CSCMP's Supply Chain Quarterly
June 26, 2019
Top-Performing Supply Chains

Moving blockchain forward: Seven use cases for hyperledger in supply chain

To handle the complex interactions occurring throughout their value networks, supply chain leaders will need to embrace open source technology.

As we define future supply chain technology, I think we need to take "a hard left." Up to now, we have been moving at a steady pace down a road that is well-known and safe. But this road is no longer sufficient to meet today's supply chain challenges. We need to change our direction. Here I clarify the path less traveled but more promising for supply chain leaders.

What do I mean? Let me explain. Supply chains currently use closed and proprietary technologies. Processes are based on relational databases with rows and columns. I believe we need to move to open source technology. In other words, get used to hearing the terms "blockchain" and "hyperledger." These are two new concepts that are here to stay.

What is the reason for this move to open, distributed technology? Currently, there are "dark holes" in the supply chain that I believe will not be closed with the current approaches. These dark holes are typically handshakes, or interface points, between applications where data does not flow, stopping visibility across the network. A dark hole could be the unloading of a container from a ship, the receipt of a shipment, a transfer of ownership, a return, or a change in status. Dark holes usually happen with the transference of ownership or change in status between two parties.

Let's examine the problem. Currently the product road maps for conventional technology providers are not focused on closing these dark holes. Instead, the focus is on refining today's enterprise applications. It is unrealistic to think that vendors like Infor, Microsoft, Oracle, and SAP will ever work together to erase the dark holes of information in the supply chain. Likewise, it is very clear that while enterprise resource planning (ERP) systems will continue to be the backbone or system of record for transactions within the enterprise, they are unable to form the backbone or system of record for a global value network that consists of complex, nonlinear interactions between supply chain partners.

This transition from closed and proprietary solutions to open source capabilities will not happen quickly. I see adoption occurring over the next five years. But if it works, I think that blockchain—which is defined as a distributed database that acts as a shared, immutable ledger for recording the history of transactions—will be embedded in all of today's current technologies.

While many may know blockchain as the engine powering the cryptocurrency and payment system Bitcoin, the possible use cases for the technology in the value network are far more pervasive and powerful. Particularly promising is the Hyperledger project, an open source blockchain platform started in December 2015 by the Linux Foundation to enable blockchain-based distributed ledgers.

The Hyperledger project aims to bring together a number of independent efforts to develop open protocols and standards by providing a modular framework that supports different components for different uses. This would include a variety of blockchain technology variants with their own consensus and storage models and services for identity, access control, and contracts.

What are the possibilities? Before I continue, let me make a confession: I am not a technologist. I cannot write code, and when I worked for a software company, I quickly discovered that writing software requirements was not the best use of my skill sets. Instead I like to paint big pictures and help others to fill in the gaps. But here are some use cases that I developed through talking to technology experts and that we at Supply Chain Insights are considering testing as part of our new Network of Networks Group.

  1. Community registry. Today network registration involves onboarding to every network as an individual or as a company. It lacks a system of reference for division/company or company/industry. What if we could have a community registry where we have a single sign-on that could be accessed by all value networks? This schema would be carried in blockchain messaging, enabling users to write information once and provide safe/secure communication across the network.
  2. Replacement of EDI. Today EDI or electronic data interchange is the workhorse of the supply chain. Messages are transmitted and opened safely and securely. However, it operates in a batch manner, and there is latency as the message is opened. In addition, the passage and receipt of EDI requires sophisticated IT groups. As a result, it is more costly. Could blockchain replace EDI? This is a stretch objective, but I think it's possible.
  3. Lineage/track and trace. Tracking and tracing goods across multiple parties is cumbersome and lacks reliability. Blockchain offers the ability to embed the origin and transfer points, destinations, and lot codes in the chain. This could help companies better track and trace food, manage gray market goods (genuine branded goods sold by unauthorized dealers) to eliminate counterfeit items, ensure compliance, and streamline recalls.
  4. Safe and secure supply chains. As goods pass through the supply chain, multiple parties handle them. Blockchain technologies enable companies to create a chain of custody. In the process, the handling requirements for each product could be communicated on receipt.
  5. Tracking social responsibility goals. Tracking a product's carbon footprint and point of origin for compliance with internal or external social responsibility requirements is difficult. One thing is clear: Audits do not work. As we tackle issues like fair labor, clean water, Congo metals/conflict minerals, and carbon consumption, blockchain can track the chain of custody and help us to better understand and measure energy consumption, carbon emissions, and other social responsibility goals.
  6. Supply chain finance. The origin of blockchain is a desire to ensure safe and secure payment. Could we disintermediate banks as we know them? Each time a supply chain transaction passes through a bank, there are charges. Could we drive a massive restructuring of world banking to reduce bank charges for credit cards, wire transfers, and electronic fund transfer (EFT)/ automatic clearing house (ACH) payments?
  7. Document sharing. In supply chain, we spend hours upon hours negotiating terms and conditions of contracts. After completion, the filed contracts are never used again. We do not connect the contracts to supply chain execution. But what if contracts could accompany a purchase order, and if conditions change, then rules would change the cost based on delivery conditions? Or they would change delivery conditions, based on availability (dynamic dock scheduling) and weather? I think this is all possible. I think blockchain along with cognitive computing will allow value networks to connect supply chain documents to transactions in real time.
  8. Today we do not know what is possible. However, the more I study this technology at the beginning of its hype cycle, the more promising I think it is. I am excited to be a part of the group that is going to do some serious testing. Supply Chain Insights has gathered together a cross-industry networking group of collaborative technology users and developers to study what we are calling the "Network of Networks." The Network of Networks will address the adoption of distributed and open technology by the ecosystem of technology providers and business users to drive interoperability in value networks.

    In the Networks of Network testing that we have planned, we will be using the IBM version of blockchain to test the use of Hyperledger to improve network onboarding. Our goal is to test the open source version from IBM in the digital sandbox/lab environment at Schneider Electric. We issued a call for participants in a webinar on January 11, 2017 and came together as a group at the next Network of Networks Session on April 13-14 at the Grande Lakes Ritz-Carlton Hotel in Orlando, Florida. The results will be shared publicly at the upcoming Supply Chain Insights Global Summit on September 5-8, 2017 at the Ritz Carlton, Reynolds in Oconee, Georgia. We hope to see you there!

    Lora Cecere is founder and chief executive officer of the research firm Supply Chain Insights.

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