Blockchain and the supply chain

A session on blockchain was the first topic discussed at the Australian Logistics Council’s inaugural Supply Chain Technology Summit. It’s a big, new(ish), interesting, and controversial topic, and here’s some of what was said.

Blockchain. It’s one of the hype words of the last 12 months or so. Indeed it appears in the ‘Gartner Hype Cycle for Emerging Technologies, 2017’ chart in the Peak of Inflated Expectations position. But that’s not to say that it’s not of interest for supply chains.

This session of the summit looked to provide a better insight into what blockchain is, and what it isn’t.

What is blockchain?

If you’re reading this and thinking, ‘Yes, I’ve heard of blockchain, but I’m not entirely sure of what is is’, these two articles are a good place to start:

• What is blockchain? (from ‘Lifehacker’)
• The promise of the blockchain – the trust machine (from ‘The Economist’)

An older technology, enabled by technological advances

Session chair Kee Wong, of e-Centric Innovations, said that “while it [blockchain] has created a great deal of interest, it has also created a lot of misinformation, myths… about what it can do.” He also made the point that while it is a hyped technology, it is not new. The idea of it has been around since the late 1970s, with the Merkle tree (or hash tree).

But while it has long been an interesting and possibly useful tool, it’s only been recent associated technological advances that have advanced the notion of blockchain being commercially viable – such as more connected devices, higher processing power, and a decided cost reduction in data storage, along with the emergence of storage ‘in the cloud’.

Is blockchain commercially ready?

Technology has evolved to help the cause of blockchain, but as panel member Christopher Berg, a Senior Research Fellow at the RMIT Blockchain Innovation Hub, pointed out, “blockchains are currently an enormously powerful proof of concept, but they are not yet commercially ready”.

Berg also thinks that for blockchain to be viable there will be a need for a global coordinating body, to handle the challenges of regulatory compatibility, and to set information standards. Or does this fly in the face of the notion of a decentralised ledger? If a blockchain is a consensus, or a “machine for creating trust”, aren’t things like regulations and standards handled on a micro level, eliminating the need for any global body?

Blockchain: the right tool for right now?

Microsoft’s Lead Cloud Architect, Chris Zhong, said that the integration of blockchain is “difficult and costly”. In light of that, Adrian Kemp, of HoustonKemp, suggested questions that every company looking at blockchain must ask:

• What can it do for you, what does it do well, and can you make a buck with it?
• Can it help us to do things better?
• Are existing mechanisms for managing your supply chain too costly or inefficient?
• Is your supply chain so complex that it is difficult to effectively manage with existing systems?

The scope of blockchain in supply chains

Christopher Berg thinks that blockchain is a valuable tool for supply chain management because, boiled right down, “… supply chains are an information problem.”

The main use cases / justification for blockchain use in the logistics sector are:

1. Provenance
2. Recognising ownership of assets
3. Keeping track of who did what when, and can that record be trusted?
4. Managing counter-party risk between multiple parties

Provenance is an interesting area. Sensors and ledgers (smart sensors and blockchain contract) could work together to not only establish authenticity, say of food, but also include triggers to report on temperature control and quality of handling as the food passes along the chain.

Blockchain vs Bitcoin

Aki Ohashi, Director of Business Development at Palo Alto Research Centre (PARC), said that if summit attendees were to walk away from the session knowing one thing, it was this:  “… blockchain is not bitcoin, it’s much more than that.”

In closing

While many of the speakers in this session, and indeed in the sessions on ports and rail transport were bullish about blockchain, all acknowledged that blockchain is not yet ready for commercial use, and in regards to areas such as regulation, privacy and data safety, there remains a lot of work yet to do.

But as the ALC noted in its summation of the event, blockchain-based technologies have the ability to help “… move value back on the chain, allowing benefits to be extracted by participants, rather than intermediaries.” That sounds like just the sort of boost the sector needs to pursue.