Blockchain excitement continues to mount, and, within the hype, using distributed ledger technology to improve global supply chains remains a key focus for innovators.
Often, that focus emerges in the form of blockchain-based solutions to make B2B payments across borders faster, or to more efficiently manage a mountain of documents that passes between buyers and suppliers.
In a survey conducted by Chain Business Insights last year, more than a third of supply chain professionals said they are already implementing blockchain-based solutions, and a quarter said they are at least familiar with the technology. A major motivation behind the blockchain interest is gaining visibility into the notoriously complex and opaque web of buyers and suppliers linked throughout the world: 80 percent of survey respondents want to use blockchain to track products, and 60 percent want to share information with suppliers.
But Tomaž Levak, co-founder and CEO of OriginTrail — a blockchain-based protocol for supply chains — says the implications of distributed ledger technology reach far beyond sharing information and moving money in this space.
“Generally, decentralized technologies are useful wherever you have a question of trust,” he recently told PYMNTS in an interview. “How can we make exchanges of data between different parties so that we know they can rely on it? That the information has integrity, without the need for a third party or proxy? This has big implications when you start to think about it.”
Among OriginTrail’s focuses include the areas of compliance and corporate responsibility. A lack of visibility throughout the supply chain means companies don’t always know what’s going on with their suppliers’ suppliers, for instance; and while they may not be directly responsible for any illicit or illegal activity, they could certainly be held accountable for it.
That is at the crux of how blockchain can improve supply chain management, Levak said.
“How can you align responsibility with accountability?” he noted. “If you don’t have the data on what’s happening in the supply chain, it’s difficult to achieve.”
It’s not just about the sharing of data: What blockchain supports, he continued, is the ability of parties to trust that the data being shared is accurate, updated and the same for everyone who needs to see it. This certainly has implications for the fundamentals of supply chain management, like payments and document-sharing, said Levak, by identifying the “accepted truth between parties.”
“You could use OriginTrail’s protocol to confirm that a certain business event has taken place,” he said, “and base transaction or insurance or compliance claims off of that exact data.”
A decentralized source of accurate information to confirm, say, product shipment and delivery means faster payments and fewer disputes. But Levak also noted that this concept can be expanded to ensure compliance and corporate responsibility by ensuring everyone in the supply chain knows what everyone else is doing.
“In a decentralized network, everyone knows you’re accountable for what you put in, and you do that confidently, and players can trust the data,” he explained. “There’s no way of tampering it or changing it. Any changes made will be written in the ledger. We’re thinking about the integrity of the data.”
“It’s not just about not being fined,” he said, adding that supply chain visibility can help address issues like criminal activity. “It’s also about optimization when it comes to buyers and suppliers. Often, you only know one step back and one step forward — you know who your suppliers are, but not your suppliers’ suppliers.”
That prevents a lot of optimization from occurring and prevents cost savings, he said.
Supply chain executives recognize the importance of supply chain visibility. Research from Supply Chain Insights, published by Elemica, in 2015 concluded “the performance of an organization today hinges on the effectiveness of flows between and amongst supply chain trading partner,” according to Supply Chain Insights CEO and Co-Founder Lora Cecere in a statement when the report was released.
But while supply chain FinTech has bred an array of solutions for organizations to digitize operations, analysts suggest that many professionals are overwhelmed by the data.
“While companies have made improvements in their supply chains, they still lack the ability to use outside-in data to improve channel sensing and reduce risk,” Cecere stated.
OriginTrail’s Levak is confident blockchain can address that point of friction. The company announced an initial coin offering (ICO) this month as it looks to capitalize on the market’s current interest in blockchain technology. The ICO will launch Monday (Jan. 15) with a crowdsale beginning later in the month. According to Levak, there is a big window of opportunity, but it can quickly close.
“There is a lot of potential that we’re going to see on blockchain in the next couple of months and years,” he said. “There is a lot of excitement, and we have an opportunity to do something more meaningful. But there is a limited time window. Companies are interested in exploration of the power of blockchain.”
For OriginTrail, that means using distributed ledger technology to boost supply chain visibility and, on a broader level, improve business relationships.
“Blockchain changes how you think about brokering trust within supply chains,” he said. “When it comes to how businesses think about trusting other businesses, the visibility factor is a powerful tool.”