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Is Blockchain the Answer to Supply Chain Security?

Is Blockchain the Answer to Supply Chain Security?

* By Mary Lou Jay *

Three years ago, when Nick Vyas spoke at the University of Southern California’s Supply Chain Digital Transformation Hackathon, he asked the 300-member audience how many had ever heard of blockchain. “Just four hands went up,” recalled Vyas, assistant professor of clinical data sciences and operations at USC and author of an upcoming book on blockchain and the supply chain. “If I were to ask the same question now, I would venture to say that 99 percent of the hands would go up; in fact, half of them would say they are blockchain experts.”

As knowledge about blockchain has grown, so have expectations for its ability to solve many of the transparency and security issues for today’s supply chains. But are those expectations realistic?

“In the last two years we are seeing a blockchain craze,” said Vyas. “Blockchain has a lot of potential, but it is not one-size-fits all. It’s not capable of solving every problem we have in supply chain.”

Blockchain security

Blockchain is a distributed ledger that records the history of business transactions in a secure, immutable way. Each time a member of a blockchain records a transaction, they add a block that only others in the chain can read but that no one can alter. If someone does try to change a record, the underlying consensus algorithm of the blockchain compares it to the other distributed copies of the record and rejects it, keeping the unaltered ledger in place.

“At the core, blockchain enables two information management capabilities. It ensures that data can be easily tested by all members of a business network to see if said data was corrupted or tampered with, and it ensures that every member of said business network has a real time copy of the most trusted version of a dataset,” explained Richie Etwaru, “blockchain futurist” and adjunct professor, blockchain management at Syracuse University. “These two information management capabilities, when applied to any information intensive business process, network or industry, can reduce the time and effort needed to identify fraud or errors displaying them publicly to the entire business network. As a result, blockchain motivates all actors in said business network to comply with trusted, transparent and genuine business practices.”

“Blockchain really does have some amazing capabilities in terms of being able to track transactions in a decentralized way, where your ability to have your network compromised is a lot lower,” said Vyas. “Normally, when you’re in the cloud, there is one central authority where the database resides. A person has the ability to hack into the system because, by design, somebody owns the repository of data. When you don’t have that, and it’s completely decentralized, the likelihood of somebody penetrating and breaching the security protocol is nearly impossible.”

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According to the recently released 2018 MHI Annual Industry Report, “Overcoming Barriers to NextGen Supply Chain Adoption,” eight out of ten survey respondents believe these supply chains will be the predominant model within just five years. However, the report found that the adoption of some of these technologies was slower than originally reported when MHI started the annual report in 2014. The report cites three top barriers to adoption of these technologies: 1. Making the business case for NextGen supply chain investments. 2. Tackling the supply chain skills gap and workforce shortage. 3. Building trust and security in digital, always-on supply chains. This issue of MHI Solutions focuses on the adoption of these digital solutions, from best practices in robotics and artificial intelligence to blockchain and innovations in last mile delivery.

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