Each generation grows up with a technology that defines it. For millennials, the internet went from being something we vaguely knew about as children to an essential part of our daily lives.
Adoption of new technology starts out slowly. Those who are paying attention start talking about its potential for disruption. Then comes the initial implementation. The general population begins to take notice of the benefits, and then change occurs rapidly as adoption increases dramatically.
Suddenly it’s enmeshed in everything we do.
Blockchain is one of those defining technologies that will change and improve many industries, particularly the supply chain space. And it’s set to enter that phase where implementation moves quickly. It’s already happening as we speak, and the implications are enormous.
But why does the supply chain need improvement in the first place? There are three major problems with our current supply chains that blockchain can solve.
Our first major problem is with data visibility. You’ve likely heard about big data and the benefits of collecting and analyzing the vast amounts of data generated by a product supply chain. But right now, that data is siloed in private cloud databases. When data is segmented, the benefits of having it dwindle. But blockchain stores data on a single, federated data sheet.
Take air quality monitors, for instance. These environmental data sensors track the air quality in a specific region, and we use them all over the world. Currently, the data from those sensors is segmented, controlled, and even manipulated, by governments and other organizations. Putting that data on a blockchain would present us with a complete and transparent picture of the air quality around the world, not just snapshots from different regions.
The processes that make up our current supply chains simply aren’t as efficient as they could be. The solution lies in blockchain and its ability use smart contracts. Smart contracts essentially automate an existing process in a secure manner. They allow you to program a set of conditional rules — If a condition is met, Then payment is released. But not just payment. It can be any next step that facilitates a faster and more efficient supply chain. And the contract is publicly recorded and cannot be tampered with, so it’s much more reliable than a third-party mediator. Blockchain will allow us to skip those third-parties and optimize processes in the supply chain to their full potential.
The third problem we need to solve is demand management. This relates back to data visibility. When our data is segmented, we can’t leverage the true power of big data and machine learning. Instead, we end up making predictions and writing algorithms that determine demand in a reactive way. We’re using past data and assumptions to calculate demand, and it isn’t efficient.
Each company does this on their own, using only a tiny part of the data available because that’s all they can see. Blockchain’s single federated data sheet doesn’t just store data, it also lets companies build on top of it to perform analytics and optimize demand management. It takes the guesswork out of demand management so that companies can produce exactly the right number of products that their customers need.
As you’ve probably noticed, blockchain technology can potentially solve all three of our major supply chain issues simultaneously. And when that finally happens, we’re going to be looking at a major paradigm shift in the supply chain.
In fact, we could be moving from a supply chain, to what Michael Casey, Senior Advisor to MIT’s Digital Currency Initiative, calls a demand chain. The demand chain is a customer driven model with fast turnarounds, lower costs, and greater efficiency. In this model, producers respond to the demand of customers, and products are collectively produced from an amalgam of suppliers.
This shift will have huge implications for our world.
We could soon be seeing circular economies at scale, with materials sourced locally, and products produced and recycled in local hubs. That means the potential for production with true net-zero waste. Machine learning will be able to determine the demand for a specific product or part based on location, availability, and the materials available for production. In essence, we can create a fully global, decentralized platform for production, one that is optimized based on machine learning algorithms that track behavior and demand.
I know, it sounds futuristic and a little optimistic. But it really isn’t. We’re already beginning to implement blockchain technology into our supply chains, and mass adoption is coming sooner than you think.