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Home » Blogs » Think Tank » Blockchain and Supply Chains: Unleashing the Potential

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Blockchain and Supply Chains: Unleashing the Potential

Blockchain and Supply Chains: Unleashing the Potential
February 7, 2019
Hope Liu, SCB Contributor

Problems dealing with data can lead to expensive reconciliations and negative impact on customer fulfillment. Blockchain technology can bring consistency, privacy and security to transactions that are booming due to e-commerce sales. 

Retail e-commerce sales in the Asia-Pacific are growing at an accelerated rate. In 2017, the market registered a 31 percent growth to $1.349tr, and in 2018 it was expected to be worth more than $1.89tr. Several trends are contributing to this growth: a rising middle class, increasing mobile usage, faster internet access, an increase in e-commerce players, and the advent of more logistic options in the supply chain ecosystem. 

The challenge for the supply chain industry is in keeping pace with this phenomenal growth. 

Start-ups in Southeast Asia have recognised the trends and are capitalising on the opportunities. In a span of just one year — between 2016 and 2017 — the amount raised by e-commerce start-ups tripled, reaching $7.86bn. This has fueled tremendous innovation in the supply chain industry — transforming warehouses and distribution centers into mega-fulfillment centers. 

Current Issues in Data Integrity

Blockchain is one exciting technology that start-ups are exploring. Blockchain can address a few significant problems that the industry is grappling with, all of which have to do with data. 

Problems can arise due to either the data being inconsistent, or residing in a discontinued system, being held in a non-standardized format, or across varied platforms that don’t interface well with each other. To circumvent these issues, supply chain professionals — manufacturers, suppliers, buyers and third-party logistics partners — are often forced to conduct costly, manual reconciliations. The biggest impact of this reconciliation effort is that customer fulfillment is not timely and revenue opportunities are lost. 

The Promise of Blockchain

Blockchain’s promise rests in the fact that it offers integrity of data. Because it is a common, distributed ledger held across multiple servers, unlike regular databases, it is immutable. This is because data verification is done at the point of entry through automated technologies, and shared governance processes ensure its integrity. The information thus must be consistent across the supply chain network. No singular individual or entity will be able to act alone to amend the records, whether intentionally or not. 

When there are updates to the data, every node in the supply chain process will receive a real-time update. This lends considerable transparency of data, as well as multiple access points to it across the entire supply chain, facilitating optimized inventory levels, and thus, the ability to fulfill customer demands in a timely fashion. 

A New Trust System

As far as one can remember, commerce has been conducted based on trust. It is a valuable commodity that is not easily earned. Companies need to do background checks on the parties they do business with, verify transaction details and put in place fail-safe mechanisms to ensure that data on business deals is not compromised. If these verifications are not done with detail, companies can risk working with fraudulent buyers or merchants. 

What blockchain essentially does is to transfer the need for trust on individuals and entities to the technology itself. 

The technology drives tremendous efficiencies as well. While previously, buyers and suppliers needed to keep separate processes and data records, to protect themselves, the immutability of the data that blockchain technology facilitates removes the need for various parties to keep records and reconcile those records. 

Then when businesses collaborate, integrity of data becomes an assured commodity, as well as the assurance of being updated real time when there is a change in ownership/state, on delivery details, on payment. Thanks to blockchain’s decentralised holding of data, it will be difficult to falsify, hence reducing fraud as well.

The transparency that blockchain technology encourages also infuses integrity among suppliers. The onus will then be on suppliers to make their past performances publicly verifiable by future buyers without disclosing their commercial secrets. When sourcing for suppliers, buyers will be able to check their records on the blockchain. Suppliers that deliver goods on time can be counted on in the future to do so again, solidifying their reputation and reliability with each trade exchange.

In time, as more and more buyers and sellers transact on the blockchain, the data collected can be a very rich source of data insights to those in the network. 

Privacy Concerns

One of the concerns of blockchain technology is that as transactions are “globally published” and not encrypted, hence privacy of critical, sensitive information could be compromised. However, smart contracts can allow for transaction data and trade secrets to be encrypted and secured and, thus, kept secret from competitors. 

A Disruptive Technology

The future of blockchain as an underlying technology for supply chains, seems quite set. In fact, that future is already upon us if one looks at the moves made by e-commerce giant Alibaba, which is already using blockchain technology for its T-Mall platform. In 2017, Alibaba applied for 43 patents surrounding the technology, the second-highest applicant in the world.

The supply chain industry has no choice but to be progressive — the opportunities from using the technology are huge; on the other hand, the costs of not keeping up are great as well. 

Hope Liu is CEO of Eximchain, a blockchain solutions provider.

Logistics Transportation & Distribution Data Management (Big Data/IoT/Blockchain) Cloud & On-Demand Systems Supply Chain Planning & Optimization Supply Chain Visibility Technology Global Supply Chain Management Supply Chain Security & Risk Mgmt Order Fulfillment E-Commerce/Omni-Channel Retail

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