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October 21, 2017

What exactly is blockchain?

Everyone has different data. Different access. Different platforms. No matter what industry they are in, people have problems securely and transparently sharing information. Blockchain is a new technology that can help organizations connect to each other across platforms. More than “crypto-currency,” it combines records into one digital system that everyone can view and add to at any time. It creates shared record-keeping, with no one organization having total control of the data. The “block” in blockchain is a record that someone puts into a ledger system. The “chain” is the time stamp of the shared blocks, keeping all of the data in chronological order.

How is blockchain being applied as a supply chain tool?

Many companies with complex supply chain networks are starting to test and implement blockchain technology. Major retailers are able to have the potential to track inventory across global supply chains.

Supply chain advantages of blockchain

In the logistics sector, the application of this technology can help increase transparency across different supply chain nodes. With one-day delivery becoming the new normal, e-commerce and retail firms can benefit as the technology makes traceability of products easily accessible. Over the long term, this can add real value to the retail, logistics and distribution sectors, which are handling heavy volumes of transaction data on a daily basis.

The elegance and ease of adoption of the technology is quickly spreading to multiple sectors, from banking to food and beverage. IBM recently announced its collaboration with key food producers and distributors to reduce contamination in the global food supply chain. IBM will work with large food distributors like Nestlé, Dole, Walmart, Golden State Foods, McCormick and Company, Kroger and Unilever to improve food safety using blockchain. This consortium of companies aims to adopt blockchain to more efficiently track when and where food items are contaminated.

For years, companies have struggled to keep a clear record of the movement of goods and materials throughout the supply chain. As corporations have expanded globally and across multiple cities in the United States, supply chains have become longer and more complex—and the challenge of tracking inventory has become acute. Once adopted, a digital history over time of products flowing through the supply chain could further help bring down costs—by reducing excess inventory.

One of the other big advantages in the supply chain sector will be enhancing the security of expensive goods. Counterfeit goods and fraud are major problems in the e-commerce and retail sector. The blockchain network could enable tracking through the life cycle of a product from the point of origination to manufacturing to sale, thereby making it resistant to fraud and human errors.

There are, however, still many unknowns and concerns surrounding blockchain. How fast might it be adopted, especially within the supply chain? How may it evolve? And if it does evolve, how could intellectual property rights be safeguarded against competing firms? Will it be greatly regulated or incorporated into existing regulations? Only time will tell if blockchain is disruption or evolution on a number of fronts.

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Aaron Ahlburn

Director, JLL Industrial Research

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