Welcome to the first article in PYMNTS’ Blockchain in Action Series.
Most people at least know that blockchain is the technology that bitcoin and other cryptocurrencies are built on, but a digital ledger that timestamps and orders transactions in an easily trackable and immutable way has a lot more uses.
See also: PYMNTS Crypto Basics Series: What’s a Blockchain and How Does It Work?
We’ll look at all of these over the course of this series, but let’s start with what is one of the biggest ways blockchain is revolutionizing the way business is done: Supply chain management, where the tech is used to move everything from bonds and bacon to shipping containers and carbon credits. In fact, thousands of companies are using blockchains to improve tracking, speed payments, increase accuracy, fight fraud and prove provenance, among other uses.
Walmart was one of the earliest large corporate adopters of blockchains, starting with a project to track leafy greens in late 2018. That leafy greens example is instructive. The retail giant deployed the technology in the wake of a series of deadly E. coli outbreaks in the Romaine lettuce industry that forced the destruction of tons of produce — essentially all of it en route to the market — because it took a week or more to trace the contaminate product back to the farm that supplied it.
Each step meant following a paper trail from a supplier to all of its vendors, repeated many times. In many cases, it was actual paper — the FDA’s new Food Traceability rule, which requires record-keeping, isn’t expected to come into effect until this November.
What blockchain provided was a single digital ledger, on which every box of lettuce was assigned a cryptocurrency token at the farm, which traveled with it every step of the way. That cut the farm-to-shelf tracking time to seconds.
Walmart now tracks more than 500 food items from farm to shelf on the IBM Food Trust’s private enterprise blockchain, which has about 500 corporate members.
There are plenty of other ways blockchains are being used besides in supply chain management.
They are used in financial transactions, of course. Slow and costly cross-border remittances are a primary target, but on Monday (May 23), French bank BNP Paribas joined J.P. Morgan’s Onyx Digital Assets blockchain network for short-term fixed-income trading, using cryptocurrency tokens to let investors briefly lend out assets while keeping them on their balance sheet.
Info here: BNP Paribas Becomes Latest Bank to Embrace Blockchain
And they can also have a big role in payments. In a January article, the Harvard Business Review (HBR) said Walmart Canada rolled out a blockchain called DL Freight to 70 carriers that ship to its stores across borders, time zones and different climates — using internet of things (IoT) technology, perishable items’ refrigeration can be tracked in real time.
“The system continuously gathers information at every step — from the tender offer from the carrier to the proof of delivery and the approval of payment. This information is automatically captured and synchronized in real-time and is visible only to the parties involved in the transaction,” HBR said, noting that each invoice factored in some 200 data points. “Prior to DL Freight, over 70% of invoices were disputed. Today, less than 1% of invoices have discrepancies, and these disputes are easily flagged and quickly resolved. Gone are the days of payments taking weeks or months; carriers are now getting paid on time.”
Smoothing the Way
Here’s a roundup of some of the biggest advantages blockchains bring.
Simplicity: Each member has to maintain only its own information, rather than a full database.
Automation: Using smart contracts, smart supply chains can automate things ranging from purchasing more products when supply runs low to payment on receipt.
You may like: PYMNTS DeFi Series: What Is a Smart Contract?
Privacy: Every supplier can tokenize information on a blockchain, but not everyone can see it all. So each supplier can provide the end user — such as Walmart — with data that’s recorded on the blockchain but not available to its competitors, which it’s also tracking in the same supply chain.
Managing complexity: Putting a coat on the rack, for example, could require the use of a dozen or more suppliers and vendors — the sheep farmers, the wool merchants, the fabric makers, the silk producers for the lining, the thread manufacturers and button makers, the factory that cuts and sews the coat. A blockchain running a supply chain would not be a straight line but have many forks splitting off of it — all traceable instantly.
Accuracy: The real-time nature of blockchain tracking makes it easier to manage stock and predict demand.
Real-time tracking: The breakdown of just-in-time supply chains during the pandemic highlighted just how valuable being able to instantly track where items are in the supply chain is. A blockchain would let that coat buyer see when buttons are delayed, allowing it to get more from another supplier so production doesn’t grind to a halt.
Invoicing: The staggering complexity of calculating, approving and resolving disputes and the payment of invoices is another big driver of blockchain development.
Compliance: A blockchain let FDA inspectors track lettuce quickly to the farm, and the technology makes it just as easy to show regulators in other verticals whether standards are being met. Several automakers adopted blockchain early on in order to prove the cobalt for batteries met legal standards for ethical sourcing.
Provenance: It’s not regulators who want to backtrack products to their source. One of the early public-facing uses of blockchain-based supply chain management was by French supermarket chain Carrefour, which added QR codes to packages of organic chicken. Doing so enabled the buyer to trace it back to the farmer who raised the fowl, letting customers know they were paying extra for the real thing and providing the grocer a marketing boost.
Identity: The UN has been using blockchain-based digital ID systems that use biometrics to provide a personally controlled proof of identity for refugees for several years.
More here: From Refugee Camps to Indian Coffee Farms, Digital ID Already Gets The Poorest Paid
