Blockchain has the potential to transform and disrupt supply chains because the distributed ledger could unify previously fragmented flows of money, goods, information and digital assets. Despite the hype and its potential, it could take a decade or more before the technology achieves its full potential.
“The technology and associated business protocols are currently most prevalent in the financial industry, but longer term, blockchain could have a major impact in supply chain once some hurdles are cleared, particularly around scalability, flexibility, confidentiality of data, efficiency, governance and interoperability,” said Andrew Stevens, research director at Gartner. “In particular, blockchain has the potential to revolutionize multi-enterprise processes, but this will add the challenge of connecting a far-flung network of trading partners.”
What you need to know
Here are five things supply chain leaders need to understand about blockchain:
- Long-term potential to be transformative across many industries
There are parallels between this global-scale distributed technology and previous technology-driven transformative waves, such as the web and the internet. Early technology adoption of blockchain will progress over the next three to seven years, but mainstream adoption across the supply chain and at scale is likely 10 or more years away. Similar to RFID in its early days, business processes and standards must be resolved before blockchain can reach its potential.
- Faces many challenges
Blockchain technologies and associated supply chain best practices bring adoption challenges, including a lack of standards, robust platforms, scalable distributed consensus systems and interoperability mechanisms.“Scalability across supply chains will need to be carefully planned and aligned with other high-priority supply chain initiatives and stakeholders,” said Mr. Stevens. “Adoption too late or too early as part of an extended supply chain and supply chain maturity progression may prove detrimental to the entire organization.”
- Not merely a new database technology
Contrary to what many believe, blockchain is not a like-for-like replacement for traditional database technologies — it lacks the ability to create, read, update and delete information. For the immediate future, traditional database management tools and platforms will continue to prevail in supply chain, where data is created, maintained and consumed largely internally. Database capabilities, however, will increasingly need to scale and integrate across a broader number of supply chain network partners and ultimately customers.
- No prepackaged solutions for supply chain
You can’t “buy” packaged blockchain solutions for supply chain use at the moment. There continues to be a lot of hype, with few even partially deployed and very limited prototypes, for which firmer results or tangible uses cases are still be reported. Only organizations that are especially risk-tolerant and early adopters of technologies should consider supply chain management blockchain initiatives over the next two to five years.
- New supply chain uses will continue to emerge
As mentioned earlier, there are some identifiable early targets for blockchain in supply chain. However, new and unexpected supply chain uses or types of products and services could emerge as the technology matures.