October 27, 2017
Column | fastlane

New kid on the block(chain)

Despite confusion about what it is and what it can do, blockchain is a smoking hot topic right now.

By Clifford F. Lynch

As anyone who has attended one of the Council of Supply Chain Management Professionals' (CSCMP) annual conferences can attest, that's where you go to get schooled. For example, at this year's "CSCMP Edge" conference in Atlanta, attendees could choose from 100-plus educational sessions on topics ranging from supply chain finance and leadership to trucking regulations.

That's not to say all of those subjects commanded equal attention, however. As is often the case at these conferences, there was one topic that was discussed in sessions and hallways more than any other. This year, that topic was "blockchain."

Why is blockchain so hot right now? Part of the explanation lies in the technology's mystique. Even with all the press on the subject over the last two years, it's been a long time since we've seen a topic so often discussed, yet so poorly understood. The most common questions seemed to be "What is it?" followed by "What does it do?" Although those questions are simple enough, the answers are not. I attended a session at the conference titled "Blockchain 101," hoping to enhance my own understanding, but came away knowing only slightly more than I did before I went in. It doesn't help that the technology is based on the same complicated mathematical functions that brought us Bitcoin, Ethereum, and other digital currencies—subjects that can be even more confusing than blockchain.

As for what it does, proponents say blockchain can increase visibility in the supply chain (as well as other functions) by breaking each movement down into a "block" and documenting the transactions every time a shipment changes hands. Linking the blocks together creates a record of the details of each movement, and every party to the transaction has access to the information. An independent third party records and validates the information, and no party can amend anything without validation by the other members of the chain. Blockchain supporters claim that this visibility will save time, reduce costs and risk, and promote trust among the parties. Some go so far as to say it is as significant as the invention of double-entry bookkeeping. Skeptics suggest that it seems to be touted most often by vendors who stand to profit from its implementation.

With interest in blockchain running so high, it's no surprise that the subject has drawn the attention of industry researchers. The 2018 edition of the "Annual Third-Party Logistics Study," which was released at the conference, devoted several pages to the subject and suggested that "the goal is to create one version of the truth, link information, and create transparency." At the same time, the survey, which was conducted by Penske Logistics, Infosys, Korn Ferry, and Penn State University, pointed to widespread confusion on the topic, finding that 67 percent of users of third-party services and 62 percent of the providers did not know enough about it to draw any conclusions at this time.

That seems to be the case across the industry as a whole. While there has been considerable interest in and discussion of blockchain, most companies have been content to watch from the sidelines. That's not to say adoption has stalled out, however. Companies like Maersk Line, Walmart, and IBM are currently working on systems, and others will no doubt follow suit as understanding of the concept grows.

This is not the first new supply chain development to require a quick education, nor will it be the last. While the technology is complex, this should not keep us from embracing the concept, determining how it can help us manage our supply chains more effectively, and implementing the concept where appropriate.

For a good discussion of blockchain, see the "2018 Third-Party Logistics Study" or Fortune magazine's recent article on blockchain and cryptocurrency.

About the Author

Clifford F. Lynch
Clifford F. Lynch is principal of C.F. Lynch & Associates, a provider of logistics management advisory services, and author of Logistics Outsourcing – A Management Guide and co-author of The Role of Transportation in the Supply Chain. He can be reached at cliff@cflynch.com.

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