How Blockchain Will Change Global Commerce
Blockchain is the buzzword of the moment; most people with an eye on technology know about — and maybe even understand — cryptocurrencies and smart contracts. But blockchain’s decentralized, trustless, and intermediary-free structure promises to do much more — and soon. In fact, we’re on the verge of a new blockchain: the smart supply chain.
It may not be as sexy as a new currency, but logistical networks and supply chains govern our economies (to the tune of nearly $70 trillion annually). And, perhaps because of its complexity, little has disrupted the sector for decades, even as technology has transformed industries around it — and made the supply chain even more byzantine.
Now blockchain, together with advances in artificial intelligence (AI), additive manufacturing, and connectivity through the Internet of Things (IoT), has the potential to create collaborative, efficient, transparent supply chains that make supply and demand more responsive, less prone to error, autonomous and self-improving. This is a supply chain that wields the razor-edge of technology rather than the blunt force of redundancy.
It’s a field ripe for collaboration between legacy corporations — with their reams of data and large-scale supply chains — and entrepreneurs (many of whom call Newlab home) offering agile, innovative technology solutions. As John Fitch, who leads supply-chain automation at Animal Ventures, puts it, “The entrepreneurs receive industry knowledge and reality checks from the legacy corporations and the legacy corporations receive the art of the possible from the entrepreneurs.” In light of these emerging opportunities, Newlab and Animal Ventures have begun a joint venture to help major corporations (in pharma and global logistics) use blockchain applications to rethink their approach to supply chains.
Both groups already have a legacy of bringing some of the most brilliant minds to the table around blockchain. Newlab’s member community features companies developing cutting edge applications for the technology in a range of fields. And last year, Tom Serres and Bettina Warburg, Animal Ventures co-founders and managing partners, joined Alex and Don Tapscott of the Blockchain Research Initiative to consider a future in which blockchain, AI, and Industrial IoT create a new kind of intelligent supply chain (their term of art: “asset chains”). As Serres wrote in announcing the collaboration, “By changing supply chains at their very core, we can then grow them into useful ‘asset chains,’ which will be able to drive the life cycle of a product with greater transparency and efficiency.”
This vision of autonomous, cognitive supply chains directing the transport of goods across the planet may be years in the future, but essential first steps are already being taken to integrate blockchain into corporate supply chains. “I believe it is similar to the field of AI,” says Fitch. “Right now the solid projects with impact involve effective, narrow AI. These early narrow solutions provide a domino effect for tackling other use cases that become stronger when connected together.”
In terms of blockchain, Fitch says, “I think it is good for supply-chain leaders to ask themselves, ‘Due to the technical and data constraints of today, what narrow problem can we address and does that potential solution act as an essential foundation to continue product growth?’” He adds, “I see preventative maintenance (a machine ordering its own part based on usage thresholds) and product safety compliance (validating material or the serialization of a product at moment of import) as two areas ready to be tackled by any industry.”
Where are the next major opportunities for blockchain in this sector?
Hardware integration: Redundancy and security around devices, tracking capability, and powerful networks will be essential in creating blockchain-enabled supply chains. Blockchain’s decentralized ledger, for instance, can track the movement of a box of coffee across the globe — but how do you verify that the box at its origin was filled with the correct goods?
Developing next-generation sensors, microchips, and nanotechnology will be key to feeding accurate data into the blockchain.
Real-time tracking: As hardware evolves, the ability to see what and how much of any given commodity exists in the supply chain will radically transform how those supply chains work. “There is a lot of latency in sourcing and payments within supply-chain networks, and a lot of these functions could be automated through decentralized applications,” Fitch notes. “The more granular visibility on supply-chain assets, the more latency that will be identified and eliminated.”
Integrated regulation: Global commerce requires collaboration, compliance, and redundancy checks with multiple foreign governments; managing the paper trail can add weeks to the process of bringing a commodity from origin to point of sale. With the shared network of blockchain, governments and corporations have the opportunity to create automated import testing and compliance auditing.
Collaborative industry-wide solutions: Blockchain’s decentralized, transparent ledger system allows for innovation across entire supply chains, allowing far greater efficiencies than any single company could create. And corporations that innovate now by incorporating blockchain into their supply chain will shape the future of supply and demand across their entire vertical.
Of course, that very decentralization may be the most challenging aspect of integrating blockchain across a global system. “Change is a constant but it can be hard for some people to embrace — especially something as radical as decentralizing a supply chain,” Fitch notes. “There are a lot of information silos in today’s supply chains, and I assume a few parties extract a lot of value from them and don’t want that to change. But I am optimistic due to Animal Ventures’ research on the future of supply chains and that shared states of truth lead to much larger value exchange across supply-chain partners.”
“It’s an amazing time for blockchain, a brief moment in which the possibilities for this technology seem nearly endless and are advancing rapidly,” says Newlab co-founder and CEO David Belt. For corporate supply chains, blockchain innovation applied today has transformative potential for tomorrow. At Newlab, we are shaping the conversation between the visionary thinkers and technologists who are building that potential and the corporations whose supply chains will feel its impact the most.
If you would like to learn more about blockchain, its application to the supply chain, and how it might benefit your business contact us.