When applied to supply chain management, blockchain proposes a system that is flexible and secure, allowing real time and transparent contracts between organizations and third party partners. It’s poised to strengthen supply chains vulnerable to ransomware from the inside out—but is it just better data management with a new name?
Blockchain: The Cons
Theoretically, for a supply chain that adopts blockchain the first thing to go is confidentiality. Blockchain systems promise incorruptibility at the expense of centralized control over potentially sensitive information. As one expert put it, "You don't put plain-text data on a blockchain unless you're happy for your competitors to see what it reveals about your market position."
While research into resolving that issue is underway, another one presents itself: how do you develop and govern technology across international boundaries? With no guarantees of interoperability or a shared protocol, systems engineering with blockchain could turn into a trek across no man’s land.
A third, and even more pressing challenge, is the law. As they put it in the Harvard Business review, “...regulations, maritime law, and commercial codes govern rights of ownership and possession along the world’s shipping routes and their multiple jurisdictions. Marrying that old-world body of law, and the human-led institutions that manage it, with the digitally defined, dematerialized, automated and denationalized nature of blockchains and smart contracts will be difficult.”
Blockchain: The Pros
On the upside, transitioning from a rigid supply chain to a dynamic demand chain has is perks. Applying blockchain systems to the supply chain potentially establishes a Nash Equilibrium where no one participant in this multilateral setup has an incentive to monopolize data. Attempting to override the decentralized nature of blockchain would make it no different from standard practices today. This is where blockchain really stands to offer a unique benefit to supply chain—IF supply chain leaders work with their IT systems to keep the technology decentralized.
Another benefit is blockchain’s versatility. “Unlike RFID, blockchain does not require devices, reading hardware or any physical process to affix tags to cases or pallets. As a result, virtually no transaction is too small to be worth generating a blockchain code.” Automatically executed smart contracts are similarly expected to expedite transactions in the supply chain industry, prioritizing transparency across the board. This ideally leads to less expensive and improved inventory management while reducing fraud and error rates.
The zeitgeist surrounding blockchain seems to be approaching critical mass. Startups like Provenance and Everledger alongside more established outfits like Walmart and IBM have only begun to explore the platform’s potential. BHP Billiton notably uses the tech to supervise outsourced mineral analyses. But of all the words that follow blockchain around, ‘trust’ is the one that carries the most weight. Without it, how well it delivers on its promises remains to be seen.