Editor’s note: Written by John Monarch, chief executive and co-founder of ShipChain, a blockchain startup focused on the freight and logistics industry. This is one in a series of periodic guest columns by industry thought leaders.
We’ve all heard about how a blockchain revolution is coming. We’re surrounded by promises that it will change the world for the better, particularly in global supply chains. Increased visibility, more accountability, less theft and fraud— the list goes on and on.
Those with high-risk operations, including the food and pharmaceutical industries, look to blockchain as the end-all solution for supply chain visibility. In a February report reviewing a 2018 E. cColi outbreak in romaine lettuce, the FDA said, that “widespread industry adoption of existing and emerging technologies, that can be used to trace product from the field to the consumer’s kitchen in real time, is critical to protecting the public during a foodborne illness outbreak linked to leafy greens.”
However, the application of blockchain, or any other technologies, in the supply chain is complex. An incorrect data node could lead to a repeat of the disastrous romaine lettuce recall, regardless of whether blockchain is used or not.
According to the FDA’s investigation of the E. coli outbreak, the source was contaminated irrigation water. With one source as the culprit, the use of Blockchain may have been able to find the single source faster, mitigating the spread of the product from the source throughout the rest of the supply chain.
People are still vital to data integrity and quality no matter what supply chain system the company deploys. However, the deployment of automated technologies, including wireless sensors, the Internet of Things and RFID tags can help.
BLOCKCHAIN AND DATA ACCURACY
The challenges with blockchain in the supply chain derive from how data is created and captured. The sharing of data through a distributed ledger means anyone within the network can access and review it. The pattern follows suit through subsequent transactions. However, all following transactional data is useless if the original data entry was incorrect. In other words, blockchain alone does not guarantee data accuracy. It only ensures the longevity of data entered into the system. But automating the data collection and entry process reduces the risk of inaccurate data entry.
For example, deploying automated identification and data capture (AIDC) technologies, handheld barcode scanners, and wireless technologies all powered by the Internet of Things (IoT), ensure accurate data entry. This is in addition to working with reputable suppliers and vendors that utilize such technologies. As supplier data accuracy increases, the value of blockchain waxes too, building trust throughout your network.
SUPPLY CHAIN DATA PROBLEMS
With all the technology in use throughout global supply chains, the idea of trust may seem odd. However, Matt Higginson of McKinsey & Company, as quoted in SupplyChainDive, believes up to 40% of all supply chain data in use is faulty. Blockchain accurately documents who enters data, when and where.
Blockchain provides the full map of the supply chain network. As data is entered via automated capabilities, it reveals details about origination and activities to other blockchain-using companies. While a degree of trust remains vital, using blockchain to further identify how data was entered eliminates all uncertainty. Even adding the IP addresses and GPS location of each data point upon entry further refines visibility. This allows supply chain leaders to isolate areas of weakness and hold suppliers accountable for issues when they arise.
Some assume public blockchains with validation tools prevent poor data from being entered.
Unfortunately, they do not, at least not without the addition of other technologies that guarantee data validity at its origin. The public blockchain refers to a system where data is not collectively managed and stored by a single company. Public blockchains validate data entered by giving all users access to like information and verifying data against other nodes. Fortunately, validating data entered by reducing the risk of human error, i.e., automation, provides an added layer of protection.
Furthermore, integration of blockchain with existing tracking technologies ensures the data you own is stored and maintained appropriately. As a result, the risk of poor data accuracy from errors during entry decreases as any attempt to change data is immediately identified following data-matching inconsistencies with the data stored on other nodes. Ultimately, this creates a self-validating and refining process that ensures everyone works together, building trust along the way.
On the other hand, private blockchains refer to a single company’s system, such as the IBM-Maersk blockchain-based system. Since the solution is wholly owned and managed by a private entity, it will be challenging to get competitors interested in and using the system. Private blockchains increase the risk of losing proprietary data.
Instead of thinking about public systems as public, it might be more appropriate to describe them as an open architecture-based consortium between companies agreeing to share and own data. For example, ShipChain uses an open architecture-based technology that allows for integration and data sharing without the pitfalls of relinquishing ownership of data to an overarching company. By its nature, sharing data means trusting others to use it properly. While a leading company may develop the software to handle its management, data is still owned by the original company.
What does this mean for the widespread use of blockchain?
First, all business operations will always require a degree of trust. Blockchain holds users accountable. It provides a trail to trace an issue back to its origins. Since users have a vested, similar interest in guaranteeing a product’s safety and validity, blockchain will continue to draw more companies into its sphere. However, it will never be able to completely prevent some users from knowingly entering false data into the system. Yet, those that use automated data collection technologies and sensors to eliminate the risk of malicious or unintentional data errors can avoid such risks.
Ultimately, shippers and logistics companies can leverage blockchain today, but they must continue to ensure their supply chain partners, suppliers, and users understand the role of data integrity and trust in one another. Furthermore, they must deploy the latest-generation technologies to gather data automatically and in greater detail. These technologies, while designed for historical records maintenance, work perfectly with blockchain-based systems. They provide the trust that may be missing in some supply chains, and they will continue to grow in capability. Meanwhile, more companies will find their success lies in better accountability and tracking of products from origin to last-mile delivery.
Editor’s note: John Monarch is chief executive and co-founder of ShipChain, a blockchain startup focused on the freight and logistics industry. He is a serial entrepreneur with multiple previous ventures and has a background in physics and computer science.
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Tiffany Hsu August 25, 2017
Joining a long line of trucking simulation games, “TransRoad” aims to turn players into digital logistics tycoons.