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By Isabelle Badoc
on 27 Oct 2017 10:04 AM

Several months have gone by with the same word on everyone’s lips: blockchain. This information transmission system is creating an unprecedented furor to the point that it could end up transforming company practices. However, the complexity of the tool doesn’t always make for easy understanding. What are the advantages? What are its uses? Is it suitable for all companies? Your questions answered.

 

Blockchain: secured and decentralized operations

What is blockchain?

Blockchain is a transparent and secure technology for storing and transmitting information, which records all transactions between users starting from the time it was created. Its access is shared among these users who verify the validity of transmitted data. Blockchain is highly valued for its ability to make asset transfers (currency, shares, etc.) as well as to automatically execute contracts (smart contracts).

There are two types of blockchains: public blockchains, which are open to everyone, and private blockchains, which can only be used by authorized users.

 

How do blockchains work?

This technology relies on three principles:

For each transaction, the user must enter a key in order to record the transaction data. This data is encrypted and grouped into "blocks", then submitted for validation by the different network nodes. This step makes it possible to confirm, among others, the identity of the parties and the viability of transactions.

Eventually, the record is duplicated on all network servers. Thus, it becomes impossible to alter a blockchain or the content of a block without authorization from all connected computers.

 

What business advantages do blockchains bring?

Blockchains benefit the supply chain sector in various ways, most notably by:

1. Automating the purchase process

With blockchains, automatic contracts (smart contracts) can be set up. Once the conditions agreed upon by the users are met, these smart contracts automatically execute their terms– service payment, shipment authorization, etc.

2. Improving transaction flow

Validation times for transactions between providers and clients (contracts, signatures, orders, payments, etc.) are drastically reduced. Result: virtually real-time management of flows and relationships with business partners.

3. Securing the supply chain

Attributing a tag to each product recorded in a blockchain enables you to secure your supply chain in the blink of an eye. Origin, place of storage, authenticity, property certificates, records: all the necessary information is in a single ledger!

4. Ensuring integral traceability

Blockchains ensure the traceability of flows and goods by recording all transactions made by users. These records are indestructible and constitute a tamper-proof evidence that guarantees the integrity of information.

5. Being more reactive

Blockchains can help you detect fraud by identifying problems from the very start of the transaction (inconsistencies with validation, suspicious identity of a party, etc.). In the event of product recovery, an alert is instantly sent.

6. Streamlining internal documents

The validity of information shared among partners prevents the creation of multiple versions of a document. Each party involved in the transaction thus has access to the same data.

 

Read also: What if the future of Supply Chain lied in a platform-enabled ecosystem?
 

What is the future of blockchain in the logistics sector?

Blockchains carry numerous benefits for the supply chain sector. For example, physical actions in warehouses can be recorded in a blockchain in the form of digital information, and multiple operations, such as payments and orders, etc., can be automatically orchestrated.

That is why the food retail giant Walmart conducted tests in 2016. Aim: to use a blockchain to follow the trajectory of Mexican mangos and Chinese pork and assess their traceability. And the results live up to expectations: the time needed to retrace the origin of products went down from a few days to a few minutes!

 

On the same topic: Blockchain: what uses for the food Supply Chain?

 

However, this technology still needs to undergo some improvements to bring it more closely in line with supply chain practices. For now, it is not possible to handle data from large infrastructures which needs to be processed by the millisecond. Only single or double-digit transactions can be processed per second by the blocks in a blockchain, but these results may be improved thanks to the ongoing efforts of experts in the sector. As proof, last August, nine multinational food retailers, including Walmart, came together to work with IBM on developing a blockchain dedicated to their activity.

 

Although blockchains alone will not be able to tackle all the challenges of the supply chain and logistics, they will contribute to securing transactions, fighting fraud and limiting errors. The formula hasn’t yet reached its full potential, but technical developments are on their way to make its application in logistics easier. Stay tuned for further developments!

Image credit : Unsplash – Markus Spiske

Isabelle Badoc

Expert in Supply Chain, Warehouse Management, Transport Management, e-commerce Logistics …