iStock Photo
Of all the main stage presentations at our recent Leaders Forum in London, none garnered more praise or eager follow up than a brief session by Mike Gault, the CEO of Guardtime. Some of the credit is no doubt due to Gault’s quick, pithy style, but more important was the relevance of his topic: blockchain.
I have written about blockchain for supply chain uses before, but in the past few months we’ve seen interest levels spike more suddenly than for any technology I’ve ever observed in this domain.
Trust, but Verify
There’s a Russian proverb that goes “doveryai, no proveryai”, which translates as “trust, but verify”. This was used to great effect by Ronald Reagan in the 1980s during the final phase of the Cold War. Its crisp characterization of the need for confidence in counterparty behavior helped end the wasteful conflict between the USSR and the west and initiate an economic boom through the 1990s.
“Trust, but verify” was also a powerful theme in Gault’s presentation on the uses of blockchain for supply chain tasks. Its meaning in this context boils down to eliminating uncertainty in transactions with a new form of metadata that can prove time, source and validity of any kind of electronic message without a central authority. It is the mechanism that supports Bitcoin, which is purely electronic and depends existentially on trust. It is also a mechanism that can assure every shipment, compliance document, software download or temperature check is correct.
From an operations standpoint this means we can design networks of material and data movement that need not rely on batched management techniques for quality control, use authorization, track and trace, field maintenance or any of hundreds of other use cases that arise in supply chain. I have now talked to dozens of senior supply chain leaders who are actively exploring where and how blockchain might fit in their networks.
Gault’s presentation offered a few examples of what blockchain can do now:
- Prove to me that that my contract manufacturers are not over-producing.
- Prove to me that there are no counterfeits in my supply chain.
- Prove to me (and regulators) that my processes are in
- Prove to me my suppliers and distributors are reporting the
- Prove to me my manufacturing facilities have not been
- Provide me a mechanism for pinpoint recalls at the item level.
- Provide me track and trace global visibility at the item level.
- Provide me a better consumer experience that provides verification of product provenance.
The value of any one of these capabilities is potentially huge given how much money and time are spent auditing suppliers, policing counterfeits, executing recalls, verifying license rights and so on. Each task today is undertaken to maintain the trust brands require to serve customers; the trust supply chains need to buy, sell, ship and receive with confidence; and the trust operators have that machinery is working as intended.
It takes little imagination to see the savings in labor, inventory and scrap, plus the incremental revenue in IP rights enforcement, brand protection and proactive field service. Trust is the ultimate business lubricant. What if it didn’t depend on human-to-human relationships to propagate?
Caveat Emptor
Blockchain is hot, but so was ERP. Transformational technologies always carry warning labels. For blockchain, one key warning is that this works only where electronic signals accompany transactions. Happily, this includes much of what happens in modern production environments and most of what we do in logistics.
It does not necessarily work in store operations at the item level or equipment maintenance in the field and it has definite limits in raw material extraction, including agriculture. IoT will certainly help.
Blockchain also must be seen in at least two buckets:
- Permissionless, like the distributed ledger system that underpins Bitcoin;
- Permissioned, which involves defined individuals doing distributed database validation within a partitioned group.
The latter is the more likely approach in supply chain applications.
The good news with these caveats is that a test-and-learn approach is ideal. Pick a problem, scope the permissioned group and process, and get started. Expertise is available in the market. Give Mike Gault a call and hear the pitch.
Of all the main stage presentations at our recent Leaders Forum in London, none garnered more praise or eager follow up than a brief session by Mike Gault, […]