Blockchain technology is here to stay. However, blockchains raise many questions that need to be answered before we can tell whether blockchains can solve the most important issues in supply chains.
It has been impossible for supply chain professionals to avoid the issue of blockchains in recent times. The hype is not entirely unfounded, says blockchain expert Teemu Jäntti. Blockchain technology has a lot to offer to supply chains, in particular.
In blockchains, information networks are decentralised and all transfers are saved in the computer network as blocks. The data is retained untouched without the need for centralised administration systems. The applications based on this technology increase security, transparency and efficiency. ‘Block chains are all about trust. Building and managing trust using technology’, Jäntti sums.
Supply chains must be increasingly responsible and traceable. Block chain technology is almost custom made for the purpose. The life cycle and overall cost of a coffee bean, for example, can be determined down to the individual bean, from the soil to the coffee cup. Those buying the beans have access to an automatically determined purchase price and can transfer the money to the farmer’s account immediately.
Technology enables secure global trade between previously unacquainted parties without middlemen. According to Fortune, this is already happening in the American coffee company Bext360. Bext360 is using a blend of mobile apps, robots, and blockchains—the shared ledgers upon which cryptocurrencies are based—to overhaul the tracking process.
Jäntti goes on to say that blockchains enable the automation of contract-related operations. Intelligent contracts can be used to manage trade conditionally.
Heat-sensitive containers, for example, must remain at a predetermined temperature throughout transport, or ownership and money will not be transferred. The temperature data is transmitted through RFID technology.
Blockchains and RFID are made for each other. Manucore, a global network of manufacturing and supply chain leaders, reported on a vision by Kouvala Innovation, where pallets equipped with RFID tags report their need for transport from location A to location B on a certain day. Transport companies then make bids, out of which the RFID tag selects the best operator. The entire transport is monitored by a blockchain.
There are several similar pilot projects under way. The giant shipping company MAERSK and IBM showed how blockchains can obliterate the inefficiency of marine logistics by creating an electronic location for documentation to replace more than 200 forms on paper. The majority of global logistics companies are already part of a blockchain alliance.
‘We must remember, however, that this is the beginning. Companies are only just piloting their first endeavours’, Jäntti says.
Technology is expensive and experts few and far between. The problem of scale also needs to be solved. Blockchain technology cannot yet process large volumes quickly. Standards and legislation are also only just being developed. But companies have come together for the first time to develop various technology platforms, which will facilitate blockchains becoming mainstream, according to Jäntti. No one can make a profit on open-source software platforms, but rather the applications built on them.
According to Blockchain Research Institute, founded by large companies such as IBM, Deloitte, SAP and FedEx, blockchains are a second generation internet revolution creating ‘an internet of value’ and revolutionising our way of doing business.
‘Blockchains are about a shift in both our mindset and our technology. That is why it is taking baby steps. Technology will first be integrated into existing systems’, Jäntti believes.
One thing is for sure: we will be seeing more and more comprehensive experiments in the coming year. Jäntti also wants to prepare us for disappointments.
‘We will be much wiser a year from now’, Jäntti says.
Blockchain expert Teemu Jäntti:
‘Blockchains are all about trust.
Building and managing trust using technology.’