Chain gang: how blockchain can help supply chains

Blockchain was heralded as a supply-chain game changer when it first came to prominence. As with all hyped technologies, it had as many detractors as supporters, and several notable failures did little to help adoption. Now though, could it be that it is finally reaching mainstream acceptance and starting to deliver on its promise?

Global supply chains are struggling. A unique combination of sudden phenomena (from mega-ships getting stuck in major transport arteries to global pandemics closing ports, hampering workforces and changing shopping habits) and longstanding underlying issues have conspired to expose a system that no longer works.

Can it be fixed? Just as there is no single root cause of the disruption we have seen over the last few months, so there is no single answer. Vaccination programs may ensure that workforce productivity is not hamstrung by COVID outbreaks to the same degree as it was in the early days of the pandemic. The fear of another Ever Given getting stuck in the Suez Canal could mean that contingency plans are more developed. A shift from Just-In-Time to Just-In-Case logistics models could build resilience and a greater degree of tolerance into supply chains.

While these may have an impact in the short term, they do little to fix some of the fundamental issues that cause ongoing challenges, such as a lack of interoperability, poor transparency and mutual distrust between suppliers and partners. As economist and author Marc Levinson pointed out in a Wired article, the inability to know where anything is exacerbates the broader issues. “There’s no real-time traceability of most shipments moving through the freight system. That’s why things are scattered to the four winds, and things have gone missing.”

Blockchain and the supply chain

This is why many feel that blockchain is the solution to some of these challenges. Each of the records (or blocks) in the chain holds data relating to the transaction in question, as well as a timestamp (to show when the record was created or edited) and key to the previous block. This makes it hard to edit a block without changing the entire chain; what’s more, any changes are clear for all to see. It all sits on a decentralized network of computers, with no single point of failure. The promise of immutability and data provenance has led many to see it as a way of improving visibility across the entire supply chain, with transparency on when a transaction was recorded and if data has been altered in any way.

While this led to a degree of hype and some notable instances of new businesses making bold claims before failing, the last couple of years have seen a gradual integration of blockchain into various parts of the supply chain.

For example, bills of lading (BoL) are central to the ownership of cargo, yet despite years of digitalization, physical BoLs are still required at various points of a journey, as no suitable digital version has been created yet. This requires different parties to courier or otherwise dispatch the actual paperwork as the cargo reaches each stage in its journey. A delay with a courier or delivery service can mean a delay in shipments being released.

However, an electronic BoL based on blockchain would solve this. Relevant parties would have access to the blockchain and would be able to review the documentation as required. Ownership of the digital file would be transferred as the relevant conditions were met (such as cargo arriving at a port), with access available to give authorities sight of the BoL as necessary. As well as being faster, it would be more secure, with no concerns regarding paperwork becoming lost or delayed.

Shipping line MSC, for example, recently introduced an electronic bill of lading (BoL) based on WAVE BL’s blockchain platform, becoming the second carrier, after ZIM, to introduce the service.

Or there’s verified gross mass (VGM) documentation. Container weights need to be captured and shared so that they can be properly loaded and transported, yet with manual data input, common errors often occur. A blockchain-based VGM would allow for data to be captured at a weigh point and then shared with the relevant haulers and carriers throughout the supply chain with the information verified and any edits available for all to see.

Elsewhere, one of the major blockchain platforms – the Maersk/IBM venture TradeLens – currently lists more than 350 organizations as part of its ecosystem, from some of the world’s leading ocean carriers to ports, custom authorities and intermodal operators. It handles more than 700 million events and six million documents per year, with a Sri Lankan tea exporter and a Greek port among the most recent companies to sign up to the platform.

Another organization, the Global Shipping Business Network (GSBN) has also started deploying more connected solutions, with its first, Cargo Release, rolled out in China early in 2021. The system aims at simplifying data exchange and reducing operation time for all parties involved in shipments, providing updates in real-time to cut the time it takes for cargo to be released.

When established players become the disruptors

This presents a contrast: we have start-ups struggling, while the more established players make some headway. This runs counter to what happens in other industries, where new digital entrants disrupt the old order, leaving legacy players to either follow their lead or struggle to compete.

There are several reasons for this. First, the interconnected nature of supply chains. Even the simplest of networks require the involvement of multiple parties. Successfully changing any element, whether automating workflows or transforming how companies interact, is dependent on getting buy-in from multiple entities. They often see themselves as competitors of one another, even as they work together.

Second, while supply chains as a whole have been digitizing as much as the rest of the world, large parts of the logistic network are more conservative in their approach. Although major players are undergoing their own digital transformations, many small but vital parts of the chain continue to rely on manual paper processes.

Reaching new levels of maturity

As with all new technologies, blockchain has had to deal with both immense excitement at its potential and significant skepticism about its actual value. However, as that initial burst of passion tempers, the true value of practical applications starts to shine through. We are only at the beginning of blockchain’s implementation, but as the results of various initiatives demonstrate, it can have a significant impact.

Blockchain technology is just one part of the digitalization of the supply chain. To find out how suppliers, manufacturers, transport hubs and logistics firms can develop and deploy supply chains that meet the needs of customers today, take a look at our report: Real-time intelligence and the future of supply chains.

Josh Turner
Josh Turner

I am a technology writer with a decade of experience in business, technology and logistics. From starting off my career writing questions for a TV quiz show, I’m now spending my time looking at how the world of business is going digital and transforming a variety of sectors and industries.