Blockchain in supply chain management: hype or panacea?

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Supply chain management faces many diverse challenges including red tape, lack of visibility, expensive intermediaries, and protracted payment processes.

And the blockchain concept is often touted as a general solution to all of them. Yes, of course, the blockchain potential promises a lot of benefits, including highest security and levels of digitisation, transparency, speed, and its value to payment processing. But what seems to be missing in the ongoing discussions are tangible and detailed explanations of how blockchain really addresses the core issues in SCM.

A lot of research has yet to be done and quite a few standards have yet to be established before blockchain in SCM can truly take off. Much of the current expectation is based on the assumption that all blockchain benefits can all be delivered in SCM at the same time. For those familiar with the complexity and diversity of supply chains as well as the difficulties it involves to roll-out holistic solutions from end-to-end, it’s clear that this is not possible.

My key concern here centres on collaboration between the supply chain partners. Blockchain success in SCM will depend on close collaboration as well as integration between supply chain partners. But achieving this level of integration that blockchain will need involves a number of challenges that we’re struggling with for many years now – without having found a silver bullet as of yet:

  • Lack of data quality: How can users obtain unified and accurate data that derives from different applications in many different companies and countries?
  • Error handling: So far I haven’t seen any mechanisms that allow the overwriting of data in a supply chain blockchain –a blockchain is inherently resistant to data modification. 
  • Interfaces: How can we convince all parties to set up interfaces to the blockchain when so many companies don’t have the manpower or budget to do so? Low-budget solutions that allow the (error-prone) manual entry into web forms would seem to defy the objective.
  • Connecting the physical with the digital world: Blockchain works really well when it comes to tracking things that are either digital (like digital pictures) or physically unique (like a diamond). But how do you track non-unique goods, those that are not clearly, individually identifiable? Look at past scandals in the food supply chain, where manufacturers knowingly shipped spoilt products. How would a blockchain-tracked supply chain be different from conventional supply chain tracking?
  • Setting up a network: A network’s value increases with the number of its participants. Overcoming the start-up phase, with a smaller network, often poses a challenge.
  • Visibility: Increasing transparency in supply chains has long been at the top of SCM professionals’ wish list but real-life implementation lags behind as there are always parties not willing – or able – to share data. A blockchain where only specific data can be made visible to specific parties might help.

But despite these concerns, blockchain is certainly an exciting new technology that could bring about new motivation to tackle old challenges. And seeing key players engaged in a new area will encourage further blockchain developments in supply chain management. Watch this space.

Geoff Taylor

Geoff Taylor is Managing Director of AEB in the UK and has been with the company since 2017. Together with his team, Geoff works closely with manufacturers and traders across industry sectors to understand the impact of market developments on global trade processes and what it takes to build efficient and flexible supply chains in the digital age to ensure future success.

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