Blockchain, the distributed ledger technology born of virtual currency Bitcoin, is getting IT companies very excited and making its way into the physical world. Is it just hype, or a future supply chain fixture we need to know about?
When I phoned around in early 2017 for comments on blockchain, many people hadn’t heard much or anything about it. It is not a word on New Zealand logistics professionals’ lips. Not then anyway.
It is very new, but getting to have the same level of hype internationally that RFID did a dozen or so years ago, according to Wellington based Gary Hartley, General Manager - Sector Development at auto ID specialists GS1 New Zealand.
He is not alone. IT analysts Gartner refer to blockchain as at the peak of its hype cycle. Yet we are a small country in a very big world, with organisations linked into the global supply chain. So when the likes of Walmart and Maersk start dabbling, most people I spoke to agree; we had better take notice.
What is Blockchain?
Actually the word Blockchain is a generic term and what we are really talking about is a distributed ledger; a running record to track something that is incrementally added to by many organisations, and held on many computers.
At each step (for example loading, transport on a ship, temperature monitoring, processing, packing, picking etc) the extra record (or block) is linked to the data already held (chain). In supply chain terms, the excitement centres around incredibly detailed (and virtually real time) traceability from paddock to plate, from mine to motor vehicle.
“It provides an irrefutable record that crosses borders and companies,” says Mark Pascall of consultancy 3 Months.
Provenance is one important role; proving the product is as organic as the distributor claims, for example. It can be used to spot counterfeit pharmaceuticals and branded sneakers, or for responding rapidly to a product recall.
So what’s new? I remember over fifteen years ago sitting in a cramped and stuffy seminar room at a logistics IT summit in the UK, listening to a US tech company discuss their new supply chain visibility development. It was the most popular seminar that week.
The main difference is that a distributed ledger has no one owner, no single source that needs to be controlled and managed, and that can be hacked and falsified. It holds everything together rather than hidden in disparate islands of information. As soon as a block is added to and accepted on the chain, it is virtually immutable as you can’t go back and tinker with it without changing numerous computers simultaneously.
And since it is easy to add information, there’s no reason why we can’t keep it all up to date as products are shipped and processed.
“Like a magic database.”
That doesn’t mean anyone can jump in and add information, explains Associate Professor Alexandra Jane Sims of Auckland University’s Faculty of Business and Economics.
“There are hundreds if not thousands of blockchains and you can make your own. Basically there are two different types; decentralised and permission based,” she says.
A decentralised, or distributed ledger is held in thousands of different computers. It all started with Bitcoin but it is basically a record of something. In a permission based ledger information is stored on a closed system. Everyone on the supply chain has access, or you can grant access to different information for different users.
As soon as the information is on the blockchain it is stored in more than one computer. “They all check and verify,” Alexandra adds. “There is just one record agreed to by everyone so there is no need for each company to update their in house ledger. It’s like a magic database.”
For supply chains, she believes it is speeding up the current way of doing things and with much more detail and transparency.
“It supercharges your information flow.”
For example, a port could know ahead of time what is being shipped, yet simultaneously a customer is checking the farm their products came from and monitoring temperature sensitive cargo, while export statistics are updated. Another use she sees is executing smart contracts, where as soon as the record of delivery is updated and verified, payment can be made automatically without any delays or paperwork.
New, but on its way
“You’ve only really started to see growth in New Zealand recently,” says Stephen Macaskill, president of the Blockchain Association of New Zealand. And supply chain is one of the applications he sees; “It’s just starting to get to that point where it’s really starting to take off here.”
Steve Lowe of Standards New Zealand would agree. Last year they asked for feedback on whether NZ should be involved in international blockchain standards and received a deafening silence. In the last few months, they have been contacted a lot more on the subject.
Stephen Macaskill warns that blockchain is not for everyone. “It’s not a mighty hammer that can be used on every little nail.”
“There’s a lot of clarity emerging,” says Sydney based Steve Wilson of international consultancy Constellation Research. “Blockchain is a bit like teenage sex; a lot of people are talking about it, there’s some fumbling going on in the back of cars, but nobody is really doing it.”
Yet there are rumours that one or two major New Zealand companies are involved in these early days. What’s more, Walmart is already piloting distributed ledger technology to track and trace pork in China and produce in the U.S. And if the world’s major retailers want to use blockchain, we’re in whether we like it or not.
“The concept is there, we’ve now got to do it. But if you’ve not thought about it, you may be left behind,” says Alexandra Jane Sims.
While Mark Pascall claims that; “In a few years blockchain will be technology nobody really knows about but just runs under the hood.”
Just remember where you heard it first.
Want more explanation on what Blockchain is all about? Start with this TED talk by Don Tapscott that has over 1.5 million views;
Article first published in FTD April 2017
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