Since its inception in 2008, the technology behind the world’s most famous cryptocurrency, bitcoin, has stood on the edge, attracting attention mostly from start-ups and the financial services sector. However, it has recently begun to receive a lot of attention, as companies are gradually realizing that it can be valuable for many things other than tracking payments.
Simply put, a blockchain is a distributed register that sorts transactions into blocks. Each block is connected to the previous one, using complex mathematics, until the first transaction. The records are permanent, transparent and searchable, which allows community members to see the history of transactions in their entirety. Each update is a new “block” added to the end of the “chain” – a structure that makes it difficult for anyone to change records at a later stage. The register allows information to be recorded and shared between large groups of unrelated companies, and all members must collectively validate all updates – which is in everyone’s interest.
To date, a lot of attention and money has been spent on financial applications for the technology. However, an equally promising test case is with global supply chain links, whose complexity and diversity of interests pose precisely the types of challenges that this technology seeks to address.
A simple application of the blockchain paradigm to the supply chain can be to record the transfer of goods in the book, as transactions will identify the parties involved, as well as the price, date, location, quality and condition of the product and any other information that would be relevant to supply chain management. The cryptography-based and unchanging nature of transactions would make it almost impossible to compromise the book.
Many startups and corporations are now deploying blockchain to rediscover their global supply chain and manage their business more efficiently:
1. For Maersk, the world’s largest shipping company, the challenge is not to keep track of the familiar rectangular shipping containers that sail around the world on board cargo ships. Instead, he surrounds the mountains with documents related to each container. One container may require stamps and approvals from up to 30 countries, including customs, tax and health authorities, distributed in 200 or more interactions. While the containers can be loaded on a ship in minutes, the container can be kept in port for days because a piece of paper is missing while the goods inside spoil. The cost of moving and tracking all of this documentation is often equal to the cost of physically moving the container around the world. The system is also fraught with fraud, as a valuable bill of lading can be forged or copied, allowing criminals to suck up goods or distribute counterfeit products, leading to billions of dollars in maritime fraud each year.
Last summer, Maersk sought cooperation from customs authorities, freight forwarders and manufacturers who fill containers. It has begun its first trials on a new digital register of ships with these partners for delivery routes between Rotterdam and Newark. After signing the document, the customs authorities could immediately upload a digitally signed copy so that everyone else involved – including Maersk himself and other government bodies – could see that it was complete. If there was a dispute later, anyone could go back to the record and be sure that no one had changed it in the meantime. Included cryptography also makes it difficult to falsify virtual signatures.
The second test tracks all documentation related to a flower container moving from the port of Mombasa, Kenya, to Rotterdam, the Netherlands. As both attempts went well, Maersk followed up on containers of Colombian pineapples and mandarin oranges from California.
2. Like most retailers, Wal-Mart struggles to identify and eliminate the food that needs to be withdrawn. When a customer becomes ill, it can take weeks to identify the product, shipment and seller. To remedy this, she announced last year that she would start using a blockchain to record and register the origin of produce – important data from a receipt, including suppliers, details of how and where the food was grown and who inspected it. The database extends the information from the pallet to the individual package.
This allows him to immediately detect where a contaminated product comes from in a matter of minutes versus days, as well as capture other important attributes to make an informed decision about the flow of food.
Wal-Mart has already completed two pilot programs – moving pork from Chinese farms to Chinese stores and production from Latin America to the United States – and is now confident that the finished version can be compiled in a few years.
3. BHP relies on suppliers at almost every stage of the extraction process, concluding contracts with geologists and shipping companies to collect samples and conduct analyzes that lead to business solutions involving multiple countries spread across continents. These providers typically monitor samples and analyzes of rocks and liquids with emails and spreadsheets. A lost file can cause big and expensive headaches, as samples help the company decide where to drill new wells.
BHP’s solution, which launched this year, is to use a blockchain to record the movements of rock and fluid drilling samples and better provide real-time data generated during delivery. Decentralized file storage, multi-party data collection and consistency, as well as instant access are all aspects that will improve its supply chain.
BHP now requires its providers to use a live data collection application – with a dashboard and options for what to do that are very simple for their respective jobs. A sampling technician can attach data such as collection time, a laboratory researcher can add reports and everything will be immediately visible to anyone who has access. No more lost samples or frantic messages. Although some elements of the process are the same, the new system is expected to boost internal efficiency while allowing BHP to work more effectively with its partners.
So far, most first-time blockchains run parallel to the company’s current systems – often older databases or spreadsheets such as Microsoft’s Excel. The most difficult part will be creating new business models. Implementing a blockchain throughout the enterprise means that companies will often have to eliminate their existing business processes and start from scratch. An effort not for people with weak hearts.