Typically associated with cryptocurrencies such as bitcoin, blockchain is a new technology that is also being used to power real business solutions. Capgemini Research Institute, an in-house think tank on all things digital, recently completed a study of 731 organizations. Of those surveyed, 447 organizations—more than half—are currently experimenting with or implementing blockchain to improve manufacturing and the supply chain. But what is blockchain, and why all the buzz, especially on the shop floor?
Although it is far from being mature technology, blockchain provides manufacturers, shipping and logistics companies with a secure, paperless solution for tracking products through every stage of their lifecycle. As blockchain grows in popularity and becomes more mainstream, digital consultancies like Capgemini and others foresee business management solutions, such as ERP, leveraging blockchain technology to provide organizations with greater operational transparency and control.
How Can Blockchain Optimize the Supply Chain?
Simply put, blockchain is a distributed database that exists on multiple computers at the same time. With each new transaction, a block is added with a timestamp and a link to the previous block, and then shared with all the computers in the network, forming a chain. The system is highly resistant to tampering, since there are multiple copies of the same data on the network.
Blockchain can be used to enable organizations to track a product as it passes through multiple stages and even locations over several months, efficiently and securely. This detailed audit trail introduces the potential of huge cost and time savings by making several processes transparent and paperless. This includes releasing products through customs or tracking fresh produce to identify the source of contamination, and even tracing the movements of highly valuable and sensitive items.
As blockchain became more widely viewed as a potential game changer in supply chain management, in 2017 it sparked the Blockchain in Transit Alliance (BiTA), a standards and advocacy organization to help establish standards for blockchain applications in the transportation industry. Today, BiTA boasts over 450 global fleet, shipping and technology companies, including UPS, FedEx, and Daimler.
Reaching Beyond Proof of Concept
Although blockchain is best known for crypto, it is surprising how relevant it is to other domains as well, such as the supply chain. For some organizations, blockchain technology is already integrated into proof-of-concept projects to accelerate the supply chain. CargoX, an independent supplier of blockchain-based smart bill of lading (B/L) solutions, is one such example. The company provides a way to process B/Ls anywhere in the world. Based on the Ethereum network, their platform dramatically reduces B/L processing time from 5-10 days to just 20 seconds, by simply eliminating cumbersome, inefficient manual processes.
FedEx recently incorporated blockchain technology to track high-value cargo, with plans to expand the solution to eventually track the majority of their shipments. To further enhance the supply chain, a new blockchain system from IBM and Maersk aims to manage and track the paper trail of tens of millions of shipping containers, saving valuable time and resources.
In manufacturing, for example, blockchain is used to assist with regulatory compliance, helping to ensure that a finished product meets with safety standards before rolling off the assembly line. According to Forbes, typical product recalls that can cost as much as $8 million can be averted by utilizing blockchain’s improved tracking and traceability functions.
Swiss developer SkyCell launched an IoT and blockchain-enabled refrigerated air freight container designed to transport biopharmaceuticals. With an estimated two-fifths of the world’s drugs and vaccines shipped degraded due to temperature changes during transport, SkyCell containers are equipped with IoT sensors that monitor temperature, humidity and geolocation, all connected to a data cloud via blockchain.
What Does Blockchain Mean for ERP?
Because blockchain has the potential to unite a large supply chain network using a decentralized system, by integrating blockchain solutions into an existing ERP system, the two can potentially work together to improve supply chain automation. This means that every company can maintain their own internal ERP system, while joining one rule-enforced blockchain network. In fact, two of the most highly publicized blockchain pilot technologies were implemented by embedding the technology inside ERP systems.
After a two-year pilot project, Walmart announced that it will use blockchain software developed by IBM to help grocers keep track of every head of lettuce or bag of spinach, to reduce the amount of spoiled and contaminated produce on their shelves. As its proof-of-concept, Walmart’s ERP system used blockchain technology to track the journey of a mango in a matter of seconds, from the very tree it was picked, to the packing house, cold storage facility and distribution center, through to its final destination, on the retailer’s shelves.
It’s important to remember that blockchain is additive technology. It is not going to now, nor in the near future, replace the need for internal ERP. Rather, ERP systems and blockchain will work together to strengthen the integrity and automation of the supply chain.
The benefits of blockchain technology to streamline the supply chain is resulting in new organizations, standards and pilots with leaders in the industry. Although it may take years to iron out standards and interoperability issues, as blockchain technology matures, ERP systems will be the natural place to use this technology to optimize the supply chain, increasing efficiency, compliance and profitability.
Andres Richter is CEO of Priority Software, a provider of flexible, end-to-end business management solutions for organizations of all sizes.