The building blocks of a better supply chain

Blockchain, typically associated with financial services and volatile cryptocurrencies such as bitcoin, is now being touted as the next big thing in disruptive enterprise technology. 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. The system is highly resistant to tampering, as there are multiple copies of the same data on the network.

Enterprises are currently exploring how the technology can help them increase transparency, potentially save on costs, and speed up business processes. Forbes recently released its first ever Blockchain 50, identifying billion dollar companies that are currently actively exploring using blockchain technology. While there were a number of financial organisations in the list, a range of industries and sectors were represented, with heavyweight names including Amazon, IBM, BP, HTC, Nestle, Microsoft and Walmart.

Optimising the supply chain

Although the technology is far from mature, one area where it’s already having a concrete impact is in manufacturing and the supply chain. A recent survey by Capgemini Research Institute found that more than half of organisations were currently experimenting with or implementing blockchain to improve manufacturing and the supply chain. The technology can provide manufacturers, shipping and logistics companies with a secure, paperless solution for tracking products through every stage of their lifecycle, offering organisations greater operational transparency and control.

Blockchain can be used to enable organisations to track a product efficiently and securely, as it passes through multiple stages and even locations, over several months. 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, tracking fresh produce to identify the source of contamination, and even tracing the movements of highly valuable and sensitive items.

Going beyond the hypothetical

Many companies are already using blockchain technology to enhance their supply chains. 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 o 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.

Viant, an Ethereum blockchain-based platform for building supply chains partnered with the World Wildlife Fund to track tuna from the moment it’s caught, up until it reaches the shop floor. With the industry rife with corruption and criticism over how the fish are caught, being able to track the process from start to finish on transparent supply chains is a huge step forward to reducing the human and environmental cost of fishing.

What does blockchain mean for ERP?

Because blockchain has the potential to unite a large supply chain network using a decentralised 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 publicised 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 centre, through to its final destination on the retailer’s shelves.

Looking forward

It’s important to remember that blockchain is an additive technology. It’s not going to replace the need for internal ERP, now or in the future. Instead, 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 organisations, 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 optimise the supply chain, increasing efficiency, compliance and profitability.

Contributed article by Andres Richter, CEO, Priority Software