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IBM Readies For Blockchain Disruption Of Supply Chains

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IBM has been an aggressive and confident investor in blockchain technology. Late last year the firm launched a blockchain ecosystem for innovators in an effort to accelerate and promote the exploration of blockchain technology, which IBM said had the potential to disrupt industries of all types.

It was only the latest sign of support for distributed ledger, with IBM announcing more than a year ago that it would begin in-house testing of blockchain-based solutions. Since then, the progress of the technology has accelerated out of hypotheticals and into proof-of-concepts and, in some cases, working solutions.

Ramesh Gopinath, VP of blockchain solutions and research at IBM, recently told PYMNTS that that acceleration has actually been much faster than he originally anticipated. He pointed to a survey IBM conducted last year in which 65 percent of respondents said they believe major global banks will be using blockchain technology within just three years, with 14 percent looking to implement blockchain-based commercial products by 2017.

Gopinath said he thought the statistics were a bit “aggressive.”

“But now I’m thinking, maybe I was too conservative,” he said, looking back on the data. “Things are happening much faster than I thought.”

The broadest adopters of blockchain so far have been within the financial services industry, he added. But the area of supply chain also shows significant potential.

The supply is exactly where IBM has hit with its latest blockchain-related news. Earlier this week the company revealed a collaboration with financial services firm Natixis and logistics company Trafigura to develop blockchain-based solutions in the supply chain management space.

Gopinath and IBM aren’t the first to look to look at the supply chain when exploring how blockchain could disrupt various markets. Last year blockchain FinTech Fluent launched the Fluent Network, which deploys distributed ledger technology for cross-border B2B trade for banks to manage payments and invoicing. Earlier this year members of the logistics industry launched a new consortium to explore how blockchain may address pain points of their industry.

There certainly are a wide array of ways blockchain may be able to impact the way supply chains are managed, acknowledged Gopinath. It could be through document management, for instance. Not only can blockchain support the transfer of smart contracts, but, he explained, it could also provide proof of documentation without data actually being stored on the blockchain. The technology can also facilitate supplier, trade and supply chain financing across borders.

Considering how varied its potential to disrupt the supply chain is, blockchain may need a bit of focus. According to Gopinath, there are three distinct clusters of the supply chain management space that experience friction and that may be able to benefit from blockchain: the transfer of goods, the flow of information and the flow of money. Use cases will fall into one of these three categories, whether they be supply chain financing (flow of money), the digitization of letters of trade credit (flow of information) or enabling members of the supply chain to gain greater visibility into where the goods in transit actually are and in what condition they exist (transfer of goods).

IBM’s collaborations with Natixis and Trafigura will first be targeting the U.S. crude oil industry, a sector the company said has been plagued by traditional, manual processes and paper.

“Processes in the energy and commodities trade business are ripe for improvement,” said IBM’s vice president, blockchain markets and engagements James Wallis, in a statement announcing the partnerships. “The approach we are taking … has the potential to transform the crude oil industry by creating consistency in trade financing and by digitizing transactions and information sharing.”

While it may be one focus of IBM’s for now (Gopinath said IBM is planning  for a working solution for the U.S. oil industry to be out later this year), the executive also said this type of supply chain disruption could hit any industry.

He offered the example of a spinach recall, which, in the U.S., often ends in widespread efforts to pull the green off store shelves across the entire country, even when just a single batch from a single supplier was affected. Blockchain could, for instance, enable the supply chain to pinpoint exactly where spinach has been and where it’s going to more strategically handle a recall, he said.

In theory, any industry in which two businesses are working together could benefit from blockchain-based supply chain disruption.

“There are clear pain point clusters we can go after with the blockchain,” he said. “Blockchain is about trust in business transactions. Every industry could potentially benefit when multiple parties interact.”

Considering the pace of innovation and creation of actual blockchain-based products, that theory could soon be reality.

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