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        What's with the buzz about blockchain? Industry experts view it as transformative, but supply chain executives aren't investing big ... yet

        May 10, 2018

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        You’ve probably heard of blockchain, but do you know what it is?

        If not, you’re in good company.

        “Blockchain is a complicated concept,” said Ken Craig, a Board of Directors member of the Blockchain in Transport Alliance. “It might be helpful to say what blockchain isn’t.”

        Craig and other industry experts unpacked the definition of blockchain and assessed the technology’s future recently during “Fusion 2018: People + Process + Technology,” a professional development event hosted May 3-4 by the Auburn University Center for Supply Chain Innovation, a research unit of the Harbert College.

        fusionWhen people hear the term “blockchain,” they may think of cryptocurrency. Bitcoin’s platform was built on blockchain code, but that represents one example of its potential applications. And Craig was quick to add that blockchain is not a mere database, but a “peer-to-peer database” – a “distributed, secure digital ledger” that can be used to track hundreds of stages within a supply chain. We’re talking management of information from the creation of a product to its distribution and all of the steps in between. 

        The value for companies that figure out how to implement it is two-fold: transparency and security. Within the blockchain, each transaction is recorded on a “block” across multiple copies of the ledger that are dispersed over multiple nodes, or computers. There isn’t one central authority governing the blockchain, and each block connects to the one preceding and following it.

        How might that work in a supply chain setting? IBM offers one example with the development of TrustChain, a blockchain that follows the journey of jewelry from the mine to the store. A customer who wants to be certain they’re purchasing a gem stone and not an imitation and also want to be certain that the gem stone was not mined by exploited labor.

        “Think of it as a spreadsheet on a cloud that is not held by any one person,” said P&S Transportation Vice President of Technology Mauricio Paredes, a Fusion 2018 panelist. “It is held by multiple people – but those people are still acting as one. Every one of those blocks is equivalent to a row on the spreadsheet.” From row to row, the data aggregates.

        It’s no wonder, then, that Craig views blockchain as a “phenomenal” opportunity whose ceiling is “through the GDP stratosphere.” Federal policymakers are paying close attention to it as well. Two U.S. House Subcommittees held hearings in early May to discuss the use of blockchain technology in supply chain management. Rep. Ralph Abraham, the Chair of the Subcommittee on Oversight, reportedly described blockchain as “world-changing technology” that would “revolutionize the tracking of goods somehow like how GPS revolutionized navigation.”

        The revolution won’t be immediate, according to the 2018 “State of the Retail Supply Chain” report recently published by Harbert College supply chain management professors Brian Gibson, Rafay Ishfaq, Cliff Defee and Beth Davis-Sramek. The co-authors conducted interviews and surveys with executives representing 61 different retailers with collective revenue of nearly $1.2 trillion. While 52 percent of the executives reported that their companies would spend more on technology upgrades in 2018 than in 2017, the researchers found that their immediate focus is on predictive analytics, robotics and machine learning. As one executive put it, “Blockchain is a great concept, a great white paper, but how do you make it work in a supply chain? That’s what we’re trying to learn.”

        The learning curve may prove to be steep for many companies as the researchers found that 78 percent of respondents do not perceive their companies to be leaders in using disruptive technology. When it comes to blockchain, many executives seem inclined to take a measured approach with the adoption of what they may view as more radical and disruptive forms of technology, whether it’s blockchain or autonomous vehicles. “We’re fast followers,” one survey respondent said. “Let someone else jump on these things and kick the tires. As a technology starts to prove out, we will look at it.”

        The buzz over blockchain’s status as the next big thing is understandable, Craig said. The hype around Bitcoin even though, as Craig stated earlier, it’s not to be conflated with blockchain, creates the “FOMO effect” – Fear of Missing Out. “So the CEOs and CIOs who don’t have a grasp of this technology are saying, `Go get us some blockchain,’” Craig said. “… It’s in the early stages, so we’re talking about a long cycle, maybe two to five years before we get some meaningful things that are appearing.

        “But that will take, most people say, about 10 to 15 years before we have all of the pieces working for it to fully function. You really need to have all of the parts working.”

        For some companies, blockchain may appear to be a solution in search of the right problem. The trick for most, according to Paredes, is to understand and weigh the potential benefits of blockchain before investing heavily in it. And that traces back to the original question of understanding what it’s not as well as what it is.

        “You have to look at the solution and ask, ‘Does this solve a problem?’” he said. “Don’t go buy a solution for a problem that you don’t even have.”