Ask The Expert
These days, it’s hard to avoid chatter about Blockchain being the answer to all problems, particularly in the supply chain. With the recent news that “94 supply chain players sign on to Maersk, IBM blockchain initiative” it’s very tempting to jump on the bandwagon and dig in.
However, according to Gartner’s 2017 Hype Cycle for Emerging Technologies, we have just summited the “peak of inflated expectations” and are barreling into the “trough of disillusionment” when it comes to blockchain. Which begs the question: why are so many companies signing up? We sat down with head of Inspirage’s Digital practice, Nilanjan Chatterjee, to get to the bottom of this.
Inspirage (IN): Nilanjan, thanks for taking time out to discuss this interesting topic. Before we talk about the TradeLens solution specifically, could you share some of the supply chain blockchain use cases you think companies should be looking closely at?
Nilanjan Chatterjee (NC): It’s my pleasure. There are quite a few intriguing supply chain use cases, actually. The food industry is using blockchain to stem the spread of foodborne illnesses by being able to identify and block the source of contamination. And many industries such as diamonds, pharma, seafood are using blockchain to verify provenance and prevent counterfeiting and fraud.
But the most talked-about use case involves using a distributed ledger-based settlement solution for the movement of goods. This not only will support more efficient contracts and payments but also will streamline the import/export process. This is essentially what Maersk & IBM have built.
IN:Interesting, that all sounds fantastic. I’m sure it’s not as simple as just turning it on. Could you give us your take on the pros and cons of the TradeLens solution?
NC: You’re correct. Other than cryptocurrency currencies (most notably BitCoin), blockchain is in its infancy from a technology standpoint. We don’t know yet whether this solution will be the big winner in this space; however, I haven’t seen any alternatives on the horizon.
The high-impact advantages of this solution include:
- This is a common platform for port and terminal operators, global container carriers and shippers, customs authorities, cargo owners, freight forwarders and logistics companies. In the past due to disintegrated information sharing, trust levels were low and information leakages common. This can easily be prevented with the distributed blockchain processes.
- This solution can reduce delays caused by documentation errors, information delays, and other statutory requirements.
- Using Smart Contract, this platform enables digital collaboration across multiple parties in international trade and empowers multiple trading partners to collaborate by establishing a single shared view of the transaction without compromising details, privacy or confidentiality.
The major disadvantages are:
- There is a risk that the encrypted data may be unrecoverable if the partner loses or forgets the private key necessary to decrypt it. This is called irreversibility.
- Storage limits can be issues as this sector will generate huge volumes of data. Moreover, the number of transactions the blockchain can handle will define the efficiency.
- For any conflict, governance around the practices and conflict resolution may pose a problem as physical rules and statutory requirements vary from country to country.
IN: In their “Hype Cycle,” Gartner predicts it will be a good 5 to 10 years before blockchain is broadly adopted. Do you agree with this estimate? What are the advantages and disadvantages of being an early adopter? What are the risks of being late to the game?
NC: Given the pace with which things are moving and technology is evolving, I feel it will be another 3 to 5 years before larger companies will adopt blockchain universally in their business. The technology is there, but companies will take time to interpret it for their needs and then adopt it. We will see a lot of proofs of concept and pilot adoption cases by different companies in the next 2 to 3 years. In fact, many of our clients are doing these today. My guess is it will take 5 to 8 years before the next set of companies exploit the full benefits.
Like any new technology adoption, the early adopters serve as the disruptors and bring in innovative business changes which others follow. The technology will evolve to meet their unique requirements. However, in doing so, they go through their own issues and sometimes, if not properly handled, can be very risky and have a serious impact on business results. On the other hand, if one is late, they will have to adjust their processes to fit more mature solutions, but the path of adoption becomes more predictive and less risky.
IN: What should companies be doing today in terms of blockchain adoption?
NC: The first step in blockchain adoption journey should be to understand it in the context of the company’s core business and whether the existing processes are right and relevant for blockchain. A pilot case or proof of concept may help the company understand and estimate the impact and what or how much change is required. Companies need to clearly understand the shortcomings of the present infrastructure and processes in order to determine whether blockchain adoption will yield a positive return on the investment.
In addition, companies also need to understand that blockchain will not fully replace the existing infrastructure. Most of your the existing IT systems will continue and blockchain may come as an additional layer. So, interoperability becomes very important and it’s important to understand the impact of integrations and data flow.
Finally, like any other new technology adoption, blockchain adoption will also require a lot of change management within the company. The physical processes will require discipline and governance to establish the best union between the physical and the system processes. Companies need to carefully access this impact and establish solid operational procedures to tackle any disruptions and conflicts.
IN: Thanks Nilanjan for your insight. We look forward to discussing other digital topics with you in the future.
This is the first in our “Ask the Expert” series where we discuss industry trends and challenges with Inspirage thought leaders. If you have a follow-up question to this topic or have suggestions on future topics you’d like to learn more about, please send us an email and we’ll do our best to address it.