In May 2016, Don Tapscott published Blockchain Revolution, his 16th book, this one co-written with son Alex. Don, whom I’ve known for over 25 years, has an uncanny knack for identifying The Next Big Thing and explaining it to everybody else through his books, articles, and speeches. Don and Alex have each developed a follow-on blockchain book. Earlier this year, Alex published Financial Services Revolution, while a few weeks ago Don published Supply Chain Revolution, which I will now discuss.
Supply Chain Revolution consists of nine chapters, edited with a foreword by Don. He opens his foreword by noting, “When we first started working on this book, the coronavirus (COVID-19) hadn’t yet made headlines… As I’ve become fond of saying, ‘If you’ve got it, a supply chain brought it to you.’ I suppose that, during these times, I could add, ‘If you can’t get it, a supply chain let you down.’”
Each chapter details how blockchain is revolutionizing a different supply chain, from general use cases like global trade to more specific ones like food traceability and manufacturing. Each was written by some of the world’s top experts on these blockchain applications.
For a few years now, I have argued that supply chain applications will likely emerge as the earliest blockchain killer apps. Given that blockchain first came to light in 2008 as the architecture underpinning bitcoin and other cryptocurrencies, many thought that its killer-apps would be in the financial services industry. That might well be the case in the future, but given its underlying complexity, transforming the global financial ecosystem will take considerable time and investment. Supply chain infrastructures and processes are significantly less complex than those in financial services, healthcare, and other industries, which is why several supply chain use cases have already been brought to market over the past few years.
“The global supply chain is a $50 trillion industry,” wrote Don. “It’s the foundation of commerce and our global economy… Information technology has certainly improved the flow of goods globally over the last decades… But, as the COVID-19 crisis revealed, there is still critical work to do.”
“Today’s supply chains are complex, with various manufacturers creating components of goods that move through trucks, planes, boats, and trains,” he continued. “Too many parties are still coordinating and conducting their transactions through a Byzantine network of computer systems with disparate applications like e-mail, phone, and fax. It is still slow, expensive, and very serial in nature… Consumers and supply-chain players alike struggle to get accurate information.”
Blockchain technologies promise to improve supply chains applications significantly by tracking the life cycle of its components and product; securely protecting the transactions and data moving through the supply chain; and increasing the speed and accuracy of commercial settlements. Blockchains provide an immutable, non-revocable record of all the transactions through the entire supply chain cycle, which will be of great help in the timely resolution of errors and disputes among widespread supply chain partners.
Let me briefly summarize three of the use cases featured in Supply Chain Revolution.
First, I’d like to focus on global trade. “Global trade has grown in complexity and magnitude over millennia, but its processes remain relatively unchanged,” observed the authors of the book’s first chapter. Global trade is now worth more than $18 trillion per year, and its transactions generally involve a variety of institutions spread around the world, including shippers, freight forwarders, ocean carriers, ports and customs authorities. “Each participant in the network of global trade stands to derive unique value from blockchain; however, the most successful implementation and commercialization of platforms will be contingent upon collaboration rather than competition.”
Ninety percent of the goods involved in global trade are handled by the ocean shipping industry. So, not surprisingly, Maersk – the largest container ship and supply chain operator in the world – launched a project in 2017 in partnership with IBM to explore the use of blockchain technologies for transforming cross border supply chains. The Maersk-IBM collaboration led to the development of TradeLens, a blockchain-based platform designed to accelerate the digitization of global trade logistics.
“For Maersk, the problem was not tracking the familiar rectangular shipping containers that sail the world aboard its cargo ships – instead, it was the mountains of paperwork that go with each container,” noted this New York Times article. “Maersk had found that a single container could require stamps and approvals from as many as 30 people, including customs, tax officials and health authorities. While the containers themselves can be loaded on a ship in a matter of minutes, a container can be held up in port for days because a piece of paper goes missing, while the goods inside spoil. The cost of moving and keeping track of all this paperwork often equals the cost of physically moving the container around the world.”
“How can global trade companies best embrace the fast-paced world of blockchain?” asked the chapter’s authors as they offered a few final thoughts. First, start with the problem being addressed, not the technology. “Ultimately, the genuine convergence of business and technology frames of thought will yield the most success.” Second, scale up incrementally. “Acting quickly on the wrong use cases can be demoralizing and can slow down momentum in the long run.” Last but far from least, work with ecosystem partners to develop blockchain solutions. “Collaboration trumps competition, when it comes to blockchain initiatives… Blockchain’s unique selling point is its ability to connect parties; the best solutions will be those that speak to multiple stakeholders’ needs.”
Next, I’d like to discuss the use of blockchain technologies to address the safety of the food supply chain around the world. In 2016, in response to a series of food contamination scandals, Walmart, IBM, and Tsinghua University – a top research university in Beijing – set up a collaboration aimed at using blockchain technologies to track the shipment of foods from their sources. That way, if they detected an outbreak such as E. coli or salmonella in the foods being tracked, they could quickly identify and pull supply off grocery shelves or restaurant menus. The initial pilot focused on the movement of pork from Chinese farms to Chinese stores.
Two years later, Walmart and IBM successfully completed a second pilot in the Americas, which reduced the time it took to track the specific farm in Mexico where a mango was grown from seven days to 2.2 seconds. Following a series of E. coli outbreaks affecting romaine lettuce that sickened hundreds, killed five, and caused grocers and restaurants to throw out every bag until the source was located, Walmart announced that starting in September 2019, it would require all its suppliers of leafy green vegetables to input detailed information about their food into a blockchain database.
The key takeaways from the food traceability use case include: carefully identify the problem warranting a blockchain-based pilot; engage and prepare members of the supply chain; identify the required data; leverage existing processes and information systems; and continue to experiment and learn.
Complex products – cars, airplanes, computers, smartphones – consist of a variety of components, some physical and some digital, often designed and developed by different hardware and software companies around the world. “As organizations start to embrace manufacturing 4.0, the focus shifts to the integration of heterogeneous participants across the manufacturing ecosystem to enable fine-grained and responsive networks of distributed manufacturing activities,” explained the author of the book’s use case on manufacturing 4.0, the final one I’d like to discuss.
“What is missing is a common and trusted platform that facilitates relationships between companies of different sizes across the value chain to build harmonized applications on an ecosystem level,” the chapter’s author noted. “Breaking informational silos, blockchain facilitates the transparent, secure, and controlled exchange of data across organizational boundaries. It could thereby serve as a trusted industry-wide platform for collaborative value-creation activities to orchestrate and manage local or geographically dispersed manufacturing activities.”
Beyond individual complex products, the need for a trusted platform to help orchestrate and manage a wide variety of collaborative activities becomes even more pronounced with the rise of smart connect products that must all work together as an integrated system, whether dealing with homes, factories, hospitals, cities, transportation or farms.
For example, a classic tractor becomes smart as it adds sensors, computing elements, software and other technologies that help it monitor and adapt to its local environment. It morphs into a smart, connected tractor by linking to its product cloud for more advanced capabilities like predictive diagnostics and remote support. It joins a farm equipment system by sharing data and control information to better coordinate with related machines like tillers, planters, and combine harvesters. Finally, the tractor becomes a component of an overall farm management system, that includes not just farm equipment, but also irrigation, seed optimization, and weather data systems.
“I can imagine a supply chain that is a high-metabolic shared network, with a real-time, single version of the truth about the location, quantity, and custody of goods,” wrote Don Tapscott in the book’s foreword. “We could use smart contracts to make smart payments in the network, thereby reducing conflict, human intervention, and legal fees. We could redirect vital medical supplies to hospitals hardest hit. Things themselves could make real-time micropayments as they moved across the network. Costs would be lower.” In conclusion, the supply chain opportunities are immense, and even more important in light of the Covid-19 crisis.