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Blockchain: Strategic But Still Aspirational

The ability of a break-through technology like blockchain deliver unprecedented possibilities for supply chain reform in electronics and other industries. It has the capacity to securely chronologize and record not only trade and currency flows but virtually any business process or documentation.

In fourth quarter, 2016, 31% of 400 executives surveyed by EfT said that Bbockchain’s biggest supply chain impact would be in data interchange between partners, and over 50% said they would be investing in 2017.

Twenty of the Global Experts Group 24 supply chain leaders are already in the process of planning or starting significant transformations of their supply chains, and 88% have already incorporated some elements of the digital supply chain into their business models.

Marine Transport International, a UK freight forwarder, has begun using blockchain with its electronics shippers for containerized cargo, and has found that the process significantly reduces the tedium of in-transit communications and the recording of complicated bills of lading and other shipping documents. The bottom line is that the blockchain market is projected to grow from $210.2 million in 2016 to $2,312.5 million by 2021.

As a former semiconductor equipment manufacturing executive with supply chain accountabilities, the potential of blockchain more than excites me. What if a company could totally do away with cumbersome on boarding electronic data interchange (EDI) procedures for new suppliers, instead using blockchain exchanges with them as workarounds for painful system integrations? Or, suppose that a company acquires a smaller organization and wants to avoid having to integrate the acquired company’s systems with its own? At least for a time, could blockchain facilitate the necessary information exchanges?

 The answer in both cases is a potential “yes”—but for electronics and other companies, there are still looming questions that surround integration with systems and business processes.

One of the forerunners in blockchain testing and implementation is IBM. In October, 2016, IBM worked with FreshTurf, a Singapore startup, to create a blockchain network of storage lockers for shipping and parcel delivery throughout Singapore that would improve last mile delivery services for consumers and businesses.

In a second project, IBM collaborated with Swiss bank UBS to design a blockchain application that would holistically combine payment transactions, foreign exchange payment processing and more, into one single, elaborate smart contract. Both of these projects hold inherent value for electronics supply chains—but even at IBM, there is acknowledgment that much more work in the area of systems and business process integration needs to be done before blockchain is ready for prime time.

“While Blockchain technologies are viewed as a disruptive force for the existing financial systems and market infrastructure and fundamentally change the way the financial services operate day-to-day business, the challenges of enterprise adoption still needs to be addressed as well,” wrote Nitin Gaur, director at IBM Blockchain Labs.

Continued Gaur, “Blockchain currently lacks generally accepted definitions and standards. Even though the financial services industry is experimenting with blockchain technology in an effort to understand the disruptive forces, for these experiments to be adopted into full-blown production systems, where enterprise[s] can exploit the benefits and realize the promise of blockchain, the industry has to address the enterprise challenges around transaction audibility, visibility and integration into existing business functions. Without this, the blockchain revolution may never see the light of day in the enterprise world.” 

Does this mean that companies should wait until major blockchain integration challenges are addressed? Of course not. 

But it does mean that electronics companies and others should take steady but circumspect approaches. How do you do this?

  • Identify clear business cases where blockchain would deliver immediate value to your company. Do you have many suppliers in your supply chain that are not very automated and use manual systems? Blockchain imposes its own digital ruleset and security, and could be a good way to onboard these trade partners without excessive investments in hardware, software and operations like iterative EDI testing.
  • Don’t rush to de-implement internal systems. Blockchain only guarantees secure chains of transactions that can be created outside of the enterprise. Its interfaces with other connecting internal systems and business processes throughout your company are at best, developmental.
  • Talk to your enterprise systems vendors. These are the folks who should be creating blockchain interfaces and integration with their systems, not your own IT department. 
  • Collaborate on a strategic roadmap for blockchain. If blockchain were a mature technology today, where in the supply chain would you want it most? How will it affect not only your systems, but your business processes? Will your employees require retraining? CEOs, CIOs and other thought leaders in your business should be discussing this for strategic purposes.
  • Don’t ignore blockchain. The tendency might be to ignore blockchain and to just wait until it is fully ready. Don’t do this. If you wait until then, your competition will already be up and running with blockchain and you will find yourself at a strategic disadvantage.

Where do you see the promise of blockchain in your supply chain operations? Let us know in the comments section below. 

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