Blockchain goes from buzz to reality in supply chain

Article By : Hailey Lynne McKeefry

IBM has teamed up with Maersk Line to digitize the global, cross-border supply chain using blockchain technology.

From being a buzzword, blockchain technology is fast becoming a real and present reality in the global electronics supply chain. The potential of benefits are myriad, ranging from reducing errors and saving time to improving inventory management as well as reducing waste and cost.

“Blockchain is providing us the ability to transform in ways that the industry has been looking for,” Brigid McDermott, vice president, Blockchain Business Development & Ecosystem, at IBM told EBN. “If you talk to supply chain experts, their three primary areas of pain are visibility, process optimisation and demand management. Blockchain provides a system of trusted record that addresses three.”

Recently, U.S.-based technology giant IBM announced that it is teaming with Maersk Line, a logistics and transport expert, to create a new solution to digitise the global, cross-border supply chain using blockchain technology. Meanwhile, China-based Dianrong and FnConn (a Foxconn subsidiary) announced Chained Finance, which they are claiming is the first-ever blockchain platform for supply chain finance.

“As a global integrator of container logistics with the ambition to digitise global trade, we are excited about this cooperation and its potential to bring substantial efficiency and productivity gains to global supply chains, while decreasing fraud and increasing security,” Ibrahim Gokcen, chief digital officer, Maersk, said in a written statement. “The projects we are doing with IBM aim at exploring a disruptive technology such as blockchain to solve real customer problems and create new innovative business models for the entire industry. We expect the solutions we are working on will not only reduce the cost of goods for consumers, but also make global trade more accessible to a much larger number of players from both emerging and developed countries.”

The IBM/Maersk collaboration, which will be offered as a service, is focused on reducing or eliminating fraud and errors in the transit and shipping of products, as well as minimising time spent managing transactions among transactions among shippers, freight forwarders, ocean carriers, ports and customs authorities. Currently, 90% of goods are carried by the ocean shipping industry annually. Traditionally, these shipments can go through dozens of people and organisations and require 200 or more interactions and communications. By providing all parties with a single shared view of data, the solution hopes to reduce complexity and make data sharing secure, accurate and efficient.

The solution, which is based on the Hyperledger Fabric, will digitise the supply chain process to create end-to-end transparency and secure collaboration capabilities. In addition, by streamlining document handling, the solution should reduce cost, since document processing and administration typically represent up to 20% of the total cost of physical transportation.

This blockchain solution provides all participants in the supply chain with end to end visibility, with each group given only the level of permission needed to achieve the objective. Rather than making phone calls or sending emails, participants can view the progress of goods online, see the status of customs documents, and view bills of lading and other materials. Further, no record can be modified, deleted or appended to another record without consensus from the entire network.

“Blockchain lets you put all of the information across all of the participants, so that everyone can do useful things with it while maintaining a single source of truth,” said McDermott. Blockchain really does drive the transformation that people have been talking about for decades.”

IBM and Maersk worked with a variety of partners, including government authorities, trading partners and logistics firms, to pilot the solution. For example, goods from Schneider Electric were transported on a Maersk Line container vessel from the Port of Rotterdam to the Port of Newark in a pilot with the Customs Administration of the Netherlands under an EU research project. “Everyone was pretty pleased with getting to see information they hadn’t before or in a time frame they hadn’t been able to before,” said McDermott. “Everyone had a better view of where the process was from a status perspective.”

Meanwhile, Dianrong and FnConn announced the availability of Chained Finance, a platform that leverages blockchain technology to meet the needs of supply chain finance in China. Using the platform, small suppliers can manage payments and supply chain activities more seamlessly and with greater visibility. China has over 40 million small and mid-sized enterprises and today’s supply chain finance solutions serve only a small percentage, about 15% Dianrong estimated.

Chained Finance is initially targeting three major industries: electronics, auto and garment manufacturing. The company expects that Chained Finance could help supply chain finance operators potentially triple the number of SME supply chain operators with access to funding in China, the company said in a press release.

"Blockchain is revolutionising the finance industry and offers seamless solutions to any company operating and financing complicated supply chains," said Soul Htite, Founder and CEO of Dianrong. "The complexity and scale of supply chain finance has posed major challenges in ensuring adequate funding and efficient operations."

Chained Finance is based in Shanghai and currently has 40 employees, with this number expected to grow throughout 2017, the company reported.

First published by EBN.