Blockchain as a new bedrock in supply chain management?

Embedding Blockchain-powered technology within supply chains could hold various advantages for the industry

The continuing impact and fallouts from the largest pandemic in over a century have prompted many businesses to consider revamping various parts of their operations, including their supply chains. In response to this, we have seen a growing trend in the number of businesses investigating how implementing blockchain-powered solutions could help improve efficiencies and transparency.

The ability to track the origin of raw materials with a system that is exceedingly difficult to tamper with could improve visibility, providing greater transparencies into supply chains. Moreover, blockchain-powered technology could provide improved oversight and robust historical records for the industry, creating greater efficiencies. So why then is not everyone with a moderately complex supply chain using blockchain-powered technology already?

Although the benefits of these solutions can be explained relatively simply, they struggle to have a clear competitive differentiated advantage in the minds of many supply chain managers vs. legacy approaches and technology (or lack thereof). The cost of implementation is also a barrier for many. Implementing such technology across the organisation and the wider supply chain ecosystem could come at a monumental cost before users could enjoy its implied benefits – why change established and proven processes for something that may be more efficient, but which comes at a high cost as well as potential risk? Trust and proof are also areas where this technology still struggles. Explaining the key benefits of blockchain requires the absolute trust of those in charge of existing supply chains, with the challenge of clearly demonstrating how it works in order to convince them that it works.

Despite the challenges to the implementation of blockchain-powered technologies there have been some industries where we have seen the opportunity cost outweigh resistance to change. For instance, the art sector has found a tremendous use for an immutable record; specialised platforms have emerged where works of art can be registered to speed up verification and authentication. The diamonds industry has also found blockchain a viable platform for managing its supply chains, with providers such as Everledger offering solutions that provide greater transparency to the industry’s supply chain.

Implementations can also be found in the retail sector; one such example is Carrefour’s implementation of a blockchain-based tracking system which enables retail customers to track 20 of Carrefour’s products through the supply chain. Due to the initial success of this pilot Carrefour intended to add 100 more products to the system at the tail-end of 2019. Other retailers are also exploring the technology for their supply chains, including Walmart and Target, with the latter currently actively developing its own blockchain-powered supply chain management platform ‘ConsenSource’.

Despite success stories from companies such as Carrefour and Everledger, it is expected that most blockchain initiatives within supply chain management will remain at a pilot stage until at least 2022. Much of the success that blockchain has seen in insurance and banking could arguably be attributed to wider digitalisation within the financial sector which has been lacking in the physical world of supply chains. A key challenge for implementing blockchain across supply chains will then be how to capture these physical events in a digital format that can then be used within a blockchain system.

In the near future, we could see blockchain-powered technology become increasingly used by companies globally to support their supply chain management activities, particularly if end-customer priorities and potential policy decisions move towards increased transparency across sectors. However, the relevant prerequisites such as the digitalisation of events across the supply chain must be met before we will see more widespread adoption.