I interviewed Julio Franca who discussed How Blockchain Can Transform the Supply Chain.
Question 1 - How Blockchain Can Transform the Supply Chain
Supply chain has become complicated. Some would say cumbersome. It takes days to make a payment between a manufacturer and a supplier, or a customer and a vendor. Contracts must be handled by lawyers and bankers, which means extra cost and delay. Products and parts are often hard to trace back to suppliers, making defects difficult to eliminate. Whether for industrial equipment, consumer goods, food products, or digital offerings, supply chains have headaches a-plenty.
Friction in supply chain is a big problem. There are too many go-betweens. There is too much to-ing and fro-ing. The rise in uncertainty stops supply chains from working well. Suppliers, providers and clients must deal via central third-party entities, instead of directly with each other. What should be simple transactions turn into lengthy procedures with many steps.
Blockchain could be the answer to many of these issues. This recent technology is what drives bitcoin and other so-called cryptocurrencies. However, it goes much further than a hackproof way of holding and exchanging money. Blockchain can be used for any kind of exchange, agreements or tracking. In a supply chain, it can apply to anything from self-executing supply contracts to automated cold chain management.
Question 2 - A Blockchain Primer for Supply Chain
What is blockchain? Here’s a simple explanation. A blockchain is a distributed, digital ledger. The ledger records transactions in a series of blocks. It exists in multiple copies spread over multiple computers, which are also called nodes. The ledger is secure because each new block of transactions is linked back to previous blocks in a way that makes tampering practically impossible. As it is decentralised, it does not depend on any single entity (like a bank) for safekeeping. The nodes connected to the blockchain network get updated versions of the ledger as new transactions are made. The multiple copies of the ledger are the “truth” about every transaction made so far in the blockchain. Trying to falsify the ledger would mean having to falsify the copies at precisely the same moment. The chances of being able to do this in blockchain networks of any useful size are negligible.
That’s all a bit abstract. Let’s look closer at the real-life example of bitcoin. It is important to recognise bitcoin as just one way of using blockchain. However, it also happens to be one of the best-known examples. Bitcoin is a recently invented currency that is separate from any state-controlled currency. Entirely digital, it exists thanks to the distributed ledger of transactions on computers across the world. You can buy bitcoin from bitcoin exchanges. You can then use bitcoin over the Internet to make and receive payments. Each payment transaction is added to the ledger, which can be consulted by anyone at any time. Details like the amount, time and date of each payment are visible, although your personal identity is not. Bitcoin holders therefore usually do not know each other. To deal with this anonymity, bitcoin uses another distributed mechanism called mining to add blocks of transactions to the ledger in a secure, tamperproof way.
About Julio Franca
Director at Spin Consulting