January 2018 | Commentary | IT Matters: Logistics & Supply Chain Technology

Blockchain Technology: Good in a Supply Chain Crisis

Tags: Logistics, Technology , Supply Chain

Mac McGary is President of Alliances, Sweetbridge, 415-663-5000

Blockchain, the technology that underpins digital currencies such as bitcoin, offers substantive benefits to supply chains disrupted by natural disasters such as hurricanes and floods.

Blockchain is a digital ledger that creates a chronological and unchangeable record of transactions. It uses an autonomous network of computers to constantly verify the legitimacy of updates to the ledger.

Just as it validates financial exchanges between independent parties transferring bitcoin to one another, this technology would also help supply chains authenticate third-party transactions on a global scale as they attempt to recover from an unforeseen circumstance such as a natural disaster.

Supply Chain Visibility

The existence of a verifiable database of all transactions, as well as a transparent record of provenance, keeps shippers and their logistics providers aware of the status of their supply chain transactions.

In the event of severe weather, blockchain gives supply chain partners the opportunity to take measures to ensure they remain as efficient as possible. Blockchain technology provides a streamlined way for global operations to understand how a weather event has negatively impacted routing so they can efficiently adapt contingency plans.

Another key advantage of blockchain is that no single entity controls the network. This helps align incentives between institutions and individuals because it removes concerns about disclosure and accountability. In the event of a natural disaster, blockchain can ensure competing players cooperate to share assets and resources, eliminating the incentive to behave capitalistically. Transparency across all network transactions quickly removes price gouging, and better rewards ethical players.

With a fairer, faster exchange in place, companies affected by incidents such as flooding or intense winter storms can benefit by receiving help from partners in the form of resources, such as talent, equipment, cargo, and warehouse space from other logistics providers. They can also receive faster payments and utilize digital currencies to generate much-needed liquidity to maintain cash flow and finance recovery operations.

Blockchain can allow users to attach digital tokens—similar to bitcoin and Ethereum—to products, allowing them to assess market and price risk along the supply chain. This lets companies ascertain the exact value they have invested in the production, shipping, and delivery of a good at any place along the supply chain.

Because many companies will find they have goods that are stranded or require alternate routing, they can achieve improved transparency in associating the costs with certain market and price risks.

Considerable Challenges Ahead

The widespread adoption of blockchain technology across global supply chain operations poses significant challenges. Creating a universal system that






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