The Blockchain Intersection with Supply Chain Data

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blockchainMost people probably are familiar with Blockchain in terms of the bitcoin context. It’s the underlying technology that supports the worldwide crytpocurrency and digital payment system, but it has applications for supply chain data, too.

In fact, in mid-September IBM and Microsoft announced a collaboration with GS1, the global business communications standards organization, to leverage its standards for identification and structured data in their Enterprise Blockchain applications for supply chain clients. The intent, they say, is to enable Blockchain network users to scale enterprise adoption and maintain a single, shared version of truth about supply chain and logistics events, with the outcomes of increasing data integrity and trust between parties and reducing data duplication and reconciliation.

It’s an adaptation of a Blockchain’s distributed ledger concept to new purposes, hosting smart contracts between buyers and suppliers. “The idea is to take historically human interactions and put some automation behind them,” says Melanie Nuce, vice president of corporate development at GS1 US.

When enough nodes on a particular Blockchain network agree that the terms of a supply chain contract have been fulfilled according to a set of rules – that specified Actions X, Y and Z have occurred for the transaction to be authorized – the transaction data can be added to the ledger. Otherwise, it won’t be.

For instance, should a supplier’s shipment fall outside the shipping windows specified in a PO, a notice would go out to the company and its logistics vendor that a term required for authorization has not been met and the transaction is not validated under the current rules. “You can’t write transactions to the ledger if you haven’t fulfilled the terms of the contract,” she explains. It’s similar to bitcoin Blockchain networks not validating transactions where the selling party is determined not to have the appropriate number of bitcoins in an account to conclude a transaction with a buyer.

It’s not about taking humans out of the relationship negotiation process, she says, but rather meant to drive enforcements that protect parties downstream. In the retail supply chain, reconciliation is a big issue, she says, often taking months to resolve cases between parties, while in the meantime shelves go un-stocked with particular brands or transactions remain unpaid. “The distributed ledger and the notion of smart contracts could help us do things more efficiently” for processes like transactional reconciliation, she says.

Mapping the Supply Chain Blockchain

GS1 plays into the mix with its foundation of globally unique product IDs – think of UPC barcodes that specify apparel sizes, color, style and so on – as well as layering in standardized, physical event-based data sharing via its Electronic Product Code Information Service (EPCIS) that uses the GS1 Core Business Vocabulary for providing value definitions to populate data structures.

“As something happens in the supply chain EPCIS has the business vocabulary to articulate each individual business step, either for discrete items or those grouped for shipment,” says Nuce. “It ensures interoperability between parties.”

Now, with the concept of Blockchain, multiple supply chain parties – say, the consumer goods product (CPG) brand that creates the candy to be shipped, the carrier who trucks it to a warehouse, and the retailer who receives it on the other end –can speak in a common language and contribute to each phase of the transaction in the distributed ledger using the GS1 standardized vocabulary.

The carrier, for instance, could record that it has crossed the state line and will deliver its shipment to the warehouse within three hours. “The retailer on the other end might use a different technology solution, but the ledger can be read so that all can communicate as quickly as possible,” she says. Parties can leverage this global language of business, harvesting supply chain intelligence data that helps them act in a more analytical way.

Previous to Blockchain, such transactions weren’t necessarily transparent to everyone involved. The supplier would give the product to the carrier but neither it nor the retailer would necessarily know where the product was at any particular time en route. “There was this cloud of no-visibility that occurred that we think can be lifted for true end-to-end traceability to all parties to a given transaction,” Nuce says.

Another important aspect that Blockchain brings to the table is that the distributed ledger can’t be changed. “Once a transaction is written it’s immutable,” she says. “The audit trail remains intact to resolve any disputes.”

Big Tech Vendors on Board

What companies like IBM and Microsoft are doing is putting enterprise capabilities around such Blockchain deployments, with party authorizations and permission concepts, for example.

“In the enterprise world, you have really smart technology companies that like the ideas Blockchain presented, but to do it in a scalable, enterprise way you have to put some rules around it,” Nuce says.

For instance, it’s highly possible and probable that as enterprises look at rolling this out, the Blockchain itself becomes a reference to off-chain data at some point in the future.

“You can see an immutable ledger of things that occurred and you know they did because the Blockchain said they did, but to get to the details of the transaction you might need an additional layer of permission,” she says.

She notes that Microsoft, for example, has put a huge amount of work to establish immutable IDs and how they tie into the ability to write transactions.

And IBM and Walmart already have partnered in Blockchain supply chain initiatives to trace pork and Mexican mangoes for food safety reasons. In the mango experiment, for instance, Fortune reports that:

“Food shipments were tracked and digitally recorded via a Blockchain….From the start of their journey at the farm pallets of mangoes were tagged with numeric identifiers. Every time they crossed another checkpoint—from farm to broker to distributor to store—their status was signed and logged.”

The result was that this information could be pulled up in just seconds in the event of a foodborne illness, making it possible for the retailer to quickly pull just affected product off the shelves rather than every mango package, to avoid further outbreaks. In August IBM announced more partnerships with Nestle, Unilever and other food companies to reduce food contamination with the help of Blockchain.

The success of such pilots give GS1 reason to hope that, as a group, it will be possible “to bring end users, technology and standards together to bypass the point of disillusionment and go straight to heavy adoption,” Nuce says. “Our role is as the foundational data sharing and unique ID provider, as it is in many other use cases today.”

She also foresees added value for the consumer coming out of supply chain Blockchain deployments that leverage GS1 data standards. Use cases might include consumer access to data about product provenance:

“Even if I don’t know who produced the cotton for my blouse, the Blockchain distributed ledger tells me it was a trusted party, so now I have assurances I couldn’t get with that cloud of invisibility,” she says. “My biggest thought for the future is the post- purchase involvement of the consumer in the conversation.”


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