The COVID-19 pandemic has laid bare shortcomings in how products and services change during a time of crisis. Our supply chains are stressed during human-centered events and can struggle to adapt. To make our global supply chains more resilient in the face of unexpected events, buyers and sellers need to rethink their approach in anticipation of future events. Blockchain networks could be the answer. But the technology is still in its infancy. Considering how much our society has changed because of COVID-19, I met with IBM and Hyperledger executives about blockchain’s potential to create a better supply system.
What is wrong with the system we have?
A supply chain is the sum of all participants in the production process from raw materials through refinement, design, manufacture, and transportation for all sorts of products. There is a chain of events that contribute to the availability of the things we buy. They seem straight forward, but the larger an organization becomes, then the more complex these steps become.
Any break in the chain can stop the flow to our retail stores. Indeed, with our current lifestyle altered by COVID-19, we can see firsthand, some products considered essential are not readily available. A popular example is a shortage of toilet paper. Why can’t large retailers stock enough to meet demand? Why are shelves sometimes empty or supplies limited? The answer is a combination of a surge in demand and due to retailers’ interruption of shipments, from local suppliers or potentially from other countries, like China or India.
But the break in our supply can include more than toilet paper. How we allocate and move hospital equipment or people to emergency areas is also a supply chain problem.
The information supply chain can also impact how health care professionals and scientists understand the spread of the problem. Data is gathered, tallied, and reconciled among databases and systems that help us study changes and responses to COVID-19. But data processing can produce errors and inconsistencies, which need to be reconciled between source systems. A break in any chain can limit the ability to move goods and services because of a lack of data visibility. In other words, where are the things we need?
Each chain is different. Pharmaceutical supply management is different from the supply chain for food. Each industry has its own regulations and standards; some are similar and some unique. Within each supply chain there are many different standards, ranging from global positioning requirements to what software a database uses.
One expert source, Mr. Irfan Khan, explains three supply weakness, in a past Forbes article, from April 2019:
· Modern supply chains are reactive and not proactive – i.e., market shocks cannot be predicted and adapting to changes is difficult for our current supply system.
· Modern supply chains lack visibility – i.e., where goods are in transit. This is a problematic variable for inventory managers.
· In general, modern supply chains lack accountability – i.e., supply chain disruption can lack consequences for error (this includes everything from theft to destination mistakes). Many companies have teams of staff dedicated to mitigating this risk.
What can blockchain do to improve the supply chain?
Blockchain technology could create more proactive and more reliable supply chains because the technology gives its users not only a high degree of data visibility but also a belief in transaction accuracy. Blockchain networks, like the examples presented in this article, allow each transaction to be recorded on a system, public or private, and reconciled by each participant’s node on its network. Each transaction is recorded and is confirmed by the participants of that network. This network confirmation is what we mean by supply chain transparency.
This kind of innovation can change how we manage fraud and theft, reduce supply chain costs, shorten transaction times, send payments and improve identity affirmation, among other benefits. But for the scope of this article, we will focus solely on how blockchain can improve reaction and management during extreme circumstances, like COVID-19.
Jerry Cuomo, IBM’s Vice President of Blockchain Technologies, said, “Blockchain is currently being recruited to help support coronavirus relief efforts. Hospitals, emergency workers, governments and suppliers have a huge amount of information to share during this crisis: from the status of people’s health, to the availability of drugs. A typical database can be used to store this data, but anyone who has watched the news recently knows that information changes quickly during a pandemic. With a database updated by a single administrator, there is a chance for lag between updates or human error. There will always be some reason to doubt whether the information is up-to-date and accurate.”
It is this commitment to transparency and data accuracy that could make a critical difference. A distributed ledger, which we commonly refer to in this article as a blockchain, creates data trust between suppliers, systems, procurement managers, and buyers while maintaining transaction privacy.
Mr. Cuomo went on, “in a crisis with so many variables that extra commitment to accuracy means that professionals can spend less time worrying about their data and more time strategizing about how to apply it to the problem at hand.” And goes on to say, “Perhaps it is for those reasons that the U.S. Department of Homeland Security recently designated blockchain managers among the nation’s essential and critical infrastructure workers.”
Given recent events with COVID-19 changes to daily life, blockchain networks could potentially help move goods faster because alternative suppliers could be identified and brought on board more quickly than today. With better insight into vendors and product inventory during a disruption, many buyers could identify where suppliers are sending products to reallocate to new sources and redirect shipments where they are needed most. Imagine a network where individuals can be identified, their health care credentials verified, across multiple organizations, and allocated around the country through a medical availability network more comprehensive than we have possible today in almost real-time.
IBM sees blockchain as an innovation that, during a crisis, can speed aid to areas that need help recovering. Mr. Coumo said, “The process of getting aid to those who need it most in any disaster is complicated by mountains of paperwork and duplicative processes. In the effort to speed the flow of aid such as unemployment benefits, vaccines, food and housing subsidies, blockchain technology could create a single source of information that could be shared among multiple national, state and local agencies to help in recovery efforts. Blockchain technology could even be used to address the broader recovery efforts needed to address the pandemic.”
Distributed ledger technology (DLT) was always a natural fit for supply chain innovation, where establishing trust and a single source of information has proved elusive in a complex, global system. But only recently have blockchain solutions gained traction. Early adopters’ belief is that blockchain can help the global supply chain become more reliable by providing greater transparency and accountability.
Big Blue’s Blockchain is poised for expansion, but will they come, even after COVID-19?
IBM has been an early adopter in enterprise blockchain technology. They have invested in different supply networks ranging from the exchange of goods to the exchange of data and services. Given the nascent lifespan of blockchain networks, they have developed experience in this space and are on the second generation of their technology platform.
Describing the breadth of IBM’s leadership and experimentation in this space is no small task. IBM has been working with more than 200 production blockchain networks across industries. There have been even more pilots and project to get to this point. IBM’s new CEO Arvind Krishna has also been a supporter of the technology, signaling a continued effort in this space.
Some believe that blockchain innovations, like the new businesses developed by IBM, have yet to live up to their promise. Many corporations have been slow to implement this kind of solution.
IBM took an unusual approach by investing in blockchain ecosystems explicitly designed to solve existing industry-wide problems. They hoped that solving bigger problems would lead to a network effect that ultimately could help entire industries modernize and transform.
Maybe the adoption of DLT networks has been slow, but large companies seem to be experimenting more often. It appears to show that IBM’s efforts in this space is helping to drive momentum.
Three notable examples are IBM’s Food Trust, supporting food supply visibility; TradeLens, a joint project with Maersk, supporting the shipping and logistics supply chain; and the Trust Your Supplier (TYS) Network, designed to help improve supplier management. Each of these networks represents a growing user base.
More importantly, they are open for business. More than a proof-of-concept, these networks could be taken more seriously by a broader set of customers after the experience of COVID-19.
The Trust Your Supplier network (TYS), launched just in August 2019, has about 1,000 active suppliers participating. Major corporations like Anheuser-Busch InBev, Cisco GlaxoSmithKline, Lenovo, Nokia, Schneider Electric and Vodafone are on the network and 25 other major corporate buyers will be announced later this year. The companies are collectively using it to solve common pain points around supplier discovery, validation and client onboarding.
Another blockchain supply business is IBM Food Trust. Used by more than 200 organizations, it tracks and records food ingredients as they travel from the farm to the store. Walmart is using FoodTrust to support its food traceability Initiative. IBM Food Trust, which is now generally available for the food sector, has completed 18 million transactions representing 17,000 products on its blockchain. Nearly 6 million packaged food products on store shelves and 500,000 product traces have been completed.
Mark Treshock, Global Blockchain Solutions Leader for IBM who focuses on healthcare and the life science industry, explained why growth has initially been slow for blockchain initiatives, “It’s hard to create networks where competitors seek to collaborate,” And goes on to explain, “Companies in any sector need to see the benefit of sharing information.”
Mr. Treshock believes that in the future, building utility networks designed to address many issues across an industry can help make proactive supply networks. “We are making progress not only by building better technology but by building purpose-driven blockchain ecosystems that solve common challenges for all the network participants – be it traceability of leafy greens, ethical sourcing of cobalt, to enabling banks to speed up offering trade finance to qualified organizations – and doing so with an agreed-upon method or standards for governing the network and how information is shared.”
It will be interesting to see how blockchain evolves after COVID-19. If we expect future events to have the same potential as what we have seen in March and now April, blockchain led solutions could offer a more resilient supply system, that in combination with cloud technology and robotics and other innovations, can address the issues cited in this article.
The information for this article was provided by a collection of sources, corporate and independent. Not all participants were quoted. IBM executives provided background on their contributions. The corporations of Nokia and Walmart offered their thoughts on blockchain adoption in supply chain management. Steve Rogers, IBM Vice President for Supply Chains, and Mark Treshock, Global Blockchain Solutions Leader for Healthcare and Life Sciences, were interviewed for this article. Independent research supports their claims, as well as other interviews with Brian Behlendorf, Executive Director of the Hyperledger Project. VP of Blockchain, Jerry Cuomo, was also interviewed for this article.