Blockchain: The “Building Block” of the Supply Chain of Tomorrow?

At the HighJump Elevate conference in mid-May in Dallas, one session – attended by roughly 600 conference attendees – was called “Blockchain: The ‘Building Block’ of the Supply Chain of Tomorrow.” Really, the title of the panel should have had a question mark at the end – like the title of this article – because the panel was in large part composed of industry analysts who tend to be far more cautious about our assessment of blockchain than the broader technology community.

Blockchain in the Supply Chain

The panel was composed of me; Dwight Klappich, a Vice President at Gartner; Victoria Brown, a Research Manager at IDC; and Piyush Dewangan, an Industry Research Manager at Quadrant Knowledge Solutions. There was one member of the panel, Kurt Wedgwood, North America Blockchain Leader at IBM, who represented the view of the technology community, which tends to be more bullish on this technology than analysts.

Ms. Brown and I were asked the first question, which was to describe the technology. My answer was to try and put the technology in a context, using a vocabulary, that supply chain practitioners are familiar with.

“We understand that supply chain applications work better when they have access to network data from participants in our extended supply chains. If we can get access to near real-time data from further upstream and downstream in our supply chains, we can make better service and cost decisions.  Further, supply chain networks, which are centralized Cloud applications that all network transactions flow through, eliminate the ‘he said, she said’ kind of disputes. Because the transactions flow through the network, network master data can be used to resolve disputes among participants.”

“Blockchain for supply chain management is, in effect, a network application. But instead of being a centralized application, it is built on the distributed databases of supply chain partners in an extended supply chain. It is a decentralized architecture. It has the advantages of existing network solutions and, in theory, will also have better IT security than existing supply chain applications.”

Later I was asked to explain the difference between blockchain and bitcoin. “When I began my research into blockchain, I began by looking at the one place where blockchain is in general usage, cryptocurrencies and Bitcoin. When I dug into how these solutions work, I thought ‘This will never work for supply chain management! Not in a million years! But blockchain for supply chain management differs from Bitcoin in fundamental ways.”

But the best exchanges among the Panel participants centered around the maturity of blockchain for supply chain management. Even Mr. Wedgwood from IBM was cautious. He saw the technical challenges as being much less difficult to solve than both internal cultural issues and getting different parties in an extended supply chain to participate in these proof of concepts. He saw these people issues as representing perhaps 60 percent of the challenge.

Mr. Klappich, of Gartner, said “I view the cultural issues as being 90 percent of the challenge.” Mr. Klappich went on to compare the hype surrounding blockchain as being like what occurred surrounding RFID in the early 2000s.  RFID was mandated by Walmart, the analyst community raved about the prospects of this technology, but the initiative was abandoned by Walmart and RFID even today is not in widespread usage for supply chain tracking.

I had a different perspective. “I don’t disagree that this is an early maturity stage technology.” But the RFID example is a bad one. “When the Walmart mandate occurred, I called 50 of the Walmart’s 100 largest suppliers who were subject to this mandate.  They could not have been more negative. Based on their feedback, ARC’s coverage was the most cautious of all the analyst groups. But some of the companies that have been involved in early proof of concepts are far more positive about blockchain.”

It may be that everyone on the stage was too cautious. One day after we appeared on the panel, an article appeared in the Wall Street Journal that claimed that 1.1 million items from Walmart are being tracked by blockchain, helping the massive retailer trace these products journey from supplier to store. When a technology moves from proof of concept to pilot, and tracking is done at scale, one big maturity hurdle has been overcome.