Blockchain: The Supply Chain Revolution

Blockchain: The Supply Chain Revolution

By Kale Schulte

Blockchain could be the most pivotal advancement since the inception of the internet. Most people think of blockchain in the financial sector, mainly due to the increasing popularity of Bitcoin. But this open-source, peer-to-peer ledger system has the potential to change more than just money. I work in supply chain and believe this is where some of the most interesting applications of blockchain will happen. 

Blockchain is a system where multiple computers owned by different entities create and validate a shared record of updates and transactions associated with specific assets. These computers use a shared protocol to verify the accuracy of the information being recorded, and updates cannot be recorded without mutual verification. The result is a permanent, verifiable, ledger of the origin and destination of all assets being tracked – updated in real time. IBM theorizes in the whitepaper Trust in Trade: Toward Stronger Supply Chains that blockchain will “reveal where an asset is at any point in time, who owns it or is handling it, and what state it’s in.”

I believe applications of this technology will first go where they can mitigate the most financial risk. Recalls, food contamination outbreaks, etc. IBM is heading the charge and when they choose a system, I believe it will be the standard that companies will need to “play ball” in the world economy. If a company mandates an open-book policy of supply with its suppliers, it will use this technology. What happens then? Where is the opportunity for consulting firms? We are in for a wild ride.

There will be some standard methods, user interfaces and other components of this technology that will be foreign to most companies. They will turn to an IBM or other firms if they have some expertise in the migration challenges. The transition to this system will occur in most companies within about 3-5 years. Yes, I think it will be a fast adoption rate out of necessity by the big players. Scary, but an entrepreneur’s playground for the next decade.

The implementation of blockchain technology will have some unique effects. Customers of a product could have access to detailed production information, ensuring that products claiming to be free-trade or environmentally friendly indeed are. Blockchain tech is already helping the diamond industry ensure the “conflict-free” label sought by many consumers is accurate. With this technology, counterfeit markets will shrink, and the prices of goods may drop as customers “buy from the block” rather than “Jimmy’s knock-off goods trunk.” This is an amazing opportunity for retail customers as well as the stores that supply them. 

Another potential effect to ponder through a scenario – Joe Shopper goes to a grocer and wants to buy a tomato. But he doesn’t want just any tomato, he wants an organic, fair-trade, sustainably-grown tomato that was picked from a family-owned farm in Ecuador. With blockchain, a grocer can prove their tomatoes meet Joe Shopper’s criteria, allowing customers to track products all the way back to their sources. But why go through the trouble to create this level of transparency? Well, because modern customers have a lot of options in this new world of accountability. They can avoid the grocery store altogether and decide to buy only from local sources, knowing who and what touched their tomatoes, if it’s important to them. As customers become more concerned with sustainability and accountability, trust and retention will be reinforced through the block. 

Blockchain technology has the ability to revolutionize the entire supply chain industry, the way customers shop, and more beyond that. As technology & innovation correspondent Sally Davies so accurately compared: “[Blockchain] is to Bitcoin, what the internet is to email. A big electronic system, on top of which you can build applications. Currency is just one.” Supply chain is another. We’ve only just begun to realize the capabilities.