In its report Blockchain Beyond the Hype, the World Economic Forum offered some grounding advice: “For any organization, blockchain technology should not be a goal in itself, but a tool deployed to achieve specific purposes.”
The overarching purpose of any supply-chain company boils down to delivering the best possible service at the lowest possible cost. Fully realizing that ideal in today’s market requires two resources: multi-enterprise business networks and digitization.
What’s fueling blockchain mania isn’t a solid business plan backed by glowing use cases, but a near-mythic notion that the technology will solve all manner of supply chain challenges.
Unfortunately, blockchain currently remains at odds with both multi-enterprise business network functionality and the process of digitizing physical goods. Let’s take a look at how.
Single vs. Multi-Purpose Systems
Today, the most successful and efficient supply chains resemble B2B ecosystems, or multi-enterprise business networks. A multitude of companies collaborate and partner with one another to provide and receive supplies and services at the highest quality and lowest cost. As this is a fairly new and evolving approach, most available technologies have not developed in service of these matrices, and silos continue to be the greatest barrier to ideal operations.
Because network relationships center around collaboration across multiple processes and order flows — such as customer and shipment orders and resource planning — they require multi-purpose systems that facilitate real-time data sharing and seamless interconnection between all flows. As it stands, companies tend to aggregate disparate systems and solutions, treating challenges in isolation, rather than working toward a comprehensive plan to bridge all systems, processes, and partnerships.
Blockchain fuels single-purpose networks, so it only reinforces these silos. At best, it promises to help businesses address certain narrow pain points, like boosting security and improving track and trace, within isolated processes or flows. But, without any means to translate between flows, such offerings dig a deeper well for companies to eventually climb out of.
Blockchain wasn’t fashioned to address the specific needs of the supply chain, so it’s no surprise that it doesn’t. When alternative solutions for security and track and trace capabilities already exist, and in platforms specifically designed to address the collaborative and unifying needs of the industry, why continue to seek quick fixes elsewhere?
Where the Physical and Digital Fail to Meet
The World Economic Forum report includes a decision tree, a handy guide to determining whether blockchain technology is right for your business. One of the first questions — the one most pertinent to the supply chain — asks: “Are you working with digital assets (versus physical assets)?” If the answer is no — which it necessarily is — the guide advises you not to use blockchain.
Unfortunately, the technology has not yet effectively learned how to translate between the two worlds. One is virtual and capable of immutability, the other is material and subject to tampering. To really drive home where the industry stands on this matter, other areas of the decision tree lead to more optimistic conclusions, like “Blockchain can’t do this efficiently yet, but solutions are in development,” or “Blockchain may work — further research is needed.” Put simply: on the subject of physical and digital convergence, blockchain technology is a dead-end in the foreseeable future.
Regardless, big players in the food industry have donned rose-colored glasses about the distributed ledger’s promise of secure digital recordkeeping and traceability. Immutability assures data integrity, but if that data references mutable items, then what good is it? When linking between the physical and digital, part of the problem involves creating and maintaining the gold standard of integrity for physical items, which are difficult to distinguish and easy to tamper with. A secure representation of a compromised item is about as valuable as forged currency.
These companies are also striving to better investigate and control food-borne illnesses, like the recent outbreak of E. coli in romaine lettuce. But, frankly, any modern system that digitizes processes can accomplish that and other similar goals as quickly and effectively — with lower cost, less risk, and faster implementation.
Despite the cold, hard facts, many continue to glorify blockchain technology as a cure-all, while the world holds its breath. Not only is this a harmful distraction, it’s also a mirage—a glimpse into an attractive future that’s not unattainable, while detracting from the practical work required to actually get there. Rather than cling to the fantasy, businesses desperately need to reassess their approach and start acting. Too many companies still send paper documents, rely on outdated processes, and lack the tools to cultivate networks in their industry.
In a way, the legend of blockchain has become as fantastical as the Wizard of Oz: the glistening, golden answer to all the world’s problems. Fortunately, it seems as though the winds are changing, and the myth is slowly deflating. More and more people are recognizing the fallible man behind the curtain, and that real progress today — the kind that’s backed by equally innovative (albeit less hyped) technology; the kind that leverages tools explicitly designed to tackle the nuanced challenges of the supply chain industry — is already possible. So, what are you waiting for?
Peter Nilsson is vice president of strategic initiatives for MP Objects, a multi-enterprise cloud platform for digital order management and supply chain orchestration.