The Smart Logistics Network of the Future: Blockchain in the Supply Chain
The numbers speak volumes! There is clearly tremendous interest among supply chain practitioners to learn, understand and share thoughts on Blockchain. In one of the best attended break-out sessions of FOCUS 2018, we joined forces with executives from leading companies to exchange thoughts on the impact and value Blockchain may hold for supply chain, as well as the challenges for adoption. The exchange offered an exclusive opportunity for supply chain practitioners to share thoughts on the topic in a trusted, non-competitive environment.
Of the 11 leading disruptors identified by Deloitte and MHI in the 2018 MHI annual industry report¹, Blockchain ranked #10 from the top (i.e., the second slowest – just ahead of artificial intelligence – for adoption over the next five years.) It seems that a clear understanding of the technology is a key barrier to adoption (29 percent), followed by the lack of a clear business case (26 percent). These sentiments were supported by the panelists and audience.
As supply chain practitioners, the questions foremost on our minds are, “Does it matter? Will Blockchain pass or is it here to stay?” Now, we can only guess, yet we all need to inform ourselves to make the best calculated decision to set the course for future success. If or when there is a mass adoption of the technology in supply chain, we better enable ourselves to accommodate it as it may – than be a case of survival.
The panel discussion was led by industry experts: Jean-Louis (JL) Marechaux, Head of Technology at JDA Software Labs; Andy Moses, SVP, Product Management at Penske Logistics; Troy Schenk, Warehouse Systems Manager at DOT Foods; and Gaurav Malhotra, EY Digital Supply Chain & Operations, IoT and Blockchain Leader.
Blockchain is not a buzzword. According to JL Marechaux, “Blockchain is definitively an emerging technology, but not a buzzword. We see a lot of concrete initiatives in different industries. The finance industry is probably ahead of the pack, but there are also a lot of Blockchain projects in healthcare, insurance, governments, and now supply chain. At JDA, we notice an increase in the number of customers who are exploring Blockchain technologies to solve concrete business problems. The early adopters of Blockchain may become the disruptors of the supply chain industry.”
Adoption of Blockchain will be dependent on standardization. No standard means no way to ensure Blockchain framework interoperability (i.e., Blockchain X could not talk to Blockchain Y). The lack of standards also raises the problem of which Blockchain framework to select. Will the Blockchain frameworks be interchangeable? There are a couple of initiatives around standards such as Blockchain in Transport Alliance (BiTA), Hyperledger, the Trusted IoT Alliance, the Enterprise Ethereum Alliance, and the International Organization for Standardization: ISO 307 (Blockchain & Distributed Ledger).
Asked what the ideal use case for Blockchain adoption would be, JDA’s JL Marechaux said, “There are so many potential use cases in the supply chain industry that will benefit from the adoption of Blockchain that it is difficult to name just one. Instead, I will answer with use-case categories instead: (1) Close collaboration [Shared data between producers, distributors and retailers (de-centralized, immutable)]; (2) Traceability [Product provenance (organic, fair-trade)/Food safety and regulation/Cold chain compliance]; (3) Disintermediation [Eliminate margin-hurting participants]; (4) Digitalization and automation [Smart supply chain, digital documents, Internet of Thing (IoT)] – Blockchain to support the digital, paperless, supply chain.”
Leading the charge on Blockchain in supply chain is the Hyperledger Foundation. Hyperledger is an open source collaborative initiative to advance cross-industry Blockchain frameworks. That said, leaders will not only come from technology providers, but also emerge from users and industry disruptors, like the organizations represented by the panelists that participated in the FOCUS session.
Penske Logistics sees potential benefits for its customers operating in the manufacturing, food and beverage sectors, as well as other industries. The company is interested in the potential opportunities that Blockchain can deliver. So much so, that Penske became a corporate member of BiTA in the past year.
BiTA is a relatively new organization that provides a forum to promote and educate, while encouraging the development of Blockchain applications and standards, within the transportation industry. Since joining BiTA, Penske has continued to learn more about the benefits of Blockchain. “We are actively monitoring any emerging technologies, including Blockchain, that can position us to drive efficiency and find better solutions for our customers,” said Penske Logistics’ Andy Moses.
According to DOT Foods’ Troy Schenk, “Blockchain holds potential, but it is very early to tell what the extent will be. Most of the barriers to adoption are not around technology, but rather about finding the right resources to support the implementation and execution thereof. The technology is complicated and to simplify it for others to connect to will be a challenge requiring advanced IT skills. There is keen interest, but the funding will be tricky.”
Blockchain is recognized as a disruptor to the way supply chains operate. It is acknowledged that it will become an integral part of the macro supply chain network. However, the interdependence on players is key to driving both the pace of adoption and achieving the envisioned footprint. Understanding how Blockchain could be leveraged to address specific business problems in your organization is critical. If you don’t have the skills internally to start a Blockchain initiative, we recommend that you find a skilled partner.
1The 2018 MHI Annual Industry Report Next-Generation Supply Chains: Overcoming Barriers to NextGen Supply Chain Innovation, Deloitte and MHI, 2018, https://www.mhi.org/publications/report.