Supply Chain Transformation by Blockchain

Many enterprise-ready blockchain platforms are in service across many industrial sectors.

Blockchain is the underlying technology originally invented to move bitcoin assets from one individual to another.  It can conceptually be modelled as an “open ledger” -- a chain of transactions that everyone in the network can see. The ledger is distributive and does not need a centralised institution to control and provide it.  It provides a protocol that is virtually impossible to defraud, leading to a maximum level of security. It is also a mechanism of collective action that grants unquestionable trust between entities. It is recognised as the main driving force behind the next generation of internet called Web 3.0. Whichever way one looks at it, blockchain captures the imagination of many.

For supply chain management communities, major managerial concerns will include supply chain visibility, product traceability, trusted relationship, information flow security, and so on.  However, these are exactly the same areas that blockchain technology is capable of delivering some permanent solutions effortlessly to.  For the first time in human history, members of a supply network do not have to rely on big institutions but trust each other based on cryptography embedded in the blockchain technology - one calls it trust protocol. Furthermore, it is infinitely more secure than any other protocol. This greatly strengthens our capacity for cooperation and collaboration.

To date, Blockchain powered supply chains are not a hype but a reality. Many enterprise-ready blockchain platforms are in service across many industrial sectors. Announced in early 2017, IBM's enterprise-grade blockchain service is based on the Linux Foundation's Hyper-Ledger Fabric which is now available in the IBM Cloud.  Supply chains which use the services can enjoy complete supply chain visibility, temper-proof security, and high level of trust in peer-to-peer relationships.

Maersk is another commercial ready blockchain service. It addresses purchasing issues by establishing distributed permission-accessible eco-system designed to digitizing work-flow and tracking shipments end-to-end, thus eliminating frictions and maximising the supply chain visibility. Everledger has showcased a supply chain wide platform where over one million diamonds are now registered in its open ledger. Its blockchain application has now expanded to other luxury goods supply chains, saving insurers $50 million annually. Even the fast moving goods supply chains like Walmart are now integrating its food chains into blockchain in order to improve food safety and traceability from provenance.

It seems like technology that can deliver the greatest impact on supply chain management has arrived. Blockchain is poised to become the next generation of internet technology and holds a vast promise for every business and every supply chain on the planet. The future of blockchain for the supply chain management is as broad as what one's imagination can reach. Nevertheless, this author is cautiously optimistic as it is not yet evident that all supply chain collaborative and integrative legacies have been or can be displaced by blockchain technology alone. Time will tell. By Dr. Lu Dawei, Associate Professor and Course Leader for Supply Chain and Logistics Management Course at WMG, The University of Warwick. Click here for more information on Warwick MSc Supply Chain and Logistics Management Programme.

Posted online, 07 Aug 2019