In part two of our series on Blockchain we look at further benefits of this technology, why it is gaining global momentum, the timescale for implementation, and sectors that are expected to be early adopters of this game-changing new development.
Blockchain and the IoT
Blockchain’s ability to enhance traceability and quality management is supported by parallel developments in the Internet of Things or ‘IoT’. Location and temperature information related to the transit of a shipment (and each unit within) could be captured and communicated at regular intervals. Blockchain provides a means for this data to be recorded securely, in a standard format, and accessed by approved parties in the chain.
Information about a shipment would be captured in real time based on specified events, documents, IoT data, approvals, certifications, and so on.
Each participant in the supply chain ecosystem can view:
- progress (‘loaded on vessel’)
- condition (‘4°C at 1402h’)
- status (‘awaiting inspection’)
- and history of the shipment (‘certified grain-fed beef; source Margaret River, WA’)
Some information would be based on their level of permission. No party can change or delete a record without the consensus from others on the network, thus ensuring the integrity of the data.
This technology is gaining considerable momentum across the globe, with significant investment occurring, and many start-up companies working on specific aspects of distributed technology (the generalised version of blockchain). IBM has been a key driver, and the most prominent in terms of supply chain. IBM has been conducting trials jointly with Maersk, the world’s largest shipping company.
An IBM and Economist Business Unit study of 200 banks in 16 countries indicates that 66% of banks will have commercial, scaled blockchain solutions in place by 2020¹.
IBM alone has 400 clients testing blockchain, and 650 staff dedicated to its development.² Microsoft is partnering with JPMorgan Chase and several other large corporates on competing software to IBM’s. There are also smaller software providers emerging.
The format for investigating the applicability of blockchain in any particular industry/situation is following a similar path: research across the relevant supply chain; selection of a group of participant organisations along the chain; and then trial shipment(s) to understand the technical feasibility and to assess the benefits. Maersk and IBM have piloted flowers and electrical parts, and Walmart have followed this path with pork and produce trials. There are several start-ups focused on agricultural traceability and provenance, conducting trials on specific fresh products such as fish and wine.
Others are taking a big-picture view: Australia Post is assessing blockchain as a solution for digital identities, and is working with Alibaba to explore ways to use blockchain and other technologies to reduce food fraud in China. BHP Billiton has announced that it will use blockchain to securely record and track key sample data in its mining processes.
Pacific International Lines, PSA International and IBM Singapore will collaborate to test blockchain technology to achieve enhanced security, efficiency and transparency in supply chain networks, as reported in Seatrade Maritime News.
The biggest barrier to widespread adoption of blockchain is governance. Hidden under the covers of the internet are several official bodies that have created standards and protocols about how we all access and use the internet. Similar protocols are needed to support widespread adoption of blockchain. There is little doubt that this will happen soon, with some pundits suggesting a 5-10-year timescale before usage moves from the trailblazers to more widespread adoption.
The potential advantages for global supply chains are massive. It is estimated that up to 20% of the cost of global transport costs are associated with document processing and administration³. Then there is the inventory cost of containers and air shipments awaiting clearances, and the cost and revenue impact of recalls.
Earliest adopters are expected to be industries that gain most by adding value to their product and reducing risk, such as agriculture.
Unlike the big IT projects of the past, no one is ‘betting the house’ on their blockchain decision – at least at this stage. Most blockchain applications are following the innovation playbook – using trials and feasibility studies; low commitment, low risk, step-by-step assessments. Considering the potential for improved efficiency, reduced risk and finally being able to operationalise the ‘end-to-end’ supply chain, this is a digital initiative that deserves a close look.
¹ IBM Institute for Business Value Leading the pack in blockchain banking: Trailblazers set the pace Unithttps://www-01.ibm.com/common/ssi/cgi-bin/ssialias?htmlfid=GBP03467USEN
² The New York Times, Blockchain a better way to track port chops, bonds, bad peanut butter, March 4th, 2017
³ IBM Press Release, 5 March 2017 Maersk and IBM Unveil First Industry-Wide Cross-Border Supply Chain Solution on Blockchain. https://www-03.ibm.com/press/us/en/pressrelease/51712.wss