There is no doubt that blockchain technology has the powerful potential to improve digital supply chains and global trade management. But how?
That's the question Dan Gardner, VP of Supply Chain for Lakeshore Learning Materials and co-founder of Trade Facilitators, Inc., and Amber Road’s Ty Bordner both answered during Amber Road's recent webinar, Blockchain for Global Supply Chain: Ghost in the Machine or Breakthrough Technology? Of course, blockchain is such a top topic these days that Dan and Ty's introduction sparked a ton of debate, and they were only able to address a fraction of viewers' questions during the hour-long webcast. Luckily, we've compiled their answers to these queries below. See if they've answered some of your biggest questions about how blockchain can be applied to the global supply chain, then watch the webinar on-demand here.
- Question: Although I understand "how" this can work for the Global Supply Chain, what I don't understand is "why" it could be preferable to existing data tracking tools?
- Answer: As we all know, the global supply chain is highly complex, and there are many different types of use cases spanning the process from purchase order to payment. Not all of the processes are appropriate for Distributed Ledger Technology (DLT). The most appropriate use cases would have attributes which lend themselves to the need for absolute trust and exchange of value.
- Q: As a solo exporter, should I adopt this system in my trade financing operations? Can a block of documents be used for satisfying the Letter of Credit (L/C) performance?
- A: The Letter of Credit use case seems to be very compelling for DLT (i.e. Blockchain). There clearly is an exchange of value with a Letter of Credit and many of the terms and conditions of an LC can be automated as part of set of business rules (smart contracts). Of course the information representing the LC and the actual movement of the goods (BoL, Commercial Invoice, Packing List, etc.) must be in a digital form.
- Q: Contracts are confidential, but how does confidentiality/anonymity work in a distributed ledger?
- A: Blockchain (DLT) technology can be implemented in different ways. There is a concept of a public blockchain (Ex. Bitcoin) and a private or permissioned blockchain. In a permissioned blockchain only the parties that have been given privileges will be able to see confidential information.
- Q: Does blockchain identify the chain of custody between sub-tier suppliers?
- A: Blockchain itself doesn’t provide anything. However, using blockchain technology to develop an application which tracks the chain of custody between sub-tier suppliers is an appropriate use case for the technology. In fact, this use case is similar (in some ways) to the tracking of currency within a crypto-currency application (i.e. Bitcoin).
- Q: If a contract for freight, once accepted, is closed (ocean freight costs agreed upon) and can’t be changed, what happens post-arrival, if there are port delays (storage and demurrage), a Customs exam, or detention charges after the empty container is returned? These are regular unforeseen charges and never included in the original freight charge. Do we have to open 2 or 3 or 4 new contracts all for the same shipment in order to pay the supplier and additional contracts in order to collect it from our client (the importer)? We are forwarders and brokers.
- A: The answer to this question is all dependent upon how the blockchain (DLT) application was developed. Presumably, a smart application would take these types of things into consideration and account for them in the software application so that the use of the application was not cumbersome.
- Q: Is Blockchain just related to bitcoin, or all cryptocurrencies? What about Litecoin, SwiftCoin, Ethereum, etc.?
- A: Blockchain or Distributed Ledger Technology is a low-level technology. Software developers can use this low-level infrastructure technology to develop software applications which provide value. As you mention, there are many crypto-currency applications on the market today (and more are being created all the time) each with different attributes, benefits, and detriments. They all use some form of underlying DLT technology. There are also multiple providers of the underlying DLT technology on the market today.
- Q: It sounds like when you say "supply chain," you really only mean the "logistics" piece where blockchain would apply. So is it just about the movement, but not any of the supply chain planning?
- A: So far, most folks have been proposing and developing use cases for the execution part of the supply chain. That is not to say that other ideas could not be constructed that pertained to the planning side of the supply chain.
- Q: What's the advantage of blockchain for a point to point transaction between only two parties?
- A: The idea of leveraging DLT technology to support many use cases within the global supply chain, seems to become more beneficial if there is more complexity and more parties involved. One of the key concepts of using this technology to support the global supply chain has nothing to do with the actual technology itself. It has to do with the need to have the data in digital form and a standard by which that data is communicated. This is a precursor to leveraging the underlying DLT capabilities. Once there is a standard way to collaborate using digital information, value is created. This would be the case with or without blockchain technology. So, if a transaction is very simple – only between two parties – the value created by the Blockchain application may not be great. But, on the other hand, the value of a crypto-currency application is also very simple and is between two parties – and clearly there is value with applications like Bitcoin. In reality though, the individual Bitcoin transactions are between two parties, but the application is tracking the actual Bitcoin for its entire lifetime. Just like the dollar bill in your wallet will be transacted thousands of times.
- Q: Who will be moderating the blockchain, and who will be in charge of servicing and maintenance of the blockchain? Who is in charge of the technology standards?
- A: That is a good question. There are various groups forming who are attempting to define standards for their particular realms. Using the crypto-currency world today as an example, each of the crypto-currencies works in their own little world. However, someone can build a “translator” application that will allow one crypto-currency world to talk to the other crypto-currency world. Presumably, the same sort of thing will happen in the supply chain world.
- Q: Can Blockchain technology be added to warehouse robots?
- A: Yes, warehouse robots could be enabled with blockchain technology.
- Q: What role can robotic process automation play in facilitating the adoption of publishing these global trade documents from existing supply chain and logistics systems?
- A: That is a great question and is key to understand where the actual Blockchain (DLT) technology ends and good old software automation begins. The actual DLT technology coordinates the distribution of information across many different computer systems, provides a mechanism to build consensus across all these system in order to protect against a hack, and creates an immutable stamp (meaning it cannot be modified) of a data record, thereby creating trust. However, creating automation of the activities around a particular realm, such as global trade documentation, is not inherent in blockchain technology. An application must be developed to do these things. For instance, first we must detect what data elements are needed on a particular document for a given country, then we must propagate those data elements from master data if we can, or prompt the user for those data elements if they do not exist in the master data, etc., etc., etc. These are the kind of things that Global Trade Management software vendors (like Amber Road) have been building for many years. The robotic process automation is this kind of automation software which will create value.
- Q: How do you get all parties involved in the supply chain to get onto the MetaBlock and what time/cost is associated with this change?
- A: This is the $64,000 question. In order for anyone to join the blockchain party (almost sounds like a block party), there must be something in it for them. Time will tell.
- Q: Do you know if any organization has already started using Blockchain, or is this all only in ideation stage? Is there a current estimate on the percentage of businesses that utilize blockchain for their supply chain?
- A: Well, clearly the cypto-currency application are up and running. I believe Bitcoin came online around 2011. With regard to blockchain applications in the supply chain, it seems like most of them are piloting solutions right now.
- Q: Big companies like IBM and Microsoft are claiming to provide blockchain service; what criteria would you use to select BaaS provider?
- A: That is a question which can only be answered in the context of the application that was planned to be developed. As with any application or technology, design decisions and tradeoffs are very important.
- Q: What role will Amber Road play in new Blockchain-enabled Trade Networks like the Maersk/IBM JV for Global Trade Digitization?
- A: Amber Road has built a digital model of the global trade supply chain, embodying many of the functions around sourcing, logistics, and trade. Our software uses this robust data model to provide collaboration, automation, and analytics for the global trade supply chain. We believe the digital data which lies within our system will be used by the global supply chain blockchain builders to create additional value. An analogy may be that Amber Road can provide the fuel that will power the global supply chain blockchain applications.
Want to learn more? Watch Amber Road's recent Blockchain for Global Supply Chain webinar on-demand by following the link below. And keep an eye out for the upcoming installments of our blockchain series, as we dive a little deeper into blockchain's potential applications in the realm of global sourcing, transportation management, and more.
This post was published on April 4, 2018 and updated on April 4, 2018.