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BlockchainInnovationLogisticsNewsSupply ChainsTechnology

Blockchain is not the magic cure-all that businesses might believe it to be

The technology of blockchain has gained impetus within the supply chain industry over the last few years, with the increase in interest roughly coinciding with the proliferation of cryptocurrency. But though the value of cryptocurrencies has fluctuated since then, blockchain’s relevance in the supply chain market has only grown in stature, with businesses pushing for pilot runs and joining blockchain consortiums to standardize usage. 

Blockchain’s place in a supply chain is in shedding light across the length of its value chain, providing visibility on logistics operations and transparency in transactions between different stakeholders. Blockchain, being a decentralized and immutable ledger, also brings in the much-needed trust found severely lacking between stakeholders – in part due to the absence of end-to-end visibility. 

That being said, though the benefits of proper implementation of blockchain across supply chains do provide utility, the more pertinent question at this juncture is how the industry can bring that to fruition. This is a concern, because although companies within the supply chain realm understand the possibilities of integrating blockchain within their operations, the technology still remains an enigma in regard to its implementation. 

For instance, a large part of the industry is yet to come to terms with the fact that to realize true visibility through blockchain, it is critical to have all the stakeholders within a supply chain to be on-board and sharing relevant and accurate data. The difficulty here is in two parts – convincing every stakeholder of blockchain’s presumed benefits and making sure the data fed into the system is devoid of irregularities. 

In the eagerness to drive efficiency through better operational visibility, companies rush toward adopting blockchain, forgetting the fact that the technology is not a magic cure-all, but rather has several limitations, which if misconstrued, would make its possibilities irrelevant. 

Take, for example, the use of blockchain in a coffee supply chain. The coffee industry is bereft of visibility, a common occurrence across supply chains that source, process and sell products across several parts of the world. Coffee supply chains are particularly of interest as a blockchain use case, as the industry witnesses several human rights violations at coffee bean farms that are predominantly situated in economically poor regions across Africa and Asia. 

Provenance tracking of the coffee bean from the farm to the cup is critical to improving the livelihood of the farmers while providing accountability to the end customers. But before putting data on a coffee bean’s journey across this supply chain, it is vital for companies to audit the information that is being fed into the system. This is difficult, because it involves stakeholders who might not necessarily understand the technology or the positive impact it could have on their earnings. 

The first step towards successful implementation of blockchain is educating stakeholders on the technology. Within the capacity of coffee supply chains, major stakeholders like Starbucks or Tim Hortons will need to work with the farmers they source their coffee beans from and push them to register their farms on a blockchain platform. When farmers enter information on how and where a bean is sourced from, it provides the industry a way to ascertain ethical sourcing means and helps clean-up redundant intermediaries who take up a bulk of the profits today. 

Likewise, for different blockchain platforms to be interoperable, it is crucial to standardize their use across all discretely functioning supply chains. The Blockchain in Transport Alliance (BiTA), a consortium of over 500 members across the logistics space, has pioneered the development of open blockchain standards that companies can use as a platform for their blockchain needs. 

In the context of blockchain standards, it is also essential to make sure they are open because that will help small- and mid-tier businesses to adopt blockchain without being forced to pay royalties for the framework. For blockchain to truly transcend the chaos of supply chains, it is crucial to tick off all the prerequisites – without which the technology will gradually be reduced to a pointless exercise and ebb away from mainstream relevance. 

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Vishnu Rajamanickam, Staff Writer

Vishnu predominantly covers stories coming out from Europe within the logistics and transportation space - be it current affairs, trend analysis, trade forecast, or technology. He also connects with key stakeholders within the freight industry, profiles startups, and brings in perspective from thought leaders in the freight space. In his spare time, he writes net-noir poetry, blogs about travel & living, and loves to debate about international politics.

2 Comments

  1. This article has the same negativity feel about it that others have regarding this technology. I have yet to read anywhere that block chain is a panacea. Like all technology, it has many uses that apply exceptionally well with it, and other uses that are not a great fit. Block chain is NOT an all or nothing technology. Working with vendors is one step of many, and has some challenges. In many cases, adding your single largest vendor can have a huge impact on visibility and some visibility is better than none! I do not think you did this topic justice in this particular article.

  2. The coffee industry example shows a lack of knowledge of that industry which rather undermines the point being made. Starbucks don’t buy their coffee from farmers. If they did, they would have full visibility of the supply chain, which would make coffee a poor use-case for blockchain. Further, the suggestion that farmers can register their farms on a blockchain platform is also ignorant of the facts – if farmers could afford the tech to do that, they would have visibility over market prices that would mean they weren’t economically challenged as the rightly author points out they are. The coffee industry is run through traders, which is where blockchain needs to be implemented for that industry.

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