When the supply chain conversation turns to blockchain, the laundry list of capabilities and benefits is often preceded by the word "could."
The technology is here. We understand what an immutable ledger could do for supply chains, but widespread adoption is still in the distance.
In early 2018, a Gartner survey put the number of CIOs (across all industries) with actual blockchain implementation at their organizations at 1% globally; 8% were experimenting, and 77% weren’t interested.
Further, the Gartner Hype Cycle predicts the time for larger, focused investments in blockchain will begin in 2022 and large-scale, global value-add won't begin until 2027.
"We are still in the investigation and testing phase with just a few [companies] further down that testing road," said Brian Reed of blockchain consultancy Laguna Consulting. He told Supply Chain Dive that to his knowledge, there are no blockchain initiatives in the supply chain that have yet reached operational scale.
A major barrier to large-scale implementation of blockchain in the supply chain is participation. Unlike finance or insurance applications, in order to employ blockchain technology to gain efficiency and transparency in supply chains, all players have to cooperate.
Cooperation, in this case means agreeing to join a shared platform and adopting an agreed set of standards. In 2018, industries and companies learned how hard that can be, and the machinations suggest what may unfold in 2019.
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Progress will happen — but it will be messy
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Food supply chains will be first
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Blockchain will be boring
In 2018, two blockchain initiatives sprung in the ocean shipping field. Maersk and IBM’s joint venture TradeLens was the only kid on the block for most of 2018, but in November, nine ocean carriers and terminal operators joined forces to create the Global Shipping Business Network (GSBN).
TradeLens announced last year it would be operational by the end of 2019, but even Marvin Erdly, head of TradeLens at IBM blockchain, told Coindesk that signing on carriers is essential, and the one that committed was not enough. GSBN on the other hand, though just getting started (as far as we know), had a handful of carriers already signed on.
"The interesting thing about that is it shows that there are a lot of companies and organizations and individuals that think that blockchain technology can be useful," said Scott Mall, director of communications for the Blockchain in Transport Alliance (BiTA).
"We’ll have to wait and see what happened when its actually there and whether everybody will participate, whether they’ll participate fully or whether they’ll participate in part because there are trade secrets or intellectual property issues." Mall told Supply Chain Dive.
Alex Pradhan, senior principal research analyst at Gartner, told Supply Chain Dive via email that the situation is not unique to ocean shipping — or blockchain, for that matter. In some technology segments, rivalries can mean cooperation simply isn’t in the cards.
"It could be possible that competitors to Maersk prefer to not use the same system because they feel they are providing additional revenues to an arch rival."
Alex Pradhan
Senior Principal Research Analyst, Gartner
"One doesn’t have to win out at the expense of the other. Furthermore, certain parties will refuse to do business with each other if the party offering the blockchain solution is a competitor. For example, it could be possible that competitors to Maersk prefer to not use the same system because they feel they are providing additional revenues to an arch rival. We see this in cloud platforms where some retailers prefer to not use applications running on AWS because they feel this is just giving more money to it rival Amazon," she said.
It's for this reason that Reed believes neither effort will throw in the towel anytime soon.
"The fact that you have such large, opposing forces on each side means neither will give up easily," said Reed, adding that the marketing of these efforts and the progress being made behind the scenes aren't necessarily in step.
Mall said competition can be good in such situations, leading to better products from both groups.
Ocean shipping is just one, fairly visible example of an industry attempting to organize behind a technology in a new way. Retailers, 3PLs and other freight modes, not to mention a cavalcade of startups, are joining associations and conducting pilots too.
What’s clear now is that a future where industries and supply chains are serenely organized on a single blockchain is not likely. Forming and joining associations could be an indication of progress but is not firm evidence of it. "Getting organized does not necessarily mean we are close to the big bang," said Reed.
One of the most lauded benefits of distributed ledger technology in the supply chain is the traceability it can provide. Diamonds, turkeys, grain, parcels: Pretty much anything that changes hands multiple times before its end user loses its origin or travel data somewhere along the chain.
In no field is that need more apparent than in fresh produce. Recalls have plagued the food world for years, but last year, there were three separate E. Coli outbreaks in romaine lettuce in the U.S — the source of which wasn’t traced until December when romaine harvests were well finished.
The months of suspicion and uncertainty surrounding romaine, preceded by years of various safety recalls in the same category, led Walmart to make an announcement. The company is piloting a blockchain-backed traceability program for lettuce, participation in which will become mandatory for growers in 2019.
As the largest retailer and grocer in the world, Walmart has been credited with scaling trends almost singe handedly in the past (the company is often praised for mainstreaming the organic agriculture movement) and now, it may do the same for blockchain.
The more [blockchain] becomes commonplace, the more likely supply chains are to reap the benefits — and the more it will be evaluated for its impact and less for its hype factor.
Supply Chain Dive
Reed of Laguna Consulting said the program is more likely to succeed than other efforts, since Walmart wields immense power as a customer.
"They will eventually push it through because their vendors have little say to push back no matter if it is a good idea or not. Any food traceability would have wide support, but someone like a Walmart can make people move much faster," said Reed.
The smart money is on Walmart following through on this pledge, but at least initially, this kind of blockchain traceability platform is somewhat simpler than those trying to track more complex supply chains. The test will be whether Walmart sets it up in such a way that it can quickly expand to other categories.
"Let’s assume that it does happen. How do you take this from lettuce to oranges to bell peppers? Hopefully what they’re doing will be transferable to other commodities," said Reed. The rest of the grocery supply chain will be watching closely as lettuce planting in California’s Salinas Valley where most U.S. lettuce is grown starts this month.
Perhaps the most important trend regarding blockchain in 2019 is that blockchain will get boring — at least according to MIT.
The MIT Technology Review, citing the Walmart initiative and others on Wall Street, posited in a recent article that blockchain will normalize beyond hype and into everyday business this year.
One of those applications will take the form of smart contracts. These are particularly relevant to the supply chain because they can, in theory, add efficiency and remove bureaucracy for any transaction. The blockchain infrastructure allows for the payment to be held "in escrow" until the terms of the deal are met and agreed, and then release it immediately.
For smart contracts to be useful at a large scale across industries, real-time data is needed – otherwise the bureaucracy remains. As more industries are digitized, and more real-time data becomes available, the opportunities for smart contracts are becoming reality.
Blockchain is a captivating technology, but the more it becomes commonplace, the more likely supply chains are to reap the benefits — and the more it will be evaluated for its impact and less for its hype factor.
