by Alok Rajiv, CTO & Co-Founder, Trames / 05 Mar, 2021
How blockchain and emerging technologies transform the supply chain?
Global supply chains have deepened over the decades, but fundamental operational processes have yet to undergo significant transformation. While there have been hotspots of innovations in specific segments of global supply chains primarily driven by multinationals and governments, sectoral-wide digitisation implementation has remained a challenge due to the diversity, disparity and hyper localisation requirements to drive user adoption.
In the past couple of decades, we have seen the growing usage of emerging technologies such as artificial intelligence (AI), blockchain, cloud, robotics and the Internet of Things (IoT), among others. These enable businesses to become efficient, collaborative, productive and significantly reduce operating costs.
For a long time, the supply chain sector has been riddled with traditional manual paperwork procedures, resulting in a high risk of fraud or loss during transit. The risk of fraud is compounded due to a lack of trust among parties, particularly in international trade transactions where counterparties often don’t know one another or haven’t had the opportunity to establish trust.
A couple of attributes leading the phenomenon are:
- Lack of cross-border end-to-end shipment information data stream
- Highly manual, fragmented and paper-based processes
Implementation of Distributed ledger technology helps change this by streamlining processes and enabling transactions (data and documents) to be fulfilled and shared both securely and efficiently over digital protocols.
Traditional problems, tech solutions
Documentation processes are a recurring inefficiency within the supply chain sector; paper-based and manually executed in most countries, it is cumbersome, slow and exposes trade transactions to counterparty risk and risk of loss. Exacerbating the situation, a transaction often brings together stakeholders that don’t necessarily know one another well enough or haven’t transacted in the past, and as such, the trust would take a longer time to build
Blockchain adoption is slighted to improve the efficiency of cross-border transportation flows dramatically. This is achieved through democratising access to data and seamlessly connecting cross-enterprise processes between different collaborating parties by building a digital network of trust amongst stakeholders.
The digitisation of shipping documents – and in particular title documents such as the bill of lading-is essential in the puzzle. Some challenges still exist, and they relate more to regulations rather than technological maturity. In the case of cross-border trade, documents inevitably pass through two different legal jurisdictions across importing and exporting countries; while digital documents may be acceptable in one market, they may not be in the other.
But the good news is that countries are slowly opening up to allow the validation of digital copies of critical documents.
Another challenge in the widespread adoption of blockchain in global supply chains is the technical complexities driven by the need for interoperability between different blockchain networks and/or protocols.
Today, there are several blockchain networks, but interoperation presents technical difficulties. While one blockchain can solve specific industry problem statements, it can only do so with participants who have chosen that particular network in isolation from other blockchain ecosystems.
Another impediment to adoption is the financial cost associated with running and maintaining blockchain networks. There have been numerous blockchain proof of concepts (POC), but many have been unable to get past the POC stage because the economics to scale has been challenging to resolve.
A Gartner study revealed that by 2023, 90 per cent of blockchain-based supply chain initiatives might undergo blockchain fatigue due to lack of strong use cases favouring this technology in this sector.
Blockchain holds promise
Despite blockchain fatigue, the technology holds enormous potential to disrupt global supply chain operations positively. This is because blockchains can significantly optimise and provide solutions for existing problems that have arisen mainly due to a lack of information, trust and manual time-consuming paper-based processes. We see blockchain technology providing value in 2 key areas:
- Enabling other digital initiatives (e.g. AI or machine learning) through thorough end-to-end data capture
- Leveraging a single source of truth between multiple parties for fraud mitigation and greater accountability
This drive to digitise fills “data blackholes” and is rapidly enabling AI and machine learning solutions to become more viable. Some examples that we have seen include route and cost optimisations and data-driven procurements or partnerships.
Blockchain technology will revolutionise fragmented and extended supply chains – moving it away from inconsistent and bilateral peer-to-peer communications to a secure digital platform powered by a single source of truth. Previously unavailable through manual processes, a digitally empowered supply chain ecosystem allows for steady and comprehensive data capture that can be analysed to improve efficiencies across disparate supply chain stakeholders.
Levering blockchain’s intrinsic tenents of time and trust, information can be readily and easily shared between different parties. This ensures traceability and greater accountability across the entire supply chain, mitigating inherent risks of fraud and loss.
Greater synergy in the ecosystem
National governments are recognising the growing need to transform this sector – as an example, Singapore has been a frontrunner in the adoption of digital initiatives, especially with the recent announcement of the Singapore Blockchain Innovation Programme by various Singapore Government agencies at the Singapore Fintech Festival.
On the back of strong sentiment to advance blockchain initiatives, Tramés has been working with the Infocomm and Media Development Authority (IMDA) on TradeTrust, and R3. TradeTrust comprises a set of globally-accepted trade process standards and frameworks that connects governments and businesses to a public blockchain. Doing so enables interoperability across different platforms so that electronic trade documents can be exchanged in a trusted fashion across these digital platforms. R3, meanwhile, is an enterprise blockchain service provider that envisions “eliminating friction and accelerating growth”.
The collaboration between these parties has yielded a Corda implementation of a TradeTrust-enabled electronic document store facilitating the curation and exchange of trade documents across shippers, consignees, custom brokers, local transporter and cross border transportation partners.
Emerging technologies will continue to cast a positive impact on consumers and the supply chain sector. We already see advances in communications technology, enabling the collection of vast data sets, which can provide insights that will help supply chain companies to make data-driven decisions.
Similarly, blockchain has the potential to truly transform global supply chains, creating an ecosystem of trust to drive efficiency and lower the cost of operations.
Digitisation of cross-border trade activities have been talked about and trialled for many years now – the good news is that with the introduction of nascent technologies, we see this change. The discussions and progressive improvements in this exciting space will undoubtedly drive exciting conversations in the upcoming years and beyond.
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Key features of the Trames platform include a blockchain-enabled document repository, customisable workflow management, FTA advisory, track-and-trace and incident notification. These facilitates collaboration with all stakeholders and partners on a single platform and effectively streamlines and optimises your supply chain operations.