Blockchain: A Distributed Ledger
Although the blockchain technology became a hot topic due to the emergence of Bitcoin cryptocurrency, Bitcoin only represents one of many blockchain-based applications. The inception of blockchain was conceptualized and developed by Satoshi Nakamoto in 2008 for digital currency exchange. At the fundamental level, blockchain records all information exchanges or transactions and utilizes a distributed network of computers or “nodes” to verify each transaction. Once verified, the information is added into a ledger that renders the transaction immutable. There are two forms of blockchain – public and private. In a public blockchain, anyone can join the network and have access to all historical transactions. On the other hand, a private blockchain provides the blockchain owner the ability to only allow certain users access to the network. The latter, for instance, will be more suitable for implementation with corporations and government entities.
Blockchain in Supply Chain
Supply Chain Management currently operates with multiple systems handling various parts of the supply chain. Transactional information from outside of the enterprise such as vendors and service providers need to be seamlessly integrated with internal applications. Security and privacy currently prevent companies from sharing systems and allowing the free flow of information between them. However, with no one party being accountable for changes, blockchain allows inventory to be tracked throughout the whole process. It prevents inventory from being lost or double counted and makes all parties more accountable for it. The live nature of blockchain allows the status of inventory to be updated throughout within minutes.
Blockchain does more than integrate systems. Because it keeps a ledger of all transactions, it streamlines the procurement process and prevents transfer of data to determine order volume and frequency. It also creates opportunity for smart contracts. Currently, companies invoice each other for the purchase of goods or services. With blockchain, the update of the ledger will allow for a faster ordering and payment process. Both sides will understand the others’ needs and supply, allowing for accurate pricing and immediate payment.
- Airline Industry
Blockchain has been implemented in multiple industries in the past few years. The airline industry has used blockchain to improve the aircraft maintenance process. For example, an airline has utilized a blockchain ledger to acquire new parts to fix a plane. This allowed the purchase and use of the parts to be visible for all key stakeholders, including engineers, logistics officers, and replacements technicians. This increased visibility decreases the time needed for the procurement process. There are limitations to the application of blockchain in the airline industry, however. The industry is heavily reliant on non-electronic records so an overhaul of these systems need to occur. This is an expensive and time-intensive process.
- Mining and Metals Industry
The mining and metals industry plays a significant role and impact in the global economy with an approximate revenue of 600 billion USD in 2017. However, the mining industry is facing issues ranging from inefficient operational practices, more stringent compliances from regulatory bodies, to fraudulent materials and cybersecurity threats. This is where blockchain’s capability can help provide transparency and security in exchange for storage of information between all stakeholders throughout the mining value chain. With the blockchain technology in place, miners will be able to comply with SEC guidelines to show the chain of ownership from the origin mine to the final customer in order to ensure ethical sourcing and limit the amount of conflict gems on the market. For instance, diamonds could be imprinted with QR codes to ensure its authenticity and complete traceability from its source. Additionally, this reduces paperwork, improves transaction speed, and eliminates tampering of the information exchanged between different parties in the value chain.
- Grocery Industry
We have also seen the grocery industry implemented blockchain to prevent food poisoning by tracking food throughout the supply chain and expedite the recall of food at any point within it. Furthermore, we’ve seen grocers utilize IoT sensors along the value chain that relay the information to the blockchain network where it captures data such as temperature and humidity to maintain product quality. The benefit of further introducing blockchain within the grocery industry is that it has been utilized before and therefore, much of their data is already electronic. However, the grocery industry is extremely large with thousands of retailers and even more suppliers, making the implementation of blockchain on the whole chain extremely difficult. Various companies are attempting to test the impact of blockchain, but if it were to be used, these users would need to agree on one large system.
The Future of Blockchain
As discussed, blockchain does have its limitations. The process requires a lot of resources due to hashing requirements for transactions. Hashing takes an input string of any length and converts it to a fixed length output string. This ensures transactional security across the network. Also, because transactions are verified on a network level, blockchain requires many users to be involved. This requires all parties in a given supply chain process to work together to establish interoperability, scalability, and governance. Lastly, one of the largest limitations of blockchain is the size of information stored in it. For example, Bitcoin has a limit of 1 MB. Regardless, blockchain has the potential to change the supply chain industry. Despite the barriers of adoption, blockchain still flourishes with more industries developing and implementing the technology to improve their business processes. Big players in the retail and ecommerce industry such as Amazon, Walmart, and FedEx have been working on integrating blockchain technology to improve customer service. This will allow faster fulfillment lead times, more transparency on the quality and source of products, as well as faster resolution to customer service issues. Other emerging technologies such as AI, Big Data, and IoT are also starting to integrate with blockchain. For instance, the International Data Corporation (IDC) anticipates that blockchain technology will be incorporated into 20% of IoT deployments in 2019. Overall, continual research on blockchain and integration with other technologies indicates a promising future for blockchain. Contact us today at email@example.com to learn how you can incorporate blockchain within your supply chain!