What’s the Real Traction on Blockchain in the Supply Chain?

Major companies ranging from Walmart to Smucker's have started implementing blockchain to track shipments. Find out what's happening and what the technology's results look like today.
Published: November 10, 2019

Digital transformation of supply chain management continues through the increased adoption of digital platforms to track shipments. Blockchain, while a buzzword and an almost ethereal concept to some, is starting to make waves. According to Disruptor Daily, blockchain innovation in the supply chain shows great promise for enabling proactive management of shipping. Faster, cheaper transaction settlement has a proven history of reducing processing time up to 80 percent; when paired with blockchain, payment processing will speed transactions and complete more payments.

Payment processing is only the tip of the iceberg, and major companies around the globe are turning to blockchain to solve their supply chain visibility and traceability challenges. Unfortunately, most companies do not publicize actual rates of use and specific statistics on how blockchain has saved money. However, based on how many companies are leveraging the technology, it is clear that blockchain is finally gaining the traction it needs. Let’s get into some use cases.

Specific Use Cases of Blockchain in the Supply Chain
The use cases of blockchain transcend all modes and forms of supply chain management. As a ledger-based technology, blockchain can be applied to any process. Since this article led with the idea of payment processing, let’s start there.

Payment Processing: SecurCapital uses blockchain to track payment and settlement terms. Upon verification of such conditions, the platform authorizes payment and completes the transaction.

Pharmaceuticals: Chronicled leverages blockchain networks to track chain-of-custody for pharmaceuticals, notes BuiltIn.com. Documented histories ensure medical authenticity and avoid risks, such as inappropriate storage temperature during transport and more. Similar companies, including Blockpharma, have managed to remove up to 15 percent of all fraudulent, counterfeit medications from the global supply chain.

Apparel: Companies at the G7 Summit voiced concern over the sustainability of the apparel logistics supply chain, including the need to guarantee authenticity. According to Apparel magazine, deployment of blockchain-based platforms in the apparel supply chain can take place within 90 days, undercutting the Grey market as well.

Fresh Food and Produce: Following severe outbreaks of food-borne illnesses, Walmart became the first major retailer to require blockchain in tracking foods from farm to table. Now, Walmart has excited demands, using blockchain to track shrimp supply chains in India, says CoinTelegraph. Since the United States is the largest importer of India’s shrimp exports, this demand will force transparency in the market. At the same time, coffee supply chains, including Jacobs Douwe Egberts and Smucker’s, are using blockchain to trace coffee beans and products, too.

Manufacturing in General: Comparable to the apparel supply chain, all manufacturers may use blockchain to track products from the cradle to the grave. Tracking includes traceability of components and hardware, which are critical concerns for electronics, automakers and others. Even IKEA falls into this category, using blockchain to avoid counterfeit products and better manage freight.

The Real-World Results of Blockchain Are in the Traction Growth of Shipping Companies
Pinning down the exact results of how blockchain is performing is challenging. Companies remain hesitant to reveal their results for fear of legality for “saying too much” and pushback from competing shippers. Some wish to keep their innovations proprietary and avoid the risks in joining consortiums or even publicly labeled blockchains. That’s the problem with today’s shipping world. Even though digital transformation is happening in many modes of shipping, companies are still not as forthcoming on the topic of blockchain results, says container shipping industry expert Lars Jenson.

Instead of trying to whittle down the numbers, shippers should look to companies that have begun initiating digital freight practices to increase business. Digital adoption will pave the way for real traction in blockchain, and there are currently several big players using digital practices to get results. Some key findings include:

• Hapag-Lloyd reports online booking rates of 6 percent, and targets indicate rates will soar to 15 percent by 2023. This sudden spike can only arise from faster processing and management, including visibility, through the adoption of digital capabilities.

• NYSHEX is on track to increase its volume more than 428,000 TEUs by 2020, up from 19,000 in 2018, leveraging digital systems along the way.

• Cogoport reports bookings up to 250,000 containers through its online platform.

• Flexport revealed its total revenue at $414 million, hinting at strong growth that will require more processing power.

• Traxens is backed with the brand power of CMA CGM and Mediterraneous Shipping Co., alluding to the demand for more container-specific data. More data to track can only mean carriers are looking to increase transparency.

Since blockchain is the logical choice for tracking data, managing shipping documents, and guaranteeing their authenticity, it is now on track to become the standard for container security, optimization and insurance, says Eric Johnson of the Journal of Commerce.

When Will Companies Release the Real Numbers on Blockchain Results?
No one really knows, but one thing is clear. The entire global supply chain is hungry for digital transformation and traceability. A simple online search reveals thousands upon thousands of blockchain articles and talking points. Meanwhile, strong growth continues in startups and through well-established ocean carriers.

At one time, the Internet stood apart as the biggest change to the global stage of supply chain management. Blockchain is in that same hype cycle, but remember, the Internet was once only hype. The Internet itself was a huge invention and changed the entire world, but no one says, “I’m an Internet company solving things for supply chain.” And, much like the Internet today, blockchain will permeate the simplest of functions to the very largest problems faced today in supply chain visibility.

No one is going to launch a blockchain-based platform overnight. It takes time and resources, and with time, some will claim to be the bigger, better blockchain for supply chains. Because at its core, blockchain is simply the newest rendition of supply chain visibility technology. The hype is going to continue, but time will see it fade as the true leaders of blockchain merge with the global supply chain systems vendors. As the demand for data and processing power grows, blockchain will rise to dominate standard shipping capabilities. The results are there; they’re hiding behind the growth rates. Blockchain is here to stay and grow in value through any change the industry endures.

This an exciting period for supply chain advancement. As companies across the globe move toward digital systems, those in the blockchain space will work to develop new applications of blockchain. Traceability is the foundation of strong digital transformation. There is ample room to grow and expand the capabilities of blockchain; the only question is, why hasn’t your organization taken a stand for blockchain innovation?

John Monarch is chief executive and co-founder of ShipChain, a blockchain startup focused on the freight, logistics and shipping industry. He is a serial entrepreneur with multiple previous ventures and has a background in physics and computer science.