Blockchain for Supply Chain Transactions

For many people, blockchain is about cryptocurrency. We’re not going to address that today. Blockchain also has real-world uses in supply chains and operations.  It has the potential to transform the oftentimes slow and costly supply chain procedure into an automated, transparent set of processes. This addresses enterprise needs, now.

Blockchain can provide trust, communication, and connectivity where there didn’t use to be.

Chris Georgen, Founder of Tobl

On the podcast “This Week in Innovation,” hosted by Jeff Roster, Advisor Council Member at GMU Center for Retail Transformation, and Brian Sathianathan, Co-Founder of Iterate.ai and Member at Forbes Technology Council, Founder Chris Georgen of Tobl joins to discuss the importance of bringing trust and certainty to supply chains. Georgen’s solution? Blockchain. 

According to Georgen, blockchain can provide trust, communication, and connectivity where there didn’t use to be. To hear Georgen’s thoughts and more about Tobl, check out the podcast episode here.

Today, let’s take a deep dive into how blockchain is the solution that supply chains need.

How does blockchain work in this context? 

Most discussions of blockchain involve cryptocurrency or bitcoins.  This has nothing to do with that.  At its core, blockchain technology is a ledger of all transactions, and then all participants in a chain also have a complete copy of that ledger.

Blockchain brings together two big factors with potential benefits:

• Security: The ledger is a secure way to record transactions, because cheating with fraudulent entries is very difficult, if not impossible.
• Distributed records: No single entity has complete control over the records. This actually increases the trust-factor as well as ability to verify transactions quickly.

What does it have to do with supply chain management?

As products move along supply chains, enterprises often run into many errors. Besides actual product manufacturing, a basic supply chain involves several transactions: retailer placing an order, supplier getting financed from bank, supplier shipping merchandise to retailer, retailer paying supplier, supplier paying bank, retailer returning damaged merchandise, supplier paying for that, and on and on it goes. 

In short, supply chains can get quite long and convoluted, and there is quite a bit of room for error along the way. 

The following are some advantages of incorporating blockchain technology into supply chains: 

• Traceability: Errors are inevitable in the supply chain, and they may be impossible to catch, especially at the time that the error is occurring. Each “link” in blockchain follows a chronological sequence of all transactions. This means that nothing that happens during the supply chain gets lost in the process, and all links in the blockchain are individually copied, encrypted, and pinpointed for each party in the supply chain. This practically eliminates current traceability issues. 
• Secure and Verifiable: Security comes from a difficulty to commit fraud or forgery. Blockchain is one of the most secure technologies out there. When it’s applied to the supply chain, all transactions along the way are secure and can be easily verified at a later point, if needed. 
• Automation. Let’s face it: supply chains as they stand can be slow. Especially when it comes to complex data sets and orders, it takes a long time to get through every process in the supply chain, especially when that chain involves thousands of components. It can be completely unpredictable. Blockchain automates important pieces of the supply chain, greatly reducing the cost of time. 
• Ethical and Sustainable. When we can trace back every link in the supply chain, it makes it simple to know where materials are coming from, where they went, and who had access to them. This can improve sourcing efforts in terms of ethics and sustainability. (think: no more conflict diamonds)
• Reduced Costs. With blockchain technology, once implemented, enterprises gain efficiency and reduce waste because, while the blockchain has redundancy built in, this streamlines other (flawed) methods of duplication that are prone to data entry errors, single points of failure, and inaccessibility.

According to Georgen, around a dozen or so startups are currently working on building supply chain perspectives on top of the blockchain, but Topl is unique by being the blockchain itself. It was built exactly for this purpose. 

As always, with new technological solutions, there are some challenges. Currently, supply chains require private blockchains among known parties. This means that only known parties can participate in a blockchain, so companies must give and receive permission to join in. This poses a potential problem in terms of data privacy: how can blockchain participants efficiently be vetted and given approval? Most companies that are already using this technology focus on narrow applications that are already well-defined, making it usable, or they’ve built a strong ecosystem of partnerships with other firms they trust.

NOTES:

• Chris Georgen of Topl – a company that helps corporations track, tokenize, and maximize positive impact.
• Ethical and sustainable concerns should be central to policy decisions
• Around a dozen startups are building supply chain perspectives on top of blockchain, but Topl is unique by being the blockchain itself. Purpose specifically for these types of problems.