By John Monarch
Editor’s note: Written by John Monarch is the CEO and co-founder of ShipChain. This is one in a series of periodic guest columns by industry thought leaders.
The cost to develop or participate in blockchain projects can be significant, but the buzz and interest over real-world blockchain solutions in the supply chain are growing. Is it worth it for your supply chain to jump on the bandwagon?
The evolution of blockchain goes back to the need for secure communications through the internet. As the internet grew to become a primary sales funnel, the risk of cyberattacks grew more prominent. There will always be hackers, so it is up to each company to ensure proper encryption of information to protect others. Even in non-malicious instances, users have the ability to edit or delete data after the fact. This creates a problem, and blockchain has the potential to solve it.
Blockchain in its simplest form is a ledger-based system that allows data entry in “blocks” that facilitates the process of recording transactions and tracking assets in a business network, according to Manav Gupta, an IBM cloud-computing expert and author of “Blockchain for Dummies.” Data, or blocks, are preserved forever, making it impossible to manipulate by faking documents, transactions and other information.
The possibilities for blockchain technology have generated significant interest in global industries. For example, e-commerce application of blockchain could track the entire manufacturing and logistics processes associated with a product. This would ensure that customers get what they order. It can provide peace of mind for resellers who want to reduce the risk of counterfeit products being purchased from business-to-business partners and suppliers.
Another potential for blockchain in logistics is tracking shipments. Blockchain technology could eliminate tracking issues. Industry stakeholders, as well as customers, would benefit from improvements to efficiency, transparency, accuracy and timeliness of activities.
Blockchain is essentially the digitalization of the supply chain. For instance, smart contracts in shipping could self-execute functions, maintain compliance among supply chain partners and eliminate the need for siloed databases that are kept apart from other systems. Essentially, the data would be isolated and inaccessible by other systems. As a result, it might be difficult to retrieve data and share it with other supply chain partners.
Blockchain-based technology could also offer faster processing times and real-time updates. These processes may take weeks by mail, and with cybersecurity under the microscope, existing systems may not be capable of offering faster processing without sacrificing security. This is where blockchain’s value becomes evident.
Anyone with the necessary access key for a blockchain could access information within the blockchain. However, each key builds off another participant’s key, and vice versa. As a result, everyone within the blockchain builds transparency by sharing information and validating it in nanoseconds.
But a critical concern in participating in or building a blockchain in the supply chain revolves around whether the technology is going to be the end-all solution to existing problems. It is essential to understand that blockchain alone only provides end-to-end visibility. Without a proper connection to other supply chain systems and use by all parties in the supply chain, its value diminishes.
Expect to see a pushback to blockchain. One of the critical concerns will be how blockchain compares to the technology of today. Existing systems, including cloud-based platforms and the Internet of Things provide increased visibility, even end-to-end visibility in some cases, but end-to-end visibility with today’s systems could still benefit from the use of blockchain technology.
Browser-based networks of today possess 75 percent of the capabilities of blockchain. The sole distinction lies in how blockchain encrypts data and prevents it from being changed afterward. A single data breach undermines consumer confidence in a company, threatens intellectual property, puts team members at risk, creates potential compliance violations and may contribute to severe consequences within specific supply chains.
Expect to see a pushback to blockchain. One of the critical concerns will be how blockchain compares to the technology of today.
For example, a data breach in a pharmaceutical company could put the protected health information of millions of patients at risk. The weakest link in any existing system will be put to the test in 2019 as hackers continue to work on ways to penetrate the strongest firewalls. Meanwhile, blockchain is penetration-proof as it leverages a random code to encrypt information. Therefore, there is nothing to decrypt, as information cannot be altered once entered.
It is not just single companies at risk. A single breach within any of your supply chain partners could lead to the breach of data within your company. The risk is too significant to ignore. While best practices to enhance cybersecurity continue to evolve, the simplest and easiest way will be to take the blockchain-based route.
Blockchain is the natural progression of digital transformation in the supply chain. It eliminates uncertainty in handling businesses processes, increases cybersecurity and lends itself to end-to-end visibility. Moreover, integrating blockchain with existing platforms will further empower your organization to handle the demands of tomorrow’s consumers.
Is the cost to build or participate in a blockchain project worth it? You bet.
Editor’s note: John Monarch is the CEO and co-founder of ShipChain, a blockchain startup focused on the freight and logistics industry.