At the Blockchain Expo Global 2019, a panel discussed blockchain solutions for increasing transparency, profitability and provenance in supply chains across a variety of markets.
Nitin Manoharan, head of enterprise architecture & technology innovation at Philip Morris International, spoke on the importance of looking at the enterprise viability of blockchain. He cited the World Economic Forum’s estimate that 10 percent of the global GDP would be stored on blockchain by 2027.
Though Manoharan agreed that the technology had not progressed enough to be adopted by enterprises now, he advocated for the need for companies to experiment with the technology, get key stakeholders on board, and work on pilot programs to see if it could help make their operations leaner and more efficient.
Sylvie Gleises, CEO of continental Europe for AXA ART, was generally skeptical about the use of blockchain in the art industry that her company is part of. The art industry is quite small, considering the number of sellers and buyers in the ecosystem, and has typically been against disruption of any kind. Gleises explained that in the art industry there are cases of counterfeit artwork making its way into the market, and companies usually insure their artwork to safeguard themselves from fraud.
Gleises hoped that if blockchain could help find a way to address the issue of counterfeit artwork and even the associated money laundering, it would help insurance companies immensely. The problem, though, is not with the technology but with the way it could be implemented on artwork track-and-trace.
For instance, if blockchain was used to track the provenance of a $30 million Rembrandt art piece, there would be a need to place a physical tracker on the artwork to make sure it is not replaced by any fraudulent means. However, Gleises was quick to point out that this is impossible, as physical trackers put on artwork would likely damage it, which is a risk that no art agency or potential buyer would be willing to take.
Marc Taverner, global ambassador at Bitfury, a blockchain technology company, substantiated Gleises’ argument, saying that “blockchain just for the sake of blockchain has zero value.” Before a company looks to work on blockchain, it needs to perceive the use case blockchain has for its operations – for instance, helping capture an adjacent market, solving issues with trust and provenance, and even tackling inefficiencies within supply chains.
Taverner cited a pilot project that Bitfury successfully worked on with the government of the Republic of Georgia, where land registered within the country was put on the blockchain. Though this was an exercise done primarily to increase trust between citizens and the government, the end result showed a 90 percent reduction in operating costs, and a substantial decrease in time taken to register from many days to 10 minutes.
Manoharan debated the idea of working on blockchain just for the sake of it, mentioning that he has worked on a few such projects at Philip Morris that were primarily about finding a solution and then looking for a problem. “The issue is no one understands the full potential of blockchain, as there are multiple layers that you need to understand. I call this technology for technology’s sake,” he said.
One of the first blockchain projects undertaken at Philip Morris was two years ago, involving the provenance of electronic devices that had multiple components manufactured and supplied by different stakeholders. In general, when such a device is damaged, it takes about six weeks to do the root cause analysis, as tracking down all the Tier 1 and Tier 2 suppliers, the specific product batches and the logistics providers is too hard a task.
Though blockchain was used in the pilot program, it did not live up to expectations. The technology was not scaled enough for the type of transactions involved in tracking the provenance of electronic goods. But today, blockchain is a more advanced and use cases are cropping up every day within the niche segment, promising accurate provenance tracking.
All of the panel members agreed that one of the primary reasons delaying commercial blockchain adoption is the need to build trust between stakeholders and market competitors – a situation that is especially true within the supply chain industry. If a manufacturer wants to build a blockchain solution for the greater good of the industry, then there is a good chance that other companies in the supply chain opt out of it, as they fear that the data they share might be used to their competitor’s advantage.
Taverner pointed out that even if companies work around their differences and create a blockchain solution, there still would be an issue with deciding who gets ownership of the system and the right to intellectual property.
Companies are also wary of closed blockchain networks, like the Maersk-owned TradeLens. Maersk and its partner IBM are having trouble inducing stakeholders into the network. Companies dislike the idea of a single organization having greater control over the system than the rest of the participants, and thus would instead opt for an open network. Standardization is the need of the day, and industry incumbents will have to partner with consortiums like the Blockchain in Transport Alliance (BiTA), to create open standards that can be used universally – creating true transparency and visibility into supply chain operations.