Walmart and Sam’s Club are leading a new charge to get suppliers to use blockchain. Here are five more ways blockchain could impact supply chain management during the year ahead.
Now that one of the nation’s largest retail chains is mandating the use of blockchain, this append-only transaction ledger technology will likely gain ground in the supply chain, where accountability and authenticity are becoming increasingly important. Beginning September 2019, Walmart and its Sam’s Club division will require suppliers of fresh, leafy greens to implement real-time, end-to-end traceability of products back to the farm using a digital ledger developed by IBM, Industry Week reports. The retailer plans similar mandates for other fresh fruit and vegetable providers.
With blockchain transactions, new information can be added but any previous information (which is stored in blocks), cannot be edited, adjusted, or changed, according to Forbes. Using cryptography, blockchain links the contents of the newly-added block with each block before it. That way, any change to the contents of a previous block in the chain invalidates the data in all of the following blocks.
A potential game changer for supply chain management, blockchain helps eliminate some the complexity while increasing the transparency of today’s supply chains. Because of this, there is real interest in how blockchains might transform the supply chain and logistics industry, Bernard Marr writes in How Blockchain Will Transform The Supply Chain And Logistics Industry.
5 Key Impacts to Watch
Due to the complexity and lack of transparency of today’s supply chains, companies are interested in blockchain’s transformational value for the supply chain and logistics industry.
“While the most prominent use of blockchain is in the cryptocurrency, Bitcoin, the reality is that blockchain—essentially a distributed, digital ledger—has many applications and can be used for any exchange, agreements/contracts, tracking and, of course, payment,” Marr writes. “Since every transaction is recorded on a block and across multiple copies of the ledger that are distributed over many nodes (computers), it is highly transparent.”
Here are five ways blockchain could impact supply chain management during the coming year:
- Companies will ferret out the “best fit” for blockchain applications. As blockchain technology continues to mature, and as more people start to understand it, the companies using it will be more focused on putting it to good use (versus just using it for the sake of using it). “There is increasing interest in corporations understanding what types of business problems are best-suited to blockchain,” Deloitte Consulting’s Amit Prabhu told The Enterprisers Project, adding that this will include “learning by doing,” via pilots, proof-of-concepts, and other early stage experimentation. “For a long time, blockchain has been inextricably tied to cryptocurrencies, but that’s simply one application of the technology,” the publication reports. “Now, a variety of industries – from manufacturing to retail – will start to explore the improvements blockchain can bring to supply chain transparency, ownership tracking, and others.”
- Blockchain will continue to work on its image. Some organizations have kept blockchain at arm’s length because the nascent technology has a bit of a reputation problem. “For many, blockchain and cryptocurrency are interchangeable concepts, and the volatility of the cryptocurrency market has given some a reason to stay away,” Lucidity’s Nikao Yang tells The Enterprisers Project. “In order for blockchain adoption to happen, the industry will need to better educate on the differences between blockchain and cryptocurrency, and the possibilities of what we can do with blockchain outside of financial transactions.”
- Trading partners will be able to trust one another. In a complex business environment where organizations might not fully trust each other, blockchain can bring them together. The world’s biggest diamond producer, De Beers, for example, is currently building out an industry-wide blockchain. This will help the company track diamonds each time they change hands in order to verify authenticity and ensure they are ethically produced, according to Oracle’s Evelyn Mei. “When granted access, parties can write to a common blockchain and view relevant data,” Mei writes. “All permitted members of the blockchain network can see the same transaction history in the same order, such that all members can agree on the same set of records and reach consensus.”
- Manufacturers may get the ultimate anti-counterfeit tool. Because they can pinpoint even the most microscopic counterfeit product as it moves throughout the supply chain, blockchain-backed programs may be the anti-counterfeit tool that manufacturers have been seeking for decades. “As companies continue to outsource their production infrastructure to vendors in disparate parts of the world, especially in regions where access to technology is limited,” Scott Nelson writes in Know Your Product: How Blockchain Will Transform the Supply Chain, “providing transparency to an otherwise uncertain ecosystem will be increasingly important to ensuring that counterfeit parts aren’t inadvertently used to create ‘genuine’ products.”
- Companies will use smart contracts to hold vendors accountable. Smart contracts is a blockchain-based system of checks and balances that holds vendors accountable for the secure transfer of goods and services from one location to another. According to Nelson, we’re already seeing companies find success in this manner. In May, IBM announced a partnership with Veridium Labs to tokenize and measure carbon emissions along the supply chain. “As each product moves through the platform,” Nelson writes, “its emissions data is recorded and transmitted back to headquarters, where experts can assess whether or not vendors are operating in compliance with energy consumption standards.”
More Blockchain Ahead
Blockchain technology is already producing “extraordinary results” in supply chain, transportation, and logistics, Jack Shaw points out in APICS Magazine. Over the next decade, he expects supply chain to enter a new world.
“Networks will become much more flexible, dynamic, and fungible. In the blockchain-enabled, self-configuring business ecosystems of the future, intelligent technologies will dynamically source new suppliers, distributors, and even potential customers,” Shaw writes. “And these tools won’t have to limit themselves to dealing with only the few partners who have been manually and laboriously set up in their systems.”