Blockchain data can be a useful source of certified data to support
the supply chain model or sometimes called a "supply chain twin".
With all the hype around Bitcoins, you’ve probably at least heard of the distributed database technology known as blockchain. But blockchain isn’t just for cryptocurrency and other financial services applications. It’s even finding its way into supply chains, and it has the potential to have a significant impact on supply chain planning.
More on that later, but first, what is blockchain? Despite its cyber fiction feel, the technology essentially just lets you send a block of data to anyone that owns a special encrypted key to access that data. Encryption keys have been around a long time, but blockchain is unique because it can be applied to support transactions between any number of people, including trading ‘ecosystems,’ that need to conduct secure, data-protected transactions. With blockchain, commercial contracts and other confidential information is digitally encrypted and stored in databases that are shared with all authorized ‘keyholders’. They are completely transparent in the sense that all keyholders have the exact same view of the data, yet securely protected from deletion, tampering, revision and dissemination.
In a world where so much internet data is a cheap commodity that anyone can generate, copy and distribute, blockchain provides a way to retain the intrinsic value of the data. It does this by authenticating data and tightly controlling its dissemination. This is why blockchain makes cryptocurrencies – which by nature must be finite in supply - valuable. (For a more detailed explanation, this article provides an excellent primer for the layperson.)
Blockchain’s ability to provide transparency while protecting data’s intrinsic security, veracity and above all, value, makes it useful to supply chains. In modern, multi-echelon, global distribution networks it’s all too easy to lose data accuracy. But, for instance, blockchain could validate the provenance of raw material in the food, medicine or consumer goods supply chain, a track and trace task that has been very difficult and expensive. Already, according to The Economist magazine, Maersk and IBM have started a blockchain-based joint venture to digitally track goods across the entire length of the supply chain.
Specifically for supply chain planning, one of blockchain’s main benefits is that it provides a single-shared view of secure transactional information to a closed group of people (See image at the top of the page). For example, many companies are implementing cross-functional business processes like sales and operations planning (S&OP), but may be reluctant to extend it to suppliers due to concerns about maintaining trust and security. Blockchain technology can ensure both.
Blockchain could also prove to be a vital enabler when it comes to the mainstream viability of commercial trading ecosystems, or e-marketplaces. These originally came about in the dot.com era, but have also been constrained by concerns over data veracity, trust and security.
Brad Householder, CEO of b2i and Chairman of the Board of Directors of APICS, says he believes “the underlying technology of blockchain is going to be transformative, maybe not in 2 to 5 years, but certainly in 10-15 years.” Beyond track and trace capabilities, he sees blockchain’s ability to create “smart contracts” as the breakthrough enabler for supply chain collaboration and transaction “hubs” in many-to-many networks. He adds the caveat that “blockchains are too slow right now for high-volume industry applications, but that will change.”
Joe Shamir, CEO of ToolsGroup, adds that blockchain’s ability to create the combination of a public ledger with high security allows it to create a unique source of certified data. He offers the analogy that one of the reasons the city of Florence flourished economically in the Renaissance period was because their invention of double entry accounting allowed them to create a financial infrastructure unparalleled at the time. He sees the possibility of blockchains offering a similar breakthrough in supply chain infrastructure.
One of today’s biggest supply chain planning challenges is managing increasing amounts of data, so blockchain offers exciting future possibilities. But right now many planning systems aren’t properly handling the data available to separate ‘noise’ from the valuable signals. Blockchain will likely be in your future, but unless you are a technology pioneer, the best next step is more likely be to get your data in order and modernize your planning.