November 2016 | Commentary | Checking In

Blockchain Supply Chain?

Tags: Global Logistics, Finance, Logistics, Technology , Supply Chain

Keith Biondo is the publisher of Inbound Logistics magazine.

Anyone doing business in a global environment knows that a lot of friction in trade activities is directly related to finance: regulatory and compliance speed bumps, fraud, letters of credit, manual and fax-based documentation. In trade finance, the sheer number of borders, intermediaries, regulatory authorities—and lack of technology—can sometimes stall your product, no matter what else you've done right. Sometimes it ain't easy moving green.

Enter disruptive Bitcoin technology, which recently made a small experimental debut in global supply chain management.

Bitcoin originated as a counterculture global electronic currency that, at its inception, was the underground financial system used by those who did not want to participate in open financial markets. Governments and their banking partners did not like it because it made global financial transactions difficult to track.

Money will move faster

The heart of Bitcoin currency is blockchain technology: a web-based transaction processing system that creates a "golden record" of a set of data that is indelibly and irrevocably secure and visible to all parties in each trade network, eliminating any need for third-party verification. Think Paypal for global trade.

R3, a consortium of 70 of the world's biggest financial and trade finance concerns and banks, has been researching ways to harness the speed, accuracy, and efficiency blockchain affords. In October 2016, we moved beyond research with a truly innovative global trade experiment that could be the harbinger of disruption to global finance and add a new dimension of velocity and security to trade financial transactions and the supply chains dependent upon them.

Commonwealth Bank of Australia, Wells Fargo, and trading company Brighann Cotton shipped 88 bales of cotton worth approximately $35,000, financed with blockchain technology, striving to prove for the first time that the combination of blockchain and smart contracts can amp global trade finance. Chris Lewis, trade services manager for Wells Fargo, says the bank is committed to new technology, but "significant regulatory, legal and other concerns remain to be addressed."

Global trade on speed—simplified and secure with electronic contracts that transfer ownership of the goods, authorize the release of payment as digital-ledger technology encrypts, and store the details of the contract—ensures all trading parties work off the same synchronized version, which cannot be unilaterally altered or tampered with. Will blockchain disrupt global trade finance for the better by enabling money to increase supply chain velocity? Yes.






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