What’s the Difference Between Blockchain and Supply Chain?

Supply Chain Blockchain

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The phrase “Supply Chain Management” was first coined in 1982.  The idea of a  “Blockchain” was conceived in 2008 although the concept of a chain of blocks began as early as 1991, and use of the word Blockchain itself has only become popular in the last few years.

Blockchain has rapidly become a very widely used term, at first intended to describe the enabling technology platform behind Bitcoin.  However as awareness and knowledge of the technology has been increasingly understood the words Blockchain and Supply Chain are more often used together.

As people become more familiar with Blockchain, and consider it’s applicability in their strategic Supply Chain plans, we thought it important to clarify how Blockchain and Supply Chain are different yet mutually supportive.

Definitions

There are many different definitions of Supply Chain Management, as covered in our article What Exactly Is Supply Chain Management? 10 Different Definitions!.  For our purpose here we will use the following definition because it includes reference to both products and services, and to both entities and processes, irrespective of the level or type of technology being used:

“A supply chain is a global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash. A supply chain, in view of the above supply chain management definition, comprises a network of both entities and processes (the engineered flow).”

(Source: http://www.aims.education/study-online/what-is-supply-chain-management-definition/)

Supply Chain Blockchain

Blockchain however is a more definitive technology.  As discussed in What Exactly is Blockchain? And How Does it Work? (Infographic)  the simplest definition is the best: It is a digital transaction ledger … period!   

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A more elaborate definition is:

“A Blockchain is a growing list of records, called blocks, which are linked using cryptography.  It is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. A blockchain is a decentralized, distributed and public digital ledger that is used to record transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the consensus of the network.”

(Source:  Wikipedia https://en.wikipedia.org/wiki/Blockchain

While Blockchain was originally associated with Bitcoin and enabling the management of cryptocurrencies, it is most important to understand that the fundamental concept is to manage transactions, ANY transactions, digitally.

Differences and Mutual Support

The dual inclusion of the word “chain” is the key point for highlighting differences and associations.

A Supply Chain involves the linkage of parts, products, services, processes, individuals, departments, organizations, companies, assets, and transactions.  The technology used underneath to make all of those linkages is highly variable.  People and processes still connect using everything ranging from phones and faxes through to email, spreadsheets, smart phones, the Internet of Things, electronic connectivity, artificial intelligence, machine learning and more.

A Blockchain involves the digital, electronic linkage of information through any type of transaction, leveraging the technology a a digital, electronic ledger.  The information could be anything as long as as it is digital.  It could used for health records management, insurance claims processing, contract management, financial services, voting records, cyber security, personal identification records, and more.

Blockchain

From the above definitions, and the context of what these are, it becomes easier to see that while they are different they can be mutually supportive.

Within Supply Chain, particularly the Digital Supply Chain of the future, the possibilities for the application of Blockchain become more obvious.

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Blockchain can be used to provide traceability, end to end connectivity, real time logistics tracking and goods movement, electronic funds transfer, purchase order management, contract management, negotiations support, sharing process information across nodes, and information security and more.

While the number of different systems, processes and technologies used to run any given Supply Chain today is too large to fathom, the future does seem to be converging on a more limited set of enabling technologies that will form the backbone of future Supply Chains.

The Internet of Things, Artificial Intelligence, Big Data, Advanced Analytics,  Cloud Computing, 3D Printing, and Blockchain will all form the basis for advanced development and deployment of the Digital Supply Chain.

Conclusion

While Supply Chain and Blockchain are different they are intertwined, or rather linked, more than just by name.

A Digital Supply Chain Strategy requires inclusion of a Blockchain technological capability.  Blockchain will be the enabling platform to provide full end to end electronic connectivity across the entire Supply Chain.

Large companies will certainly be the first to embrace this Blockchain technology given the investment requirements, but over time the costs and barriers to implementation will be lowered making this a more accessible capability for companies of any size.

Forward thinking Supply Chain leaders will consider Blockchain as a part of any long term, or short term, strategy.

Originally published on January 2, 2019.
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