Want to be at the forefront of supply chain collaboration? Then now’s the time to embrace blockchain

Posted on 26 Mar 2020 by The Manufacturer

Heinrich Zetlmayer assesses the future of blockchain technology and urges senior management to grasp the supply chain opportunities it offers.

Most people in international management are familiar with blockchain by now, and some may even be aware of its application to specific industry initiatives.

The global supply chain industry is increasingly being viewed as a key test case of blockchain’s success – indeed, the National Australian Blockchain Roadmap published in February 2020, highlights agricultural supply chains in the wine industry as a cornerstone of the government’s blockchain strategy.

And only last week, the US Department of Homeland Security (DHS) published guidelines for the Coronavirus pandemic, listing blockchain managers in food and agricultural distribution as ‘critical infrastructure workers,’ showing the growing importance the technology has to play in industry and other corners of the economy.

To understand how blockchain can resolve the inefficiencies within supply chain we must first view the technology in light of the sectoral solutions it can overcome – rather than through the prism of the technology alone.

This will allow us to examine and explore how blockchain should be considered as a solutions-focused technology rather than as an abstract theoretical concept.

Nail in the coffin for the supply chain paper trail

The ability of blockchain to resolve the inefficiencies in global supply chains revolves around its application as a trusted distributed ledger technology.

Simply put, this means blockchain will enable new levels of ‘track and trace’ in global supply chains and, as a result, lead to the further automation of supply chain processes between individual supply chain participants. Through immutable tracking records, supply chains can then be monitored and managed effectively in real-time and through more secure, controlled and automatic access.

All this serves to greatly boost value-added activities of supply chains, and once blockchain reaches mainstream adoption, it will be the nail in the coffin to the supply chain ‘paper trail’.


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Trusted access key to real-time information flow

The distinction between permissioned and non-permissioned ledgers also comes into consideration.

Permissioned blockchain is a private ledger to which access is managed and controlled, ensuring trusted access to relevant third parties in the supply chain. Trusted access through permissioned blockchains ensures business partners are privy to the most relevant and correct information, providing a framework of cross-collaboration and effective management of global supply chains.

This all has the benefit of real-time information flow, which combined with the application of smart-contracts – a form of executable software – can be applied to any shipment or product in the supply chain.

Low barriers to mainstream blockchain adoption

Consider blockchain as a significant software upgrade to your current company IT architecture, and in this regard there are no regulatory hurdles – only opportunities.

Low barriers to the technology will therefore be the lightning rod that speeds up widespread blockchain adoption in supply chain, putting it well on course for mainstream adoption by 2040.

Certain applications will likely become mainstream sooner than 2040, however, especially in healthcare and pharmaceutical supply chains. Already, several blockchain-based applications are positively transforming the pharmaceutical industry.

For example, UK-based Veratrak is targeting the pharmaceutical supply chain to ensure better collaboration and workflow management in the industry. Their aim is to ensure that pharmaceutical companies are better able to communicate sensitive documents and work together with their customers, suppliers and partners with greater efficiency and security than ever before.

US-based Rymedi is another company leading efforts in pushing the boundaries of healthcare quality assurance. Through its blockchain-enabled, trusted B2B data transmission infrastructure, Rymedi’s technological solutions offers life-science companies the opportunity to collect data into meaningful and actionable information for end-users.

The success of these and other projects will, no doubt, help accelerate the widespread adoption of blockchain in global supply chains with certain industries, such as healthcare and pharmaceuticals, likely to be at the forefront in driving these efforts. Already, today, it is relatively easy to create a functioning system on Ethereum blockchain.


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Technology should lead with the solutions

It’s clear that blockchain technology will continue to evolve, but too often initiatives focus on the technology first, rather than identifying the industry processes where it can be utilised.

The best way forward for the technology’s application is to concentrate on the industry-wide use cases first, and focus on the supply-chain process improvements. This will ultimately provide the opportunity to devise the system architectures that allows multiple blockchain technologies to be used and provide more robust solutions to supply chain management.

Governance and financing may be a hurdle – but they can be overcome

The widespread adoption of blockchain will ultimately lie, not with a handful of companies, but rather through broader sector initiatives that lead to industry-wide outcomes. In this sense, for blockchain to become mainstream it must connect all the different market participants and industry parts of the global supply chain.

Undoubtedly there will be complexities and challenges along the path to mainstream adoption – but it can be done with no regulatory burden. Unlike other industries, there are, as yet, no clear leaders in blockchain supply chain management. This begs the questions: who drives it forward, and ultimately who pays for it?

Indeed, current blockchain initiatives are grappling between entrepreneur-driven initiatives and large corporate-driven initiatives – unifying these together will be crucial to the successful mass adoption of blockchain by 2040.

Financial investors are willing to fund blockchain initiatives once a critical mass of supply chain participants endorse these platforms and commit to its use when its functionality has been proven. Striking a balance between the influence of participating companies and the flexibility an individual project needs is necessary to create successful platforms.

A realignment of talent and skills

At the heart of all this, blockchain will enable businesses to maximise more value-added activities, while removing the administrative burden for both businesses and the professionals in the supply chain. This will serve to boost company efficiency and speed up the integration of supply chain functions.

As the automation of supply chain functions take hold, there will likely be some alterations to the role of the supply chain worker – not made redundant – but rather, a realignment based on talent and skills to boost these value-added activities.

A new wave of ethical and sustainable management awaits the supply chain function if it embraces blockchain. Already, we are seeing the technology empower smaller producers to have more visibility in supply chains, while new levels of ‘track and trace’ through blockchain are also ensuring sustainable procurement, as exemplified by the ability to trace labour standards and carbon emissions.

Volvo and Mercedes-Benz, among others, are driving ethical sourcing of cobalt batteries through blockchain technology. This ultimately provides blockchain with the power to set new industry standards and prevent fraud through better automation of quality control and assurance.

For blockchain to be applied successfully across global supply chains, it should not be viewed in isolation to other emerging technologies. Rather, its true potential will only be fully realised when it works alongside other value added technologies, such as Artificial Intelligence (AI) and robotics, to maximise efficiency, sustainability and ethical standards in industry and supply chains.

Technology-driven change is undoubtedly sweeping through industry, from supply-chain management to trade finance and the capital markets. If senior managers in business and industry, are serious about being at the forefront of new technology innovation and collaboration, then now is the time to embrace blockchain.


Heinrich Zetlmayer is founder and general partner at Blockchain Valley Ventures

Images courtesy of Depositphotos