Blockchain in Supply Chain Management: Fact vs. Hype

Graphics representing blockchain technology

With the rise of so-called “crypto-mania” over the past couple of years, “blockchain” has become a major buzzword across industries all of kinds, including the manufacturing and industrial sphere. Many enthusiasts herald blockchain and distributed ledgers as the next step in the evolution of business and industry, citing it as a solution for seemingly every pain point in supply chain management.

While there’s certainly much to gain in trying out new technologies — as IBM is currently doing with Maersk, for instance — it’s also important to take an objective approach and carefully assess how advanced technology and new tools can serve your company’s unique needs. And that includes fully understanding all of the risks, obstacles, and limitations involved.

Blockchain Maturation and Adoption

Perhaps the biggest concern among supply chain management professionals is the lack of technology maturity. Because blockchain implementation in the supply chain is still so new, businesses often run into issues related to adoption.

A classic example of the “network effect,” more and more actors must utilize blockchain technology in order to provide real value. If universal adoption were able to be easily implemented in the supply chain, across every aspect of production, shipping, logistics, and so on, then blockchain would be able to provide substantial benefits over more traditional methods of handling data. But currently, that’s not the case.

Finding Qualified People

As of now, there is limited use of blockchain in the supply chain. For the various benefits to truly be realized, industry leaders will need to rely on near-universal adoption, an end result not likely to be seen anytime soon. Adding to that concern is the cost of acquiring the talent needed to create these systems and properly implement them.

As with artificial intelligence (AI) and machine learning specialists in Silicon Valley, blockchain developers and specialists are difficult to come by. According to estimates from TechCrunch, last year there were 14 job openings available for every one blockchain developer. That’s great to hear if you’re a developer operating in a competitive market, but not so great to hear as a company looking to hire.

Latency Concerns

Last but not least are the issues of timing and network delays. Unlike centralized systems, blockchain applications require confirmations from the network for sharing and recording data. Depending on the specific scenario, a transaction delay can be a dealbreaker for many logistics applications.

Those “mining” on decentralized networks like Bitcoin can validate and add data to a blockchain, but the process can take minutes, sometimes longer. Though waiting 10 minutes to an hour may not be detrimental when sending bitcoin to a friend, many supply chains require accurate, up-to-date information in near-real time.

The Bottom Line

While it’s easy to get lost in the hype surrounding blockchain technology, it’s crucial that businesses carefully evaluate their individual needs and goals before implementing anything or making any major investments. So as enthusiasts continue to tout the advantages of the latest disruptive tech, be sure to keep in mind any potential downsides, risks, and obstacles, and investigate all of your options thoroughly.

 

Image credit: whiteMocca/Shutterstock.com

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