Home' MHD Supply Chain Solutions : MHD July-Aug 2017 Contents other useful applications, and is capable of
managing information of widely disparate kinds.
It has been said that “Blockchain technology is a
leapfrog technology” that is intended to reinvent
data management processes, just as TCP/IP did
in the mid-70s. The claim has also been made
that Blockchain solves ‘the greatest missing
element since the invention of the Internet’, which
refers to the ‘trust protocol’, or a way of knowing
that a transaction is verified and authentic.
While we all trade online, in the ether we
still cannot reliably establish one another’s
identities, nor can we universally trust one
another to transact without ‘third-party validation’.
That is to say, we are not confident enough
to deal directly with each other, without our
data passing through some intermediator
such as eBay, AirBnB or Uber. However, with
Blockchain technology, it is possible to imagine
a supply chain system where information such
as the provenance of goods, bills of lading or
manifests, certificates and customs values,
indeed all manner of relevant supply chain status
information was immutable and available for all
parties involved. This would be available at any
time and everywhere, rather than being collected,
stored and data-mined by the previously
mentioned data aggregators and intermediators.
So how, you might ask, does Blockchain
technology achieve this feat? I believe this is
best described by breaking down the process
into the core attributes of a Blockchain.
What is a block?
A ‘block’ is a unit of information, and is not just a
data string. It could be a certificate, for example
a POD or an image, which is recorded in cloud-
based digital ledger technology (DLT). Each block
has an encrypted key that is made of two parts,
which are called a public and a private key. The
private key is used by both the sender and the
receiver of the block of information, with each
using different algorithms to encrypt and decrypt
data respectively, thus making it a very secure
transaction. However, the security layer is further
enhanced by using the public key. The public
key is used to independently verify the data using
multiple nodes (or independent data approvers)
operating in the cloud. This feature means that
data cannot be modified unless 51% (consensus
approval) of the nodes agree to a change in data.
So, if the block exists in a permission-less space,
that is one which is open to anyone to verify the
Blockchain data, there may be thousands of
people involved, making it practically impossible
to change block data. The security inherent in
Nakomoto’s algorithm that is used to build the
database essentially removes the need for any
central authority to determine data veracity. So
far, so good, but now it gets a bit more involved...
What is Blockchain?
The name Blockchain stems from its technical
structure – namely a ‘chain of blocks’. Each
block is then linked (‘chained’) to the previous
block with the cryptographic ‘hash’. The hash
of a new block is dependent on the hash of the
previous block, therefore any attempt to corrupt
the data in a particular block entails changing
the hash of the previous block and so on - and
to do this requires (51%) consensus approval.
Apart from requiring considerable computing
power to make such changes, it is simply not
economically viable, to consider such an action.
Under these conditions, Blockchain
technology allows us to securely and
transparently track all types of transactions, and
in this way it also solves the trust protocol!
Imagine the possibilities that this presents
across the supply chain. For example, every
time a product changes hands, the transaction
could be documented, creating a permanent
history of product from manufacturing to sale,
allowing everyone in the end-to-end supply
chain to instantly view trustworthy data. This
could dramatically reduce time delays, costs in
human error, and lack of corporate IT systems
integration that plague many organisations today.
Possible Blockchain technology applications
are increasing, resulting from significant
investment from venture capital, high-worth
entrepreneurs and Tier-1 consulting firms.
This growth of interest is based on the positive
early experiences in the financial sector, which
is beginning to identify significant upside
advantages in the supply chain and logistics
industry. Three examples, taken from early work
in the shipping, clothing and food industries, are
The ocean freight industry accounts for 90% of
goods involved in global trade, but the sector
remains highly dependent on paper forms that
are never digitised. It is estimated that for a
18,000 TEU container ship (not that we see
these at Australian ports), savings in labour
and documentation costs for landside logistics
could amount to $300 per container (or $5.4
million per ship). Extrapolating this estimation
globally, IBM’s Blockchain research director
estimates that billions of dollars are lost annually
to coordination costs in the shipping industry.
This has been demonstrated using the example
of spoiling perishable goods. It has been
claimed that if a single piece of paper goes
missing when it arrives at the Port of Rotterdam,
a full container of, say, avocados will just sit
there. However, if the documentation is ‘block-
chained’, then visibility is instantly provided
across the 30 or so disparate organisations who
participate in moving this produce to market
across international borders. This presents
a real opportunity of how costs could be cut
by streamlining the checks that shipping
companies are required to complete.
In international shipping, where there are
many stakeholders requiring access to the same
information who are unknown to each other,
THE SUPPLY CHAIN
“Imagine ... every time a product changes hands,
the transaction could be documented, creating a
permanent history of product from manufacturing
to sale, allowing everyone in the end-to-end supply
chain to instantly view trustworthy data.”
MHD SUPPLY CHAIN SOLUTIONS — JULY / AUGUST 2017
SUPPLY CHAIN 49
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