CSCMP's Supply Chain Quarterly
February 23, 2018

The Supply Chain of the Future – Tomorrow's Vision or Today's Reality?
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If you don't know what blockchain is, start studying

Get familiar with this technology now. Originally designed for managing digital currency, it's well on its way to adoption as a means of tracking supply chain transactions.

Before we get into any discussion about blockchain, let me say right up front that I am no technical expert, nor am I especially knowledgeable about finance. I won't profess, either, to fully understanding how blockchain works. But I do recognize that some very astute, respected analysts and a host of technology providers believe that blockchain has the potential to fundamentally change the way global supply chains share information and conduct transactions. That idea is very quickly gaining momentum. For that reason, it's important to be aware of what blockchain is and to start investigating, if you haven't already, how it might benefit your company.

Blockchain technology originally was developed for managing payments in digital currencies like Bitcoin. As finance executive Enrico Camerinelli explains in the CSCMP's Hot Topics publication "Blockchain in the Supply Chain," it is basically a database that runs across a global network of independent computers. It serves as an open ledger, where every transaction on the network is recorded and available for all participants to see and verify. By providing a common view, a blockchain eliminates the need to transfer information between organizations through such things as e-mails, spreadsheets, and direct electronic connections, and it helps to reconcile any differences in data between suppliers and customers. Importantly, the database is immutable; in other words, it cannot be changed without all participants' agreement.

Experts believe there are many ways blockchain technology could be applied in global supply chains. For a useful overview of that topic, I recommend the Harvard Business Review article "Global Supply Chains Are About to Get Better, Thanks to Blockchain." The authors, both digital currency experts, also include a clear explanation of blockchain's advantages and potential roadblocks to adoption.

We've published a couple of articles on this topic ourselves. In "Why blockchain is not just for banks," Alexander van Tuyll van Serooskerken, a senior management consultant at the technology services and consulting firm Synechron, offered some examples of how organizations such as exporters, importers, insurance companies, and credit rating agencies could benefit from being part of a blockchain. However, he argues, nobody will gain the full benefit of blockchain unless everyone in a supply chain participates.

In "Time for a change in direction: Seven use cases for hyperledger," Lora Cecere, founder and chief executive officer of the research firm Supply Chain Insights, discusses the Hyperledger project, an open-source blockchain platform launched by the Linux Foundation. Cecere foresees supply chain applications in such areas as chain of custody, product security, document sharing and data exchange, supply chain finance, and social responsibility.

With many tests already underway, all this could become a reality more quickly than you might think. IBM has taken a prominent role, working with companies like the ocean carrier Maersk Line and the retail giant Wal-Mart Stores and rolling out its Blockchain Founder Accelerator program to support successful adoption of the technology. Microsoft has launched a supply chain blockchain group called Project Manifest. An online search of "blockchain supply chain" will show that many other technology firms, both established giants like SAP and small startups, are jumping on the blockchain bandwagon.

It appears inevitable that blockchain will become integral to many supply chains. That's why it's a good time to start learning about what's coming and why it will matter to you and your company.

Toby Gooley is Editor of CSCMP's Supply Chain Quarterly.

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