Block chain – the Newest Technology in Supply Chain Part 2
As mentioned in a previous post, block chain is a distributed digital ledger that is anonymous and secure. The type of security block chain brings to businesses is appealing since it can cut costs and cut out middle men. Block chain as the digital ledger can help companies keep track of price, date, location, quality and much more to assist in the challenges of managing a global supply chain. As the hype around block chain continues to build, an increasing number of companies are testing out the new technology.
Block chain can also impact logistics across a broad array of areas, ocean providers for example; when shipping items from point A to B it is imperative that companies have marine insurance since there are several things that can go wrong. Marine insurance is one area that has the potential to be disrupted by block chain. The shipping giant Maersk “completed a 20-week block chain proof of concept trial for marine insurance. They partnered with EY, Microsoft, Willis Towers Watson, and several insurance companies to try securely sharing shipping data on a block chain” (Forbes.com). Another area with potential value is the ability to trace food borne illnesses, which is typically a several week process and error prone. Walmart, Dole, Nestle, Unilever and other food companies are partnering to explore the use of this technology on their supply chains. Their goal is to use the technology to maintain secure digital records as well as improve the traceability of food items. As an example, Walmart used block chain to digitally track the movement of pork in China. The block chain used was a “private database co-developed by IBM, is designed to provide the retailer with a way to indelibly record a list of transactions indicating how meat has flowed through a commercial network, from producers to processors to distributors to grocers—and finally, to consumers.” (forbes.com). Walmart understands that customers want more transparency with how and where their product came from and they are seeking to give their customers what they want. This trial was a success and Walmart went on to track Mexican mangoes using block chain, decreasing the time to trace shipment origins from one week to seconds.
The previous examples only touch on a few use cases where block chain can have an impact. Logistics Bureau shared others, including supplier payments, cold chain monitoring and smart contracts. For supplier payments, simply put, “block chain allows transfer of funds anywhere in the world. Transfer is direct between payer and payee. It is also secure and quick, done in minutes” (Logistics Bureau). In cold chain monitoring, it is common that food and pharmaceutical items need a particular storage to maintain temperature. “Sensors on sensitive products can record temperature, humidity, vibration, and other items of interest. These readings can then be stored on block chain. They are permanent and tamperproof. If a storage condition deviates from what has been agreed, each member of the block chain will see it. A smart contract can trigger an action to correct the situation” (Logistics Bureau). Smart contracts define and execute the terms of a particular agreement, without the need for a third party, and are emerging as one of the key components of block chain delivered supply chains.
As more companies begin to test out block chain and the benefits the technology offers it can drastically change how supply chain process would function as well as cut cost in many areas. However, there is still much hype and confusion around the true capabilities and benefits to be derived. While the idea of verifiable transactions and chain of custody without the need for the overhead of third party oversight has value in some cases, it also injects much risk in the form of bad, inaccurate or potentially inappropriate data being included. Additionally, the ability of block chain to manage high volumes of data, and simultaneously messaging multiple customers will provide limitations in some applications.
In our next installment around block chain and its impact potential on logistics, we’ll discuss distributed ledger options, maintaining security and increasing the value inherent in creating transparency across the supply chain and logistics functions. Leveraging forward looking solutions that provide insight into real time supply chain behavior, combining multiple data sources, analyze trends, and get predictive analytics creates significant opportunities for cost savings.