With blockchain set to disrupt the supply chain, you’re left to wonder whether companies are really and truly prepared to trust each other to reap the benefits.
Apparently not, according to Biju Kewalram, the chief digital officer at the logistics company Agility, writing in Forbes this week.
Blockchain is an industry buzzword. Thousands of articles have been written about its potential for the supply chain and everyone’s a believer. But the number of companies actually getting into it belies the hype.
A recent study by the Boston Consulting Group says that 88% of transport and logistics professionals think blockchain will disrupt the industry, yet 74% of them say they have given the issue barely a cursory glance, or worse still, they haven’t even begun to think about it.
Costly paper chase
Why are they holding back when the benefits are so in-your-face? Kewalram argues that paperwork in the supply chain accounts for some 20% of the overall shipping cost. So a secure, shared electronic database system to replace the paperwork could slash costs for adopters.
Blockchain essentially means that everyone along the supply chain puts their data into one place, creating perfect traceability in a transaction. Freightwaves says it well: “To put it simply, a blockchain is like a database. It’s a way of storing records of value and transactions. However, calling a blockchain a new type of database is like saying email is a new way of sending people letters.”
With one shipment sometimes generating up to 200 documents, the database aspect alone is appealing but the real attraction is how such a system could tie into the whole world of big data and the Internet of Things devices like smartphones.
The diamond industry, for example, is using a blockchain to ensure the provenance of individual diamonds, from mine to jeweler.
Kewalram cites the potential for a microchipped sweater to make its way from China to Britain, digitally signaling its progress, automatically triggering the various payments and customs documents as it goes, arriving where it should, with a blockchain-enabled identity management system identifying the correct customer.
Incorruptible data
It’s track-and-trace at a global, minute-by-minute level, with all the secure and incorruptible data that anyone needs to carry out each stage of the cargo journey.
It sounds great. What’s the hold-up? “A lack of trust,” says Kewalram.
“And there’s a lack of coordination between industry players – the very aspects of the logistics industry that blockchain could help to improve – who are currently blocking widespread adoption.
“Implementation,” he says, “is very difficult due to a fragmented value chain.”
It’s also due to a “lack of a common implementation of technical standards and complex regulatory requirements that differ from one market to the next (and to a) lack of collaborative forums in the industry and a lack of transparency.”
“You have an industry that’s both ripe for blockchain disruption and simultaneously very difficult to disrupt,” he says.
It’s also about when to jump in and invest, timing it right so as not to be too early to carry the burden for those who come later, but not too late to miss the boat.
And with 74% of supply chain professionals not even thinking about getting onboard yet, the few companies teaming up and taking the plunge with “smart contracts” and the blockchain now may well become the supply chain kings of tomorrow.
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