Blockchain has been the buzz among supply management organizations that wonder how the technology will benefit them and their processes.
Since it enables multiple parties to be engaged in one long-running transaction, blockchain is a boon from a supplier-management perspective, says Saleem Khan, global head of data innovation at Dun & Bradstreet, a Short Hills, New Jersey-based commercial data and analytics provider. Blockchain offers transparency and enables tracking where goods are coming from in real time, he says. Take food provenance as an example.
“You now have an ability with this technology to track every supplier and every link along the chain,” Khan says. “You can track the farm that produced the goods, the company that packaged the goods, the company that shipped the goods from another country into the U.S., and finally, the retailer that sold the goods. So, if I’m a large retailer in the U.S. at the end of the supply chain, I can track all the way down to the farm in Argentina that produced the spinach.”
Benefits of Blockchain
Until now, that traceability has been very fragmented in disparate databases, Khan says: “One of the benefits of blockchain is the idea that you can have multiple parties in a decentralized way sharing information and making everything transparent.”
For supply managers, Khan says, blockchain also offers:
●Smart contracting capability to automate payments along the supply chain
●The ability to standardize processes across the entire supply chain, rather than having numerous disparate tools
●The ability for companies to compete for the best price. “You might be able to find real-time suppliers in Argentina that have the best price for the quality of spinach you are looking for,” he says.
Blockchain also enables the creation of trust among the parties. “The trust component is interesting because it requires a bridge between the physical and the digital world,” Khan says.
“What I mean by that is you still need someone to go to that farm in Argentina and confirm that it’s a legitimate farm, that it is run by a legitimate organization and that it’s authorized to operate in the country,” he explains. “The first part of trust is confirming in the physical world that the business is trustworthy. The second part of automating the trust is digitizing it. Once you’ve confirmed the farm is legitimate by physically going there, a certificate or seal within blockchain can be used as confirmation that you have tamper-proof evidence that someone has visited that location, that it’s a legitimate farm and that the farmer isn’t going to sell tainted products.”
Speeding Toward Standardization
Blockchain is going to become a standard process among supply management organizations, Khan predicts. Shipping and logistics companies like Maersk are looking to automate their processes using distributed ledger technology. Walmart and other companies are considering blockchain for food provenance and other processes.
“Early adopters are investing in this and are trying to determine what the best adoption mechanism is,” Khan says. “There will be hurdles with respect to legacy technologies. But the long-term trend is using something like a blockchain or a distributed ledged technology to track multiple parties and to make the supply chain more transparent regarding transactions.
“In two to three years — if we’re still talking about blockchain — blockchain will have failed. The reason I say this is blockchain needs a user interface, a front end.” Khan envisions it as a software-as-a-service tool, where a supply chain manager or supplier provides company information as well as the verification that the company is allowed to operate in its location. “And behind the scenes,” he says, “that software as a service — the front end — is using a blockchain for all the participants. The end user never really touches the blockchain.”
Sue Doerfler is senior writer for Inside Supply Management®.