How to get the Block into the Supply Chain
For years, global operations teams have been pressured into creating a transparent supply chain that can be tracked, traced and managed end-to-end. While a noble target, it has so far proven very difficult to realize due to technical, organizational and operational restrictions. With new technologies such as IoT, Artificial Intelligence, Machine Learning and Blockchain emerging and rapidly developing, this utopia might be closer than we actually believe.
In this post we will specifically look at blockchain and how it will enable the supply chain of the future.
So, what is a Blockchain?
Simply put, Blockchain is the technology that allows the recording and storage of data and information in a way that it cannot be altered retroactively. The concept of blockchain was first described by Stuart Haber and W. Scott Stornetta in 1991 and conceptualised by Satoshi Nakamoto in 2008. It was then implemented the following year as a core component of the digital currency bitcoin, where it serves as the public ledger for all transactions.1
Blockchain builds on a string of information elements that are tightly interlocked with each other as they are always referring to the previous element in the chain. Additionally, a calculation mechanism assures that manipulations of information contained in an element i.e. block can easily be detected. Replicating these chains of information across multiple locations makes the blockchain resistant to manipulation and fraud.
The New Supply Chain Reality
The increasing fragmentation and globalisation of the supply chain and the rapidly accelerating shift to production ecosystems are fundamentally changing the nature of the supply chain in today’s world. In production, maintenance and services we see an ever increasing number of players co-create and co-deliver products and services. Therefore, the promise of blockchain to enable a distributed and secure way to record, track & trace and share information across the ecosystem can prove to be a critical capability in the future:
- Record – As described above, blockchain provides a manipulation-resistant way of recording and storing data and information across a distributed network, e.g. to record material information, shipping information or other productions / supply chain relevant data.
- Track & Trace – As information in the blockchain can be made available to the public or key stakeholders along the supply chain in a secure way, an end-to-end, track-and-trace mechanism for products and spare parts can be established from raw material to product retirement.
- Share – Due to the distributed, manipulation-resistant nature of blockchain, information can easily be made available for multiple parties along the supply chain. As parties can only add to, but not change the blockchain, there is no risk of retroactive manipulation.
Blockchain and the Supply Chain
Today there are many reasons to make the supply chain transparent and develop an end-to-end reporting and management mechanism. Some of these influences or reasons are routed in the increasing need for sustainability, corporate social responsibility, circular material flows, legal compliance and maybe most important in fragmented supply chains. Therefore, it becomes critical to introduce new technology into the supply chain that allows the tracking for example of raw material from the harvesting of the tree in the Finnish forest to the recycling of the end-of-life products in a rural area of China. Blockchain can help by documenting each step. Key benefits in a nutshell:
- Transparency – Blockchain will enable the end-to-end documentation of the lifecycle of a product from raw material to end-of-life product and into recycling thus enabling unseen levels of transparency.
- Scalability – As you can easily add new contributors into the blockchain due to its distributed nature, there are virtually no limits to how big your supply chain network that feeds into the blockchain can be.
- Security – The distributed, encoded and manipulation-resistant nature of the blockchain provides a high degree of security even when shared across the supply chain ecosystem.
- Cooperation & Innovation – Making data and information of a product available will enable new ways of cooperation along the supply chain and beyond. Thus fuelling new innovative approaches and services that will accelerate innovation.
While today the impact blockchain will have on the transformation and modernization of the supply chain is not yet fully understood, there are many companies that have started to experiment with blockchain as well as other new technologies in their supply chain with promising results. As more and more companies will embrace the promise of blockchain across the cooperation we will see new operating and business models emerge and ecosystems form. The future of Supply Chain is a Block.
For more information on blockchain and a short introduction on the simple mechanism behind it you might want to watch the following video: Understand the Blockchain in two minutes by Institute of the Future (IFTF)
Writer of this blog post for Maintworld-magazine: Michael Hanf
Michael is a Partner in Taival Advisory specialized in digital transformation, ecosystems, innovation and future business architectures. With more than 17 years in business and technology consulting, Michael has deep experience in helping companies deliver and navigate disruptive change. He is passionate about bringing together corporates, start-ups and senior experts into an open ecosystem to deliver impact and value. www.taival.com
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