Blockchain Supply Chain : IBM & Maersk

Global IT specialists IBM, announced in early 2018 that they were working with Maersk on a supply chain project built around blockchain technology. The shipping industry is well-known for being late to the digital age, with the primary source of information being communicated on paper.

The blockchain initiative leap-frogged current digital data technologies and offered the opportunity for the shipping aspect of the supply chain to gain an advantage and be at the forfront of the latest tech.

The aim of the project was quite ambitious: to reduce the cost of global shipping, improve data transparency across supply chains and eliminate inefficiencies derived from paper-based processes.

Retail Supply Chain

After digital payments, supply chain is the most obvious use case for retail blockchain as it involves multiple parties, large data volumes and a current lack of transparency.

Whilst IBM & Maersk are starting to make in-roads into the shipping element of the global transportation of goods, the retail supply chain includes additional elements, which in turn lends itself further to a blockchain case study.

Blockchain is a digital, decentralised database that records data from more than one source, making it ideal for the multiple entities involved in the retail supply chain. The records are secured using well-established cryptographic principles, where access is only granted to authorised users but is not controlled by a single entity. The data is immutable and transparent, meaning it is almost impossible to be changed fraudulently, and most certainly without detection.

The complete supply chain in retail appears to start with the manufacturers but in reality, many retailers are also concerned about the ethical behaviour of their suppliers. This may include the origins of the components supplied to the manufacturer, claims of sustainability of the raw materials, compliance of having met regulatory conditions, waste management, working conditions and so much more.

Unfortunately, retailers are often several steps removed from the manufacturing process, screened from the details by overseas distributors, licenced agents and the brands themselves. How can they assure themselves, and their customers, that they themselves have been satisfied by the sustainability & ethical production claims of their suppliers? At present this is as simple as seeing a certificate, which may or may not be authentic.

“Whilst Blockchain provides extensive benefits in the retail supply chain, the combined effect of distributed ledgers and complimentary applications like RFID and IoT, explodes the scale of opportunities beyond our immediate comprehension.”
- Mark Taylor

Blockchain Retail Supply Chain

A Blockchain Supply Chain allows for the authenticity of raw materials, supporting claims of Fair Trade™, sustainability, ethical sourcing and organic goods. It also allows for the authenticity of provenance, giving a much needed boost to combating counterfeit goods.

Using blockchain technology in the retail supply chain resolves some of the following pain points;

  • Provenance: authenticity of raw materials, including component suppliers
  • Compliance: proof of certification of regulatory conditions being met
  • Transparency: visibility for all parties across the full supply chain
  • Faster Payments: self-executed smart contracts facilitate automatic payments
  • Reduced Costs: reducing administration resource cuts costs
  • Improved Accuracy: digital transactions without human intervention can improve data accuracy

Retailers are at the end of the supply chain route yet they are the ones paying all the bills, either directly or indirectly. They have no visibility of the production schedules, shipping dates, port quotas, customs delays and a whole raft of other challenges. However, having a blockchain supply chain gives the retail business greater insight into the process from start to finish, which in-turn allows them to provide more accurate information to the end user.

A fully connected supply chain like this offers all parties greater transparency, meaning theoretical planning can be refined with the latest information and not having to wait for the previous stage to be complete – for example, retail warehouse managers can plan for arrival dates based on shipping dates with higher accuracy on when the ship will leave, and then arrive, not just based on the manufacturers say or even the shipping agents promise but on connected data from the shipping company, combined with the latest weather forecasts en-route.

Faster Payments

Cash flow is the bane of most businesses. In a developed ecomony, there is no real starting point for the flow of money but for this example we will use the consumer as the starting point.

The goods purchased in-store could have been there for 60 days (or longer) before the credit card comes out of the customers wallet. However, before this transaction takes place, the retailer will have had to pay the supplier, who in-turn will have paid the shipping company, their agents, the manufacturer, who will have paid their own suppliers and so on.

Retailers usually don’t pay for the goods until they have been physically received in their warehouse or distribution centres. But why? As consumers, we pay for goods online before we receive the goods because we trust that we will receive them as promised.

Could the retail supply chain payments model be changed to a micro-payments model in which small payments are made at each stage of the chain, based on self-executing smart contracts? This clearly benefits everyone in the supply chain, except of course the retailer. What if the retailer was to receive a discount for early payment, not just from the brand supplier but from each benefiting party?