenges we've had in supply chain management for decades is getting everybody together up and down a particular supply chain. If you take a very simple system, a relatively confined ecosystem, you would think it would be pretty straightforward for everybody to know who all the players were and what's going on. But it's not.

In the past, there was a constant reconciliation process. No one had a view of the supply chain as a whole or the ability to understand where their piece fits into it and to optimize the flow of products and materials through the supply chain. 

Blockchain solves that problem. Blockchain allows you to create a virtual single shared pool of data among all the authorized players in a particular supply chain ecosystem. Within that a shared pool of information, everyone who's involved can see everything that's relevant to them and that they are authorized to see as soon as a change takes place.

With blockchain, people can very quickly identify exactly where, when, and by whom an order was issued: It came from this computer at this particular day and time. On the fly, you could catch something that appears to be out of line and needs to be immediately investigated or addressed.

Because you have shared data and immutable information, you can track the flow of products all the way through the supply chain.

Practical Uses for Business and Consumers

Visibility in the supply chain is crucial for mitigating business risk and for satisfying consumer expectations for ethical and sustainable business practices. By providing a transparent and immutable record, blockchain has the potential to reshape longstanding processes and practices in nearly every industry—for the benefit of businesses and consumers alike. 

For instance, in the past few years, consumers buying diamonds have been horrified to find out retailers were being cited for selling conflict diamonds, with profits going to a warlord or invading army. Now, most of the diamonds sold in the world go through the Everledger blockchain and variations of it, so that consumers know the exact movements of their diamonds from the time they came out of the mine until they were sold to retail consumers.

Blockchain has the potential to accelerate food safety processes as well. Remember the recent recall on Romaine lettuce? Only a small percentage of lettuce was contaminated, but all supplies had to be pulled from shelves. Without blockchain technology, businesses would need approximately a week to track products all the way back through the supply chain. With blockchain technology in place, tracking and tracing products for recall can take minutes and can save businesses the loss of uncontaminated products.

Blockchain also eliminates huge amounts of time and effort spent continuously reconciling internal records—for instance, matching up invoices, receipts, and purchase orders to determine whether your business needs to pay a particular invoice. In a blockchain-based environment, if you’ve agreed on a price as well as the terms and conditions, all this information can be stored in the blockchain for easy reference by all parties—making an invoice altogether unnecessary.

This is one of the most exciting aspects of blockchain technology: It enables smart contracts that are in essence self-executable.

Blockchain allows you to replace the vast majority of human intervention with relatively simple AI capabilities. Most of the analysis required to fill out forms, make sure information is valid, and confirm that suppliers are legitimate can be done by AI—and done within seconds or minutes, not weeks.

Making Blockchain a Reality for Supply Chains

Business still face some outstanding issues with blockchain—for example interoperability among blockchains. There are a number of approaches to how to design blockchains, and it will be important for those blockchains to connect. But that problem is going to be solved within the next two or three years.

The much bigger issue is: How do we make the changes in our businesses to take advantage of blockchain technology? What do we think our companies and industries need to look like five to 10 years from now? How are our industries likely to change?

Blockchain will require updated business strategies, and perhaps a realignment of personnel to develop and implement those strategies. It’s not a trivial effort, but the return is significant. A shared pool of data that is reliable and immutable is invaluable.

The Very Notion of a Supply Chain Is Likely to Be Altered in the Future

You can't really talk about blockchain in isolation, because if you think about the supply chain, and especially the idea that it becomes more and more autonomous, it's got to include machine learning. It's got to include IoT. It might even include 3D printing, which could be done onsite. That would change everything completely. We might be able to create the finished product, or at least finished parts and materials to be assembled into the finished products, at the place where those products need to be used or consumed—so we may not even need to transport value-added goods anymore.

In the future, the concept of a supply chain will still be in place, but it will be dramatically simplified and significantly changed. If we look instead of five or 10 years down the road, we look 20, to 30, to 50 years down the road, the very notion of what a supply chain is will likely be altered dramatically.

 

Jack Shaw’s experience spans more than 30 years, including roles informing critical business needs for such Fortune 500 organizations as Mercedes Benz USA, GE, Coca-Cola, IBM, Oracle, and SAP.

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