How Blockchain Technology Can Improve the Way Companies Do Business

Maersk and Walmart have adopted IBM’s version

9 February 2018

Blockchain technology, best known for supporting Bitcoin and other cryptocurrencies, is designed to be secure, transparent, and decentralized—the same characteristics that make it attractive to businesses for other uses such as managing their supply chain.

Blockchain technology can track and verify each step along the life cycle of products, including the origin of their raw materials, the steps in the manufacturing process, and delivery dates to warehouses and consumers’ homes. The system also can be invaluable in ensuring products meet regulations and preventing counterfeit versions from being sold.

IBM is aiming its blockchain technology at the needs of business. Its customers include retail giant Walmart, which is using the technology to ensure food safety. Walmart tracks its produce from the farm to the store shelf to confirm items have not been contaminated or are not past their sell-by date. Transport company Maersk last month established a joint venture with IBM to develop a global trade platform for the blockchain system to help companies reduce costs and eliminate inefficiencies with how items are being shipped.

The Institute interviewed IEEE Member Ben Amaba, chief innovation officer for the industrial sector in IBM’s Watson and Cloud Division, who helps lead the company’s blockchain strategy.

THE WHOLE PICTURE

What makes blockchain superior to current database systems is that it’s a shared and distributed ledger, Amaba says. That makes it easier for companies along the supply chain to track items when an order is placed. They can keep track of the movement of items to ensure there are no delays, and can confirm the right amount of inventory products are being delivered.

Take the food industry, for example. The farm, the shipping company, the food processor, and the retailer now use separate databases. But if they all used blockchain technology, they could record all transactions across a shared system; supply-chain managers could monitor activities from beginning to end. A company like Walmart, for example, buys in, and then gives all its suppliers access to record information into the system.

Related: How Blockchain Technology Could Combat the Global Counterfeit Drug Market

Blockchain is transparent to all users. Every change to a file on a blockchain system can be traced back to the employee who entered it into the system, making everyone accountable. And once submitted, information cannot be overridden, deleted, or tweaked—it’s set in virtual stone.

If a shipment gets lost or food is found to be contaminated, the issue can be traced back because each company records every step of its process in one place. That can help grocery stores, for example, confirm whether items are in fact organic. Or a coffee company can check whether the beans it roasts are from a fair-trade source and have been grown in the region claimed by their distributor.

Documents such as contracts with third-party vendors and tax forms are easier to audit, and that can help prevent money laundering and fraud, Amaba says. He notes that IBM’s blockchain technology is built on consensus, meaning that all parties involved can agree on and validate the transactions. That also prevents any exclusive control by one party.

The system provides its customers with a wealth of data. Transportation companies, for example, can see which trucks are delayed the most and then change their routes or adjust delivery times. Retailers can find out which products are returned most often and to which store, leading to changes in what they supply to each location.

With so much critical information residing on a single system, IBM’s priority is security, Amaba says. Because the company owns all the moving parts—hardware, network, database, and software—it can avoid gaps, he points out, which hackers might try to exploit.

TECHNOLOGY FOR ALL

Hyperledger, IBM’s open-source blockchain tool, allows customers to develop customized applications without having a programming background. A business manager can create, for example, an application to meet the needs of her department, and then release it on the company’s blockchain network.

The open-source tool also will be able to handle applications for the Internet of Things, delivery drones, 3D printing, and other emerging technologies if they should become part of the supply chain, Amaba says. Customers could easily build a way to account for, say, which robot picked up which packages in the warehouse and which drone delivered them.

Amaba points out that blockchain technology is not a silver bullet for all businesses—particularly not for small companies in which they databases already in use are sufficient for managing their supply chain. “Make sure you’re adopting blockchain for the right reasons, and not because it’s a shiny new technology,” he says.

Learn More