As the advantages of blockchain technology become clear among all organizations, it is poised to revolutionize supply chain logistics.
Where did your product come from? How did it get here? What happened along the way? You may know your customer, but how well do you know your vendor? Once upon a time these were easy questions to answer. Now, as concerns over product quality and ethical sourcing drive demand for greater clarity over a product's journey, organizations across all industries are challenged to derive clear answers for increasingly complex supply chains.
This is where blockchain and Internet of Things (IoT) technologies are poised to reshape the supply chain environment.
Globalization and cost-reductions are among the forces adding complexity to modern supply chains. Organizations are going to great lengths to deliver their products at cheaper costs, and the pressure is on procurement managers to seek more cost-effective solutions either by sourcing materials and services overseas or enacting cost-cutting measures among their partners. As a result, supply chains are expanding to include touch-points across the globe, creating intricate manufacturing plans, shipping routes, and regulatory challenges – and that is before products even land in Canada for distribution.
Entire industries have risen up to help companies make sense of this complexity. Still, with stronger scrutiny over the source and quality of products – especially among global players – there is a need for capabilities that will allow companies to not only track a product's complete migration from source A to shelf B, but disentangle our increasingly complex supply chain logistics.
Digital ledgers and peer-to-peer transactions are terms more commonly associated with the technology and finance sectors. Yet as the advantages of blockchain technology become clear among all organizations, it is poised to revolutionize supply chain logistics.
The technology would take a paper in itself to explain, but the concept is (relatively) straightforward. A blockchain unites all supply chain partners with a distributed ledger of an immutable ‘chain’ of events which contain real-time information pertaining to a product’s journey. Partners participating in this ‘chain’ have the ability to both add their data to the chain as well as view what has already been uploaded by other partners, helping them keep better track of the process and their role within it.
Traditionally, companies have only had access to information about a product's journey after the fact. Working in tandem with key technologies, however, a blockchain can help organizations track every aspect of the product (e.g. volume, location, condition, and even temperature) and can be instantly recorded and uploaded to the blockchain's nodes.
Those technologies include IoT devices, which can inform the blockchain with the help of sensors and self-reporting devices at each step of the product journey (e.g. on a cart, in a factory, in a truck, etc.). Each device is connected to the blockchain with a unique identity, where it uploads real-time information to the blockchain regarding everything from sourcing locations to shipping updates, and product volumes to environmental conditions – information which can keep all partners in a blockchain informed about the product journey every step of the way. The key differentiator here is while the sensors track the movement of the product, help track inventory, and where applicable help with transportation logistics, the blockchain provides a real time view of data integrity(i.e. of the information being provided by such devices or sensors).
Enabling supply chains with IoT and blockchain has many advantages. Consider the following examples:
The strength of a blockchain is also determined by the trustworthiness of its tools. And while IoT sensors and related real-time devices play a critical role in unlocking the aforementioned benefits, their relatively minimal design can raise concerns over their ability to adequately uphold blockchain security.
More specifically, while there are many IoT and blockchain device solutions in the market that are made to uphold high levels of security, the possibility that some manufacturers may leave critical security features on the cutting room floor in order to save costs and simplify their designs is real. For this reason, implementing IoT sensors and related self-reporting devices benefits from a comprehensive IT strategy that includes a robust cybersecurity assessment of the IoT component.
Like all data-driven technologies, users must consider the ‘garbage in, garbage out’ principle; that is, the quality of a digital ledger is intrinsically linked to the security and effectiveness of its controls, protocols, and cyber security measures. In addition, you need to be sure that the technology being used is the right solution to the right problem.
Indeed, the value of blockchain governance cannot be overstated. The risk of uploading fraudulent, corrupt, or inaccurate data will always exist – especially as long as real people are part of the equation. That is why it is critical for blockchain technology to be embedded into supply chains alongside the proper controls and cyber security measures. Using the right technology to solve the problem is critical, including considering which sensors to use, and how to ensure they are not being compromised.
And as more and more industries become wise to the advantages of blockchain and IoT innovations, it is critical to ensure those controls are suitable, monitored, and ready for the challenges ahead.
While the journey to blockchain adoption may seem complex, there has been an explosion of investment and vendor startups that is broadening the scope of choices available to organizations. Organizations need to develop roadmaps and strategies for blockchain that are tied to clear business benefits, as well as a solid vision of the technologies needed to quickly harvest the benefits. Four broad phases of an organization’s blockchain roadmap are: