Efficiency, transparency and security remain the watchwords of distributed ledger technology (DLT), an immutable ledger most often associated with cryptocurrency, but lately finding traction within supply chains, which in a worldwide economy have grown increasingly complex and multi-faceted.
One report indicated that over half the products made around the globe require shipment over a border another report estimated that at present banks and other financial institutions pour some $10 trillion a year into trade, and that a typical shipment requires some 30 documents. Yet another noted that the mere shipment of flowers from Kenya to Rotterdam required no fewer than 200.
DLT can make a difference. It can lead, by one estimate, to a 15-30 percent cost reduction, according to the World Trade Organization, and $1 trillion in new trade over the next 10 years, according to the World Economic Forum. And while there are those who argue that DLT can be difficult to implement, Frederik De Breuck, head of Fujitsu’s Blockchain Innovation Center in Brussels, argues that it can be put in place immediately, and “fit invisibly” within a company’s current structure.
As he wrote for his company’s website:
DLT essentially functions as a layer supplementing your existing enterprise resource planning (ERP) software or any other related software you may have in use. … Your underlying process and the interface to your software remain as they were, with the difference that you now can trust that your inventory numbers (and those of all the other participants) are more accurate, as are the prices based on the consumption of your ecosystem, and you know what has happened to the underlying data along the way.
Again, it’s a matter of improving efficiency, of bringing processes out of the pen-and-paper era and into the 21st Century. Everything is more streamlined. Redundancy is eliminated. There are fewer middlemen to include in the process, and less risk of error, fraud and waste.
That goes hand in hand with transparency, of course. All of the trading partners have access to real-time information about where a given transaction stands. And when it is completed and proof of delivery is provided, invoicing and payment is immediately triggered. Gone is the lag that exists in current payment cycles. As DeBreuck wrote, supply companies currently stipulate that payment be made within 30 days, though lags are typically far greater.
Another aspect of transparency is that it allows for improved regulatory compliance. An example offered by Forbes was that of the Rwandan government, which used blockchain to track the mining of tantalum, a resource used in electronics. A 2018 study also mentioned that DeBeers, the diamond company, used DLT to register and store documents related to those precious gems, in an attempt to restore trust in that industry.
As for DLT’s security, note that nothing is invulnerable, but if the user of each node in the chain does his or her due diligence and protects the public and private keys required to lock things down, risk can and will be minimized.
In sum, DLT can improve any supply chain enormously by making it more efficient and, ultimately, more profitable.