Supply chains | is the Blockchain the answer?

In February 2018, a Gartner analyst described the “irrational exuberance” of blockchain – a term synonymous with a 1996 Alan Greenspan speech which warned of an overvalued market. On the Gartner hype cycle, Blockchain has gone beyond the “Peak of Inflated Expectations” and has been met with a lot of negative press. Despite the adverse coverage, the potential benefits to supply chains promises blockchain is not going to disappear anytime soon.


Blockchains may have originated as the enabling force behind cryptocurrencies, but its potential use cases are much, much wider. In the first three months of 2018 VC funding for blockchain, start-ups had already reached 40 per cent of last year’s total. It has been linked to just about everything with the potential to be the solution for problems in public and private sectors. From immigration, transportation and land registry to gaming, software development and supply chains…the list goes on and on. The blockchain is the disruptive solution.

Here are three reasons for the scepticism, albeit there are many more:


  1. Overuse: Blockchain is not a good fit for each and every use case. If the use case is primarily within an enterprise, then it might better for a secure central database or similar technology. Don’t apply blockchain to use cases where it is really not needed.


  1. Loss of ownership: When it comes to deployment of a blockchain, some parties are not comfortable with the fact that data will be shared in order to improve the overall visibility of the process amongst stakeholders. If this is an impediment, consider alternative approaches. The blockchain is about 100% transparency.


  1. Regulations and technology: Regulations like GDPR have stringent requirements for an organization to adhere to the data management procedures. However, some of them are not aligned with the characteristics of immutability in the blockchain. Of course, there will be architectural patterns for how blockchain and GDPR could comply over time. However in the short term, this leads to ambiguity on how technology can support such requirements – and this throws up more uncertainty.

Scepticism is a healthy reaction to the claims made of the blockchain. Ask yourself, why use blockchain over other methods that have existed for years? Change is never easy, especially when it is a disruptive technology with lofty ambitions.

Blockchain can deliver value through record-keeping, increased security and transparency. Typically, blockchain comes into its own when there are numerous participants who need access to information, where trust and validation are important and where controlling access levels is key.  


Don’t believe the hype?

In a recent supply chain proof of concept (PoC), blockchain demonstrated its capabilities to achieve absolute traceability, as well as increase efficiency, security and speed. The use of blockchain in global supply chains is not hype: it is real. It is happening now.

For instance, tracing a box of mangoes to their point of origin takes around 18 hours. With blockchain, it can be done in two seconds or less. The security and trust blockchain confers onto a system is a value creator in itself. Porsche recently announced it was introducing blockchain to its cars, which would enable owners to perform functions like locking and unlocking the car via an app. It would also enable temporary access authorizations to be granted quickly, easily and securely. Furthermore, the security of a decentralized system like blockchain is not compromised if one point in the system is. (Unlike what happened with Jeep in 2015, when hackers were able to remotely seize control of cars by exploiting a software vulnerability – in one case, while the vehicle was being driven at 70 mph).

In the digitally-dominated age, it is not just supply chains involving physical goods that benefit from blockchain. Software supply chains are being transformed by blockchain-enabled secure DevOps, leading to faster launches and better, earlier bug detection. The transparency blockchain enables also means that a project’s status updates can be instant, even when the process involves geographically-dispersed, remote teams consisting of suppliers, contractors and/or partners. Similarly, the provenance and security checks of digital goods can be validated through blockchain, which is increasingly valuable in our hyper-connected world.

Early challenges with blockchain technology, such as the computational power are required or the amount of storage used, are on the way to being solved thanks to newer protocols like Intel’s Proof of Elapsed Time (POET). As blockchain matures and adoption spreads, expect interoperability to become an issue between the different systems of distributed data ledgers. For instance, a smart city might host several different blockchain-based systems regulating its many services, all of which need to ultimately work together. Google, among others, is creating blockchain lattices (“blockchains of blockchains”) to address this issue.


Supply chains and the Blockchain

While some of the blockchain’s biggest real-world impacts may still be some years off, there is no doubt that the excitement around this technology is well-founded. Already, the hype is beginning to make way for grounded, practical examples and use cases across every type of industry. Supply chains have been among the first to benefit. Another major area to benefit will be the supply chains visibility, security, asset tracking and IoT domains.  Examples of blockchain powering smart cities or vehicle-to-vehicle interactions are beginning to trickle in. Many more will follow.

There are plenty of problems to be solved with blockchain. But Blockchain is not the problem. So, it is time to stop the blockchain bashing. As the Gartner report from February 2018 citedIT leaders must cut through the hype and apply blockchain for maximum benefit”. Blockchains are just getting started.


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