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ASCM Insights

6 Far-Reaching Blockchain Applications in Supply Chain

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Decentralized, secure, transparent and immutable: Blockchain enables value to be exchanged without the need for a third-party authority and has the potential to overcome several enduring challenges in supply chain management. In fact, McKinsey has identified more than 90 blockchain use-cases across multiple industries with potential for hundreds more as the technology matures. Following are six applications that represent some of the most exciting use cases for blockchain in supply chain today:

1. Integrated joint venture management. Joint ventures are fragile entities. They may fail for several reasons, such as insufficient planning, lack of leadership or poor process integration. If data cannot flow and be shared efficiently between two organizations, they have little hope of extracting the promised value from the partnership. Interestingly, integration has been identified by Deloitte as one of the top 10 challenges involved in joint venture management. But blockchain has the ability to transform joint-venture related processes such as balloting of authorizations for expenditure, joint interest billing and overall working interest management.

“With blockchain, information and outcomes are available to all parties in real-time,” says Rebecca Hofmann, president and CEO of Blockchain For Energy. “Data loss is eliminated, and disputes are reduced, leading to quicker settlement of receivables and operational costs, such as copying, mailing and labor time.”

Blockchain in IJVM also brings an opportunity to create consistency in document formats, establish transparency of one source of data, add touchpoints among stakeholders and facilitate smoother payments.

2. Provenance tracking. Global counterfeiting of food and consumer products may cost $10 - $15 billion per year, with food fraud impacting as much as 10% of the grocery trade. As the counterfeiting problem grows, consumer awareness and demand for end-to-end provenance tracking is rising. Simon Callaghan, head of OTC markets at Celsius Network, says that provenance and tracking are core benefits of blockchain within supply chain management. He adds that Mastercard has been doing interesting work in this area and committing resources to blockchain-based supply chain management solutions for food provenance and order tracking.

3. Commodity transport. Blockchain makes it possible to know where a product is, when it will reach its destination and its condition. Radical visibility is created through blockchain-enabled validation of every step in the product’s journey. Hofmann believes we will see improvements in commodity transport as organizations will be able to validate that a transaction occurred in the field upfront.

This could take the procure-to-pay process down to two days, driving efficiency. It will also minimize contract leakage and stop unwanted practices due to blockchain’s inherent transparency. Increased visibility will ensure products go to the right place in the right volumes. Further, due to its immutable cryptographic nature of locking shared data and the fact that smart contracts on the blockchain are validating as the activity is occurring, you only pay for what you actually ordered or what activity actually happened in the field as smart contracts on the blockchain are validating as the activity is occurring.

4. Seismic entitlement. Blockchain will also be vital for seismic entitlement, which refers to organizations’ ownership and proprietary rights to their data. The technology boosts document control and use tokenization to lease, buy, or sell seismic data on a blockchain. “We see seismic data as asset data that can have ownership rights and be managed on the blockchain,” Hofmann says. “We also see a future marketplace where we will be able to lease, buy and sell seismic as an asset. We have developed the functional and technical specifications of seismic entitlement and the pilot has already begun.”

5. Document handling in container logistics. The freight market is often held back by paper-based processes and manual data entry. Among 1.26 billion freight invoices generated every year, an alarming 90% are manually processed. This situation is exacerbating delays, yet a paperless, automated future is possible with blockchain. “The ability to reduce errors, save time, and increase accountability when providing document handling in shipping container logistics is a global problem that blockchain can help solve,” Callaghan notes.

6. Dispute resolution. Callaghan also believes dispute resolution will become highly important as smart contracts become more prevalent: “While smart contracts automate many actions, how they manage disputes is more complex. Solutions are being developed to democratize this across the blockchain, but they are imperfect. This is an exciting area of development in smart contracts.”

Prepare for blockchain

First and foremost, stay informed. As with any transformative or disruptive technology, it’s important to maintain awareness of industry trends and how they may impact your business. Management must have a reasonable understanding of tech trends in their industry.

Next, consider the skills that will be required. Educate and expose employees to the digital future, including blockchain.

Callaghan adds that it is important to understand the costs involved: “It may be impractical for a small or medium-sized supply chain management company to hire a blockchain developer, but it may be cost-effective to partner with a company that can offer blockchain-as-a-service and may already have a working solution for your challenge.

Finally, take risks and learn from failure. Supply chain is changing so rapidly — it’s essential to future-proof your network by applying technology as a key tool for problem-solving and ongoing progress.

About the Author

Elizabeth Rennie Editor-in-Chief, SCM Now magazine, ASCM

Elizabeth Rennie is Editor-in-Chief at ASCM. She may be contacted at editorial@ascm.org.

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