What is blockchain and how does it help retail supply chains

by | May 22, 2018

No doubt you’ve been hearing all the buzz lately about Bitcoin and blockchain, wondering what all the fuss is about and exactly what it is.

What is blockchain?

For starters, Bitcoin is an alternative currency that doesn’t exist in physical form. Blockchain, on the other hand, is more important to today’s technology, and it can be extremely useful to the supply chain. So we thought we’d take the opportunity to help you explore what it is, how it works and how the retail supply chain can benefit from it.

Think of blockchain as a spreadsheet that gets shared and synchronized among thousands of computers. When a new transaction (a block) is made, it gets added to the spreadsheet (the chain). The block becomes a permanent part of the chain, and it can’t be changed or removed. Many folks will describe blockchain as an append-only ledger. Most importantly, because this blockchain is not centrally stored, there’s no single point of failure or weakness, and it’s not controlled by one centralized entity that can be hacked or compromised.

Compare that to, say, a bank’s centralized network that shows incoming and outgoing money. A hacker could break in, change different amounts here and there, and make it appear as though someone has more money than they do. Moreover, because the bank’s records are centralized, the cyber criminals only need to edit one set of records to make this change. (Of course, most banks have fantastic security and several backups, so this isn’t something that would likely happen, but it illustrates the potential problem that a centralized set of records can create.)

With blockchain, a scenario like this would never happen. When a transaction is made — say, a deposit is placed into a person’s bank account — the transaction is recorded and is immediately synchronized and shared among all the computers using the same blockchain.

If hackers were to change a single record, which is nearly impossible, the change would immediately be recognized by all the other computers with the same blockchain and it would be flagged and discarded. However, even though the blockchain is stored within a “public” network, it doesn’t mean the data is readily available and visible. Each record is encrypted and each user gets a key that lets them access their transactions without being able to see anyone else’s.

How blockchain helps retail supply chains

Anything that reduces the risk of cyber attacks is always going to be a good thing. However, we can expect to see other benefits, such as improved communication, faster tracking of shipments, better ingredient chain-of-custody management and reduced paperwork loads.

For example, blockchain is already being used in the shipping industry. According to an article on ComputerWorld.com:

In shipping, for example, a bill of lading for cargo shipments has traditionally been paper based, which requires multiple sign-offs by inspectors and receivers before goods can be delivered. Even when the system is electronic, it still requires multiple parties to sign off on cargo shipments, creating a lengthy administrative process. To try and streamline that cumbersome process, the world’s largest container shipment operator, Maersk, in March 2017 announced it is using a blockchain-based ledger to manage and track the paper trail of tens of millions of shipping containers by digitizing the supply chain.

Each participant in the shipping supply chain can view the progress of goods through the blockchain ledger, understanding where a container is in transit. They can also see the status of customs documents or view bills of lading and other data in real time. And, because it creates a permanent record, no one party can modify, delete or even append any one of the blocks without the consensus from others on the network.

Blockchain can also be useful for reducing shrinkage and loss that may occur during the ordering and shipping process. Imagine the typical ordering process facilitated through an EDI system: a purchase order is sent to a supplier, that order gets acknowledged, and then the supplier sends an Advanced Shipping Notification, which can hold valuable information like tracking numbers, number of units and even case and pallet weights.

Now imagine something were to change along the way. For example, a supplier delivers a pallet load of goods to a retailer’s distribution center, and the pallet is 40 pounds lighter than when it left the warehouse. That disparity can quickly be noted via the blockchain system, especially if the shipment has changed hands at different places along the way. And whoever is responsible for the missing 40 pounds can’t change the records to hide the difference.

Blockchain can also be used to reduce problems related to ingredient purity and to prevent counterfeiting. Once again, as records and forms are tracked, and ingredients/supplies are shipped in and out of different supply centers, discrepancies can be discovered immediately through system alerts, which can help companies immediately identify problems.

For example, as we were working on this article, Rose Acre Farms in Indiana had to recall 207 million eggs due to salmonella fears. The eggs came from one of their North Carolina farms and produced between January 11 through April 12.

While their current tracking system was able to help track down the eggs, where they were sold, and what brand names they were sold under, blockchain technology could have sped up the process, helping them identify particular customers and brand names, and reduce the amount of time it took to investigate everything. The grocers could have even checked out their own supplies on their own, without waiting for notification from the original producers or distributors.

There’s no doubt that blockchain will be a disruptive technology that changes the way many industries work, whether it’s supply chain, financial technology, healthcare, or manufacturing, to name a few.

To learn about SPS Retail Business Solutions, please visit the SPS website for more information, or ask to speak with one of our EDI experts.

Streamline and improve workflows with EDI.

Streamline and improve workflows with EDI.

Enhance supply chain predictability and connect to the retail industry’s largest network with EDI.

Brandon Brunkow

Brandon Brunkow

Strategic Account Executive at SPS Commerce
Brandon is an account executive at SPS. Brandon enjoys reading about business finance and talking to others about. When he’s not selling EDI solutions he dabbles in selling on Amazon and other e-commerce sites as well as reading technology blogs.
Brandon Brunkow

Latest posts by Brandon Brunkow (see all)

0 Comments

Submit a Comment

Your email address will not be published. Required fields are marked *

Did you like what you read? Get updates like this delivered directly to your inbox.

Subscribe to our blog to receive weekly retail and supply chain news, valuable resources, expert tips and more.