Beyond Cryptocurrency: Blockchain as a Value Creator and Connector

From the January-February 2019 edition of Supply Chain Management Review.

January-February 2019

Truth be told, I was not a Boy Scout, or at least not a very good scout and not for very long. But I think there are some lessons for supply chain managers in the Scout motto: Be prepared. When I Wiki’d it this…

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Most people recognize blockchain as the underlying technology for en-vogue cryptocurrency, but few truly grasp the potential of this technology to substantially reduce operating costs for companies and enable new ways of creating value. For companies reliant on strategic partnerships, or those that are seeking to increase the transparency of interactions between consumers or business partners, blockchain presents a world of possibilities. Ultimately, as companies co-invest in blockchain solutions, we will see supply chains and business partner ecosystems become increasingly interconnected, enhancing a sense of shared fate and creating opportunities for joint ventures.

To understand the value of blockchain to companies, both as a cost savings and value creation mechanism, we will explore three key use cases. As we lay out these three examples, it will become clear how blockchain can enable a substantial evolution of partnerships along the supply chain. Our three use cases are:

• how blockchain can increase transparency in the supply chain by validating provenance;
• how blockchain can reduce costs and complexity in asset tracking and smart contracts; and
• how blockchain can drive upsell opportunities through data purity.

Understanding what blockchain does and what it looks like in practice

First, it's important to understand what blockchain does, how companies can cooperate to implement blockchain solutions and what that looks like in practice. Blockchain is a digital, distributed transaction ledger shared across a public or private computing network. Transactions are added to the blockchain only after the computers in the network confirm their validity through cryptographic challenge-response authentication. This feature eliminates the need for thirdparty intermediaries, as the network uses a consensus mechanism to execute transactions. Transactions are stored on the blockchain in groups called “blocks.”

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