Supply chains are messy. Blockchain in Supply Chain Can Help.
A manufacturer in China doesn’t read the specs on an order. A supplier in Mexico mixes up two similar parts. An ecommerce fulfillment warehouse in the USA sends the wrong packages to customers. On top of all that, billions if not trillions of dollars worth of potential working capital are tied up in illiquid assets such as 90-day invoice payouts or even the real estate value of, say, a warehouse or factory building.
Why Blockchain will Create Extreme Supply Chain Management Optimization
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The inefficiencies that plague supply chains have seemingly been around forever. Maybe Ethereum could provide a long-needed solution.
2017 was the year that blockchain technology finally made world headlines, but it was mostly for the wrong reason. While Bitcoin’s jaw-dropping rise in value stole the attention, what flew under the radar was the potential application of blockchain in supply chain, the technology underpinning most cryptocurrencies, including Ethereum.
Ethereum shares some common features with Bitcoin, including how it’s mined by computers and codifies unique data that can be used to track everything from transactions to an exchange of goods (more on that below). Otherwise known as a distributed ledger, the automatic recording of data into the blockchain allows for cryptocurrencies such as Ethereum or Bitcoin to serve as way more than just a store of value.
What makes Ethereum different is that it actively encourages software development teams to use its open-source protocol to design tokens that run on top of the Ethereum blockchain. Kind of like how Android and Apple OS serve as the basis for thousands of apps to run on, Ethereum offers the same potential for decentralized applications (more commonly known as dapps) to utilize its programmable digital ledger for not only tracking value, but data as well.
Everything from dentistry to digital advertising is getting disrupted on the Ethereum blockchain. It’s still early days, but there are already two Ethereum-based projects that address some of the major problems that hamper logistics.
Provenance ensures transparency in supply chains, with the aim of encouraging brands to source materials and labor in an ethical and fair trade manner. There’s certainly no shortage of demand for better quality in sourcing: 8 out of 10 British consumers check the origin of their food, while a survey from 2015 found that 72% of Millennials would be willing to pay more for products or services offered by companies committed to positive social and environmental impact. a pair of jeans that didn’t come from a sweatshop, for example.
Companies have known about this data for quite some time, but implementing a trustworthy store of data across multiple networks has always seemed impossible. Blockchain in supply chain changes that. Provenance cites a case study with major British grocer The Co-Op:
“Provenance linked together data from the farm, factory, Co-op depot and retail branches, building a digital history that store colleagues, the food team, and shoppers can all access. Using sell-by dates as unique batch IDs, we matched each product correctly to its corresponding journey.”
The resulting benefits of such a system are threefold and unprecedented:
- Each step in the supply chain registers a “digital handshake” that marks exactly when and where goods change hands. This makes it clear who is liable for products every step of the way.
- The Co-Op can use data from this blockchain tracking system to give customers an accurate, transparent overview of where their broccoli came from and how long it took to get from the farm to the produce section of their local store.
- With multiple, independent operators sharing their data under the Provenance umbrella, it’s easier than ever for resellers and product sourcers such as The Co-Op to know at a glance the weak spots in the chain as well as sort out verifications such as organic certifications.
Making it easier to track shipments and supplies is a huge part of the promise that blockchain holds for supply chain and logistics. Sweetbridge is another Ethereum-based token that not only aims to decentralize supplier networks, but to collateralize illiquid assets to create cash flow.
This is done through Sweetbridge’s Liquidity Protocol. The whitepaper explains it as follows:
“The Liquidity Protocol allows anyone to borrow money against assets they already own without using the services of a lender. It is designed to dramatically decrease the time required for any entity to convert assets, such as accounts receivable, real estate, inventory, equipment, and commodities into cash. Smart contracts enable automated money supply management, implementation of specialized accounting rules, and a variety of pre-programmed behaviors associated with economic tokens. In Sweetbridge’s Liquidity Protocol, token crypto economics replaces banking services while providing access to low-cost liquidity.”
Wrapping Up Blockchain in Supply Chain
Imagine if Apple or another company that sold incredibly sophisticated products were able to free up capital that was previously assumed to be off limits. A flood of liquid cash would be unleashed on the entire field of logistics. Antiquated systems could be updated. R&D departments would be inundated with funding. Ultimately, the repercussions of collateralizing previously illiquid assets with such speed could spill over into the economy at large.
When that happens, Ethereum will probably reach the mythical moon prophesied by that crazy Bitcoin holder five years ago. Even if you don’t have a ticket to the moon, just being a part of the blockchain revolution in the field of logistics will be quite a show.
Editor’s Note: This is a guest article from Jake Rheude. Jake is the Director of Marketing at Red Stag Fulfillment, a fulfillment company for e-commerce retailers and online sellers. In this article, Jake shows 2 Ethereum-based projects that demonstrate how Blockchain in supply chain grants success.