Blockchain in SCM

Blockchain: The long missing link in supply chains?

From the original vision of an ideal supply chain and burst bubbles to most recent developments in the area of the blockchain. Can the dream come true after all?

When I wrote my thesis on “supply chain management” in the late 90s, I was completely and utterly fascinated by the topic. At its core was the idea of optimizing the flow of goods beyond the borders of organizations. The search for the global ideal was on – with IT as central enabler through smooth data exchange. It sounded ever so exciting. And it seemed one could change the (logistics) world with it.

Well today, almost 20 years later, numerous projects and resulting experiences have led to a great sense of disillusionment. Even 20 years on, we’re still far from easily exchanging required data for high-level optimization. What’s the main problem? Required data formats, standards, and technical transfer options to enable such exchanges are certainly (and sufficiently) available today.

EDI, edifact, XML, FTP, and S-FTP, Web services, … are just some of the available options that everyone can master these days. What’s missing, however, is the required data.

Still a pain today…

In theory, the data is also available, of course. But in practise, most businesses already struggle with mere master data maintenance. Adding further data management to the equation, for example, the kind that requires cross-company management such as long-term supplier’s declarations or product classifications for foreign trade, amplifies the challenge significantly.

To resolve it, businesses often resort to investing additional, manual efforts in everyday business. Areas this refers to include:

  • Mapping between supplier information and own master data IDs
  • Determination of the right triggers for transactional data exchanges
  • Signed documents and forms still subject to paper-based requirements
  • And of course, quality control of incoming information prior to processing

Bursting the bubble…

Rather often in this area, the marginal costs of such processes then simply vaporize the vision of the ideal supply chain. Regardless of the actual flow of goods, the accompanying information still requires way too many manual process steps in order to follow the goods quickly and smoothly enough – or even, to lead ahead.

Conclusion: even 25 years after the initial idea was born, there are still parts of the chain missing to comprehensively map the supply chain on a digital level.

Maybe the vision will get its second wind by simply interweaving two chains…?

Can blockchain drive the digital supply chain?

Most recently, we increasingly get to read about a certain “chain” again, which – IMHO and in the midst of the current “we call everything digitization”-phase – bears the greatest innovation potential and the most significant power to create disruptions (far beyond the world of finance, where it’s already a focus today): blockchain.

So, what is it? According to Wikipedia, it “is a distributed database that maintains a continuously-growing list of data records hardened against tampering and revision. It consists of data structure blocks — which hold exclusively data in initial blockchain implementations, and both data and programs in some of the more recent implementations — with each block holding batches of individual transactions and the results of any blockchain executables. Each block contains a timestamp and information linking it to a previous block.”

I find it much easier to understand, however, in a video that the Institute for the Future (IFTF) made publicly available on YouTube.

Click here to view it.

Blockchain originates in the area of the cryptocurrency “Bitcoin”. But, as the video explains quite well, blockchain is the underlying technology that can manage information far beyond monetary transactions.

This is why it’s rather exciting also for us folks in logistics and global trade.

Impacts of blockchain technology on logistics

So – what if we were to combine both concepts in one, comprehensive chain? Will it then – finally – be possible for the data to follow the goods within one “shared record”? Let’s make it more tangible, for example, in the area of global trade:

What if tariff codes, classification data, origin information, import and export certificates, customs values, clearance status, and all further required information about goods were available for all involved parties to access and complete through one unique ID? Anywhere and anytime? And also protected against manipulation thus delivering the same significance as certificates, seals, and signatures?

… and from here on, just let your thoughts run free! Can you imagine it? My supply chain management vision certainly got its second wind ;).