Building block

How does blockchain fit into the future of supply chain? Jerry Foster says ‘anywhere and everywhere’


Blockchain technology is not brand new, but it continues to evolve. While most of the noise around blockchain is related to the burgeoning NFT market and cryptocurrencies, there are many opportunities for blockchain to improve and optimize the industrial supply chain.

At its core, blockchain is a distributed ledger that is secure and immutable, providing access to all transactions by all players, including supplier, manufacturer, distributor and client. For example, you can see how a block of steel became part of a finished car, tracking its status and creating a permanent record of its supply chain lifecycle.

Another example is its use in IoT technology. IoT currently faces issues with security, scalability, and encryption. Blockchain lends itself very well to managing and keeping track of IoT technology in a secure way that is visible to everyone. For instance, this can be done at a machine-to-machine transaction level where materials are sent back and forth and micropayments come through via cryptocurrency automatically.

Similarly, blockchain can make contracts easier. Smart contracts give each member a digital record in lieu of a paper document, increasing trust in the process and serving as an immutable record of the agreement. Any change made to the contract is immediately updated and members are notified automatically, meaning everyone always has the most recent contract on-hand.

Regardless of use case, blockchain makes it easy to keep track of the transactions and flow of material in and out of a facility at every step.

What’s the hold up?
While the use cases are numerous, part of the reason why adoption of blockchain in the supply chain has been so low is the fact that none of the major players have heavily invested in it yet. Blockchain is participatory by nature, so it’s hard for companies to gain value unless others are using it. If they’re not directly involved in the distribution of goods and services via blockchain, then they feel there is no incentive for adopting the technology.

However, the tide is expected to change over the next few years as more companies are exposed to blockchain and begin to see the benefits that it offers. Think of the internet, which started as the government ARPANET. It took time to gain general acceptance and usage, and now it’s an irreplaceable part of everything we do.

Companies involved in blockchain will demonstrate the ease of a physical transaction ledger to their immediate customers and suppliers, proving that the transactions are secure, immutable and visible to all parties without the need for connecting to various systems and APIs. These customers and suppliers will then spread the use of blockchain to their larger networks, leading to widespread adoption throughout the supply chain.

Finding the right fit for blockchain
For those companies looking to be at the forefront of blockchain, the most important consideration for implementation is identifying the use case for this technology. For example, will blockchain aid with tracking contracts or will it be used to track material between customer and supplier? Once that business need has been identified, the next step is building a proof of concept, getting shareholder buy-in and making sure you have the appropriate budget.

Like any other decision to adopt a new technology, it’s important to ensure all members of the team are on board with the investment. The one difference from the traditional process is selecting the specific blockchain technology. Currently, there are dozens of different blockchain technologies, so it’s important to identify the technology that’s right for your business needs. Because blockchain is so volatile, organizations really need to do their due diligence to ensure that the technology they pick will be for the long-term. While blockchain can seem like a daunting concept, at its core, it is meant to simplify processes.

Blockchain is extremely cost effective and efficient, making it easier to conduct business across the supply chain. Like any other new technology, it will take early adopters demonstrating the benefits of using blockchain to spur widespread adoption. Once that has occurred, blockchain will likely be a core part of the supply chain and manufacturing. D

For the sources used in this article, please contact the editor.

Jerry Foster is Chief Technology Officer at Plex Systems. Plex Systems, Inc., a Rockwell Automation company, is the leader in cloud-delivered smart manufacturing solutions, empowering the world’s manufacturers to make awesome products. Its platform gives manufacturers the ability to connect, automate, track, and analyze every aspect of their business to drive transformation. The Plex Smart Manufacturing Platform includes solutions for manufacturing execution (MES), ERP, quality, supply chain planning and management, Industrial IOT and analytics to connect people, systems, machines and supply chains, enabling them to lead with precision, efficiency and agility.
www.plex.com