After its emergence in 2008, the technology behind the world’s most notorious cryptocurrency, Bitcoin, stayed on the sidelines, attracting attention primarily from startups and the financial services sector. However, it has recently started to get a lot of attention as businesses gradually realize that it could be valuable for much more than just tracking payments.
Simply put, a blockchain is a distributed ledger that classifies transactions into blocks. Each block is chained to the previous one, using sophisticated math, until the first transaction. Entries are permanent, transparent, and searchable, making it possible for community members to view transaction histories in their entirety. Each update constitutes a new “block”, added to the end of the “chain”, a structure that makes it difficult for anyone to modify the records at a later stage. The ledger allows information to be recorded and shared among large groups of unrelated companies and all members must collectively validate any updates, which is in everyone’s interest.
To date, a lot of attention and money has been invested in financial applications for the technology. However, an equally promising test case lies in global supply chain relationships, whose complexity and diversity of interests pose exactly the kinds of challenges this technology seeks to address.
A simple application of the blockchain paradigm to the supply chain could be to record the transfer of goods in the general ledger, since the transactions would identify the parties involved, as well as the price, date, location, quality and status of the product and any other . information that would be relevant to supply chain management. The immutable and crypto-based nature of the transactions would make it nearly impossible to compromise the ledger.
Now, a host of startups and corporations are implementing blockchain to reinvent their global supply chain and run their businesses more efficiently:
1. For Maersk, the world’s largest shipping company, the challenge is not tracking the familiar rectangular containers that sail the world on cargo ships. Instead, you are circumnavigating the mountains of paperwork associated with each container. A single container can require seals and approvals of up to 30 parties, including customs, tax and health authorities, spread over 200 interactions or more. While containers can be loaded onto a ship in a matter of minutes, a container can be held in port for days because a piece of paper is lost, while the merchandise inside is spoiled. The cost of moving and keeping track of all this paperwork often equates to the cost of physically moving the container around the world. The system is also rife with fraud, as valuable bill of lading can be tampered with or copied, allowing criminals to divert goods or circulate counterfeit goods, generating billions of dollars in shipping fraud each year.
Last summer, Maersk sought the cooperation of customs authorities, freight forwarders and producers who fill the containers. It started running its first tests of a new digital shipping ledger with these partners, for shipping routes between Rotterdam and Newark. After signing a document, customs authorities could immediately upload a copy of it, with a digital signature, so that everyone else involved, including Maersk himself and other government authorities, could see that it was complete. If there were disputes later, everyone could go back to the registry and be sure that no one had tampered with it in the meantime. The cryptography involved also makes it difficult to forge virtual signatures.
The second test tracked all the paperwork related to a container of flowers moving from the port of Mombasa, in Kenya, to Rotterdam, in the Netherlands. Because both trials went well, Maersk continued to track containers with pineapples from Colombia and mandarins from California.
2. Like most retailers, Wal-Mart strives to identify and eliminate foods that must be recalled. When a customer becomes ill, it can take weeks to identify the product, the shipment, and the supplier. To remedy this, it announced last year that it would start using blockchain to record and record the origins of products – crucial data from a single receipt, including vendors, details on how and where the food was grown, and who inspected it. The database expands the information from the pallet to the individual package.
This gives you the ability to immediately find the source of a contaminated product in minutes rather than days, as well as capture other important attributes to make an informed food flow decision.
Wal-Mart has already completed two pilot programs – moving pork from Chinese farms to Chinese stores, and products from Latin America to the United States – and is now confident that a finished version can be prepared in a few years.
3. BHP relies on suppliers at nearly every stage of the mining process, hiring geologists and shipping companies to collect samples and perform analyzes that drive business decisions that involve multiple parties across continents. These vendors typically track rock and fluid samples and analysis with emails and spreadsheets. A lost file can cause big and expensive headaches, as samples help the company decide where to drill new wells.
BHP’s solution, which started this year, is to use blockchain to record the movements of fluid and rock samples from the wellbore and better secure the real-time data that is generated during delivery. Decentralized file storage, multi-party data acquisition, and immutability, as well as out-of-the-box accessibility, are things that will improve your supply chain.
BHP has now required its vendors to use an app to collect live data, with a dashboard and what to do options that are highly optimized for their respective jobs. A technician taking a sample can attach data such as collection time, a lab researcher can add reports, and everything will be immediately visible to everyone with access. No more lost samples or frantic messages. While certain elements of the process are the same, the new system is expected to drive internal efficiency while allowing BHP to work more effectively with its partners.
By now, in most early implementations, blockchain runs in parallel with current business systems, often older databases or spreadsheets like Microsoft’s Excel. The hardest part will be creating new business models. Implementing blockchain across the enterprise means companies will often have to scrap their existing business processes and start from scratch. An effort not suitable for the faint-hearted.