Blockchain: Risks and Rewards for the Future of the Supply Chain

By Michael Carmody

How can you determine which solutions are a good fit for your organization?

As enterprise shippers and logistics organizations look over the horizon for their blockchain bearings, there is a growing trend toward inaction when deciding which path to blaze. Organizations are asking themselves several questions during the decision-making process, assessing both the risks and rewards of blockchain within the future of supply chain execution.

Here are five considerations when deciding which blockchain solutions best fit your organizational needs.

Build vs. Buy | Top of Mind
Organizations need to decide whether they want to buy blockchain services and tools or build their own blockchain ledger workbench. With blockchain data solutions, there is an additional element of risk in that most ledgers will need to be replaced, maybe regularly, until the market settles into agreed-upon forms and toolkits that can be adopted as the mainstream accepted standard.

An organization putting its data into a blockchain ledger raises the risk of having to reinvest money and development hours every time a new partner joins or continues to run the network that has already been developed. When a need arises to update ledger participants, the current blockchain workbench becomes a legacy artifact. Successful future blockchains will need to solve this data obsolescence challenge to incorporate legacy data chains.

Private vs. Public | Where Are the Real Benefits?
The next fork in the blockchain road for organizations is whether to invest in public or private blockchain. Public blockchain seems to offer the ideal situation, where all parties build their data chains on a common, agreed-upon format so they interchange for all parties in the network. Currently, clearly stated standards are not in place to encourage confidence from all parties involved, especially in today's freight markets. The Blockchain in Transportation Alliance has accepted this challenge.

Private blockchains are proving to be "few and far between" and harder to roll out than many had hoped. Outside of TradeLens, a supply chain platform underpinned by blockchain, it is hard to point to any clear winner in the private sector with a blockchain solution unlocking intrinsic value, providing solutions for all stakeholders.

Whether an organization chooses the public or private blockchain route, there are two types of technology toolkits to consider: Before Blockchain (BB) and Blockchain-Enabled (BE). Legacy BB platforms and BE start-ups and some established players are competing in the private and public blockchain arenas. Client "use cases" that aim for solutions requiring authentication have the highest chance for success. Use cases such as spare parts and highly regulated tobacco, pharmaceuticals, and fresh or cold chains would greatly benefit from exploring private blockchain.

Cost/Benefit Analysis for Catastrophe | Loss of Trust
A prime factor that will determine how an organization should invest in blockchain is the cost analysis of responding to a catastrophe: the loss of trust.

Organizations with the most to gain are retailers, pharmacies, restaurants, food growers, processors and shippers. The roots of the traceability project with IBM Food Trust is an example of a public blockchain launching with self-regulation in order to deliver a framework for joint benefits. Trust is the key benefit. Fresh produce growers and food distributors also have huge potential to leverage a joint effort in determining the costs and structure of publishing data that could set traceability expectations everywhere.

Obstacles to Blockchain Success | Fighting Uncertainties
When asked what the largest obstacles for blockchain adoption are, it is easy to point to a common trend of enterprises being unprepared for the big-data conversation needed to establish master data management (MDM) best practices. While strong MDM is the required foundation for any data-oriented benefits like blockchain, radio frequency identification (RFID) or the Internet of Things (IoT) to be of any value, messy MDM is almost always the reason that large data projects can fail, due to a lack of confidence in operational data—rendering downstream data value a moot point.

Another obstacle necessitating an industry-wide conversation is that blockchain fails to deliver a clear, upfront return on investment (ROI) for shippers and logistics providers. There seem to be no clear winners on the "buy" blockchain toolkits; however, most major industry players are already assigning tech "build" resources for research and development applications where blockchain may deliver future ROI in BE organizations. This lack of clear ROI is a leading reason for why most enterprise organizations take the "wait and see" approach, laying their hopes on a future winning blockchain.

Offensive vs. Defensive Blockchain
Exploring BE solutions from both an offensive and defensive point of view could ultimately benefit every enterprise. When looking across their existing footprint, leaders must honestly assess where they are vulnerable to blockchain's disruption and develop a defensive strategy as a countermeasure. Trust is the game, and blockchain enables trust. Living without blockchain means trust is assumed in the status quo.

At the same organization, roadmaps and innovation planning are needed to consider the offensive benefits that blockchain can provide in leapfrogging over the competition, establishing "data-based" trust in the services and brands employed. Offensive blockchain may open new markets or even refresh old markets looking for a trusted leader willing to publish the root data for consumers wanting to know where their products and food originated. They want to buy from brands they can trust!

In conclusion, the distribution of and clear standards for blockchain technology across the supply chain is asymmetrical at best; however, clearly there are plenty of benefits to blockchain that are ready to be harnessed.

Michael Carmody is an enVista Solutions and Technology veteran with more than 20 years of deploying 3PL solutions in the United States, Canada and Mexico. He is bilingual, with extensive Mexican experience working across the automotive, retail, consumer goods, high technology and agricultural industries.