By Michael Prokopis, VP Strategy & Innovation, OnProcess Technology

I recently attended a Blockchain in Supply Chains: Looking beyond the Hype roundtable hosted by MIT Center for Transportation & Logistics. Surrounded by 50 esteemed colleagues, from a host of industries, we spent the day discussing this nascent technology and various ways that it can be used to create value across the supply chain. Two very clear messages resonated with me and seemed to permeate the audience relative to the macro problems that blockchain can potentially solve:

  • Tactically: how we as practitioners can identify, trace, and gain visibility across our supply chains in a trusted network that is secure and almost guarantees immutability.
  • Strategically: which ‘Market Makers’ (e.g., governments, exchanges, corporations) have the clout to drive adoption although without standards to ensure operability across ‘chains’.

Tactical: Michael Casey, Senior Advisor Blockchain Opportunities, Digital Currency Initiative, MIT Media Lab kicked off the session with a historical perspective Blockchain in Supply Chainsof how important trust becomes in the context of ‘institutions’ we believe in (i.e., banks). Net-net, we cannot always agree so we seek mediators to guarantee transactions. Thus, in a supply chain network…we can achieve identity, traceability, and visibility encircled by the trust created through the power of the network. Security is almost guaranteed and becomes a simple relationship to the cost of buying enough computing power to re-write a record. In the context of blockchain, that cost becomes almost prohibitive as each transaction is witnessed by all the members participating in that network. Whether it’s a logistics agreement for shipping or a supplier contract to supply certified product, once both parties agree to the transaction, it becomes a permanent record in the chain of custody going forward.

Strategic: Whether discussing permissions, incentives, standards, etc., it’s also clear how difficult it is to create each of these blockchain networks.  This is because the problems that need to be solved, whether by Belt and Road Consortium, Foxconn, GE, Lykke, Maersk, Microsoft, etc., are discrete to the participants. Thus as currently constructed, in a free-form world, companies will have to participate in MANY different blockchain networks complicating their roll-out and participation. While the titans of industry can apply the necessary resources, how do the 2nd tier and 3rd tier companies participate in a demanding and resource intensive world?

While it is easy to see the benefits and value of identity, traceability, and visibility in each of our supply chains, it is not as obvious how participation in blockchain solves the problem in a manner that is more efficient than other means available today. Nascent technologies are fun to think about but a lot of work will have to come before blockchain can become a viable solution worthy of the ever-increasing hype.

At a macro-level, as you think about the use of blockchain in your own supply chain, what networks will your company participate and for what reasons? And, at a micro-level, what is the value you must realize to undertake the cost in resources (both monetized as well as human capital)?