Blockchain and Supply Chain

Interesting Fact : In 2010 a programmer paid 10,000 BTC to buy 2 Pizza's. At the time of writing this post 10,000 BTC is equal to 64189250.00 USD. Now bitcoin enthusiasts are celebrating May 22nd as Bitcoin Pizza Day.

Dictionary.com defines "Trust" as "reliance on the integrity, strength, ability, surety, etc., of a person or thing; confidence". What is important to note is that, there is a cost associated with trust. An organization relies on multiple trusted parties (think of credit checking) to do business with other untrusted parties. This business of trust is about to get disrupted by the advent of blockchain, the technology which has the potential to disrupt multiple industries.

Blockchain as it is now known originally appeared in Satoshi Nakamoto's paper (October 2008 ) as two words, i.e. block and chain. Historically there were others who worked upon different ideas but it was Satoshi Nakamoto's work which led to the creation of Bitcoin. In essence bitcoin became the first application of block chain. Bitcoin statistics are available here . While bitcoin focuses on digital currency, it cannot be used for building other applications especially in the supply chain. In 2015, Vitalik Buterin pioneered blockchain 2.0 which allows execution of scripts. This was an important step in the blockchain story since now it was possible to create applications which can help solve real world business problems.

Some of the promising applications which the author has researched until now are mentioned below:

• Block Stack - Blockstack is a new decentralized internet where you own your data and apps run locally without remote servers.

• Photochain - This application has the potential to disrupt the 3 billion dollars per year stock photo industry. Photochain empowers the content creator allowing them to retain major share (95%) of all gross sales.

• Slock - Slock.it brings the benefits of the Blockchain - transparency, security and auditability - to real-world objects.

• Everledger - Everledger is a global startup that uses the best of emerging technology including blockchain, smart contracts and machine vision to assist in the reduction of risk and fraud for banks, insurers and open marketplaces.

While the list is exhaustive, one can visualize and appreciate the scale of crypto universe here (courtesy: Alexander Rupert).

In the context of supply chain, it is important to understand the benefits of using blockchain within a supply network.

The word "supply chain" is a misleading term for the simple reason that modern supply chain does not work in a linear way. It can be safely said that the term chain is a simple setup while the supply network is a more complex structure with linkages between organizations. Often organizations focus only on their organization and misses out at looking at the overall movement of information, material and money. An important question arises why even look at the network? This can be answered by understanding that modern supply networks are complex and requires the fine orchestration between a network of suppliers, service providers, people, systems, governments, banks to deliver the product to the end customer. One can imagine how error prone this network can be. Even more important is the fact to understand it that the due to lack of synchronization between digital systems and physical products the performance of the overall network gets degraded. PwC in a 2017 report estimates there is around 1.2 trillion euros stuck in the global supply network simply due to inefficiencies.

Wikipedia defines ERP as " Enterprise resource planning (ERP) is the integrated management of core business processes", i.e. it is centric to the organization. It misses out on providing the network view.

Transparent, trusted, autonomous global supply network visibility is probably the Holy Grail, which none of the existing technologies help solve. Combine block chain with IoT and an organization can achieve the greater goal of linking multiple parties involved, thereby reducing IT budget waste, utilize assets efficiently and unlocking the value a network can deliver.