In 2018 I participated in a blockchain panel at a conference of senior supply chain executives representing a variety of industries and companies. I welcomed the opportunity to learn how these supply chain executives felt about the potential impact of blockchain technologies in complex supply chains.
At the time, I was convinced that blockchain technologies would be a major next step in the evolution of the internet. Two years earlier, for example, the World Economic Forum (WEF) had named The Blockchain as one of the Top Ten Emerging Technologies for 2016 in its annual list. The WEF report compared the blockchain to the internet, noting that “Like the Internet, the blockchain is an open, global infrastructure upon which other technologies and applications can be built. And like the Internet, it allows people to bypass traditional intermediaries in their dealings with each other, thereby lowering or even eliminating transaction costs.”
I also believed that supply chain applications would emerge as the killer app for blockchain technologies, that is, an IT application whose value is simple to explain, its use is fairly intuitive, and the application turns out to be so useful that it helps propel the success of new technologies or products. For example, spreadsheets and word processing played a major role in the 1980s adoption of personal computers, as did e-mail and the World Wide Web in the 1990s mainstream success of the internet.
But, it hasn’t quite worked as expected, either for blockchain technologies or for their applications in supply chains. “Blockchain, the technology underpinning bitcoin and other cryptocurrencies, for years has been viewed by some companies as a way to drive industry-transforming projects, among them the tracking of assets through complex supply chains,” according to “Blockchain Fails to Gain Traction in the Enterprise,” an article published in the Wall Street Journal (WSJ). “So far that hasn’t happened.”
The article noted that 2022 had been a very tough year for blockchains, with the failure of several ventures, most prominently the recent announcement that TradeLens was discontinuing its blockchain-based global trade platform. TradeLens was launched by IBM and Maersk in August of 2018 to promote more efficient and secure global trade by leveraging the digital container with shipping information on its shared blockchain platform. It was one of the largest enterprise blockchain projects, whose partners included 15 major ocean carriers, 10 multinational trade finance banks, and more than 270 port terminals. According to the Maersk press release announcing that TradeLens would be discontinued, “The platform, founded on a bold vision of achieving global industry collaboration, has yet to reach the commercial viability necessary to continue work and function as an independent business.”
Why did TradeLens and other enterprise blockchain projects fail or, like Walmart’s food traceability application, are making slower progress than originally anticipated? The WSJ article cites three potential reasons: the difficulty of enlisting participants to collaborate on a common objective; the considerable time required to deploy a complex new transformative technology; and the intrinsic complexity of blockchain-based systems.
However, upon closer examination, it’s become clear that supply chains were nowhere ready to be transformed by a sophisticated technology like blockchain because many of the tasks and processes involved in supply chains are still in the early stages of digitalization.
The current state of supply chains was nicely explained in “Open-Source: The Key to Accelerating Supply Chain Digitalization,” by Sean O'Malley, co-founder of the supply chain company BlueX. “The advantages of digitizing supply chains are undeniable: improved visibility, enhanced efficiency, reduced costs, and better decision-making,” he wrote. “Despite these benefits, the adoption of digital solutions has been slower than anticipated. The root of this issue lies in the immense complexity and proprietary nature of these global networks. However, open-source software that is modular offers a promising solution by empowering companies to build upon a shared digital foundation.”
The article cites four key obstacles to the transformation of supply chains:
- Legacy Systems: “Many existing supply chains rely on outdated, fragmented systems that do not easily integrate with modern solutions.”
- Lack of Global Standards: “The absence of universally accepted data standards creates communication difficulties between different systems.”
- Cost and Expertise: “Implementing and managing comprehensive digital supply chain solutions requires significant investment and technical expertise.”
- Trust and Collaboration: “Building trust between supply chain partners is often crucial for data sharing and successful collaboration, yet it can be a slow process.”
These four obstacles bring to mind the state of IT in the early decades of the computer industry. In the 1980s, for example, proprietary systems from different vendors didn’t interoperate with each other.
Just sending an e-mail across two different proprietary networks and applications from different vendors was quite complicated, as was sharing information across disparate systems. Despite significant advances in computer technologies, their impact on economic productivity remained quite low, leading MIT Nobel Prize laureate economist Robert Solow to say in 1987 “You can see the computer age everywhere but in the productivity statistics,” which has since become known as the Solow productivity paradox.
This all changed in the 1990s when the Internet and the World Wide Web brought a badly needed culture of standards to the IT industry. Open network protocols (e.g., TCP/IP), were widely embraced across the marketplace, making it possible to interconnect systems from any vendors. Internet e-mail protocols, — SMTP, MIME, POP, IMAP, — enabled people to easily communicate with anyone on any system. And the Web’s open standards, — HTML, HTTP, URLs, — enabled any PC connected to the Internet to access information on any web server anywhere in the world.
A similar story played out with Unix. In the late 1980s, Unix became a popular operating system for technical workstations, supercomputers, and emerging internet systems. But, every vendor had developed its proprietary version of Unix, — IBM’s AIX, Sun’s Solaris, HP’s HP-UX, and several others, — and they were all somewhat different and incompatible with each other, making it difficult to port applications across these different flavors of Unix. Finally, in the 1990s Linux emerged as a Unix-like operating system that over time was embraced by all vendors.
O’Malley wrote that the same kind of standards, open-source modularity, and collaborative innovation that propelled IT forward in the 1990s can provide a powerful framework for the evolution of complex supply chains. The framework should include the following product pillars:
- Building Blocks, Not Monoliths: “Instead of imposing one-size-fits-all solutions, open-source software allows companies to select and combine modular components that address specific needs” such as bills of lading, payments, and customers.
- Shared Foundation: “Open standards and protocols promoted by open-source projects create a common language, enabling seamless integration and data exchange between different solutions.”
- Collective Innovation: “A large community of developers contributes to open-source projects, driving innovation, security improvements, and rapid problem-solving.”
- Lowering Barriers: “Open-source reduces the cost of entry, especially for smaller businesses, who can leverage pre-built components instead of starting from scratch.”
Such a framework encourages businesses to focus on competitive differentiation. By building proprietary solutions atop proven open-source models, companies can:
- Develop Unique Solutions: Address specific supply chain challenges by building innovative proprietary software offerings atop open-source modules, as has long been the case with the internet, Web, and Linux.
- Accelerate Time-to-Market: “Focus development efforts on unique features instead of reinventing basic infrastructure.” And,
- Create a Thriving Ecosystem: “A diverse ecosystem of proprietary solutions around a common core benefits all stakeholders.”
As O’Malley pointed out: “The electronic bill of lading (eBL) is a perfect illustration where this model is playing out. Initiatives like Open eBL are establishing the fundamental framework for creating and managing eBLs. This open-source foundation paves the way for a wide range of companies to build complementary, value-added services that leverage the bill of lading (e.g., customs, financing, payments), accelerating the shift away from paper-based processes.”
In a companion article, “The Future of Supply Chains: An Open-Source, Standards-Based Approach,” O’Malley further explained Open eBL, a recently launched non-profit initiative co-founded by the Center for Global Enterprise (CGE) and BlueX. Initially focused on establishing open-source standards for the electronic bill of lading (eBL), Open eBL aims to develop open-source supply chain solutions by working with a community of large supply chain players and stakeholders.
“As the network of Open eBL expands, there is the added benefit of a marketplace of standard Apps and integrations that can allow all stakeholders to further benefit from the growing ecosystem,” wrote O’Malley in conclusion. “The systemic expansion of the Open eBL network and community will create the opportunity for participants to collaboratively explore and experiment with solutions to wider digital trade document concerns including solving for other related trade documents critical to trade.”
I’ve been a CGE Fellow for the past decade, and I am now involved with Open eBL as technology advisor. The emergence of initiatives like Open eBL demonstrates the potential of open-source frameworks to foster collaboration and innovation, paving the way for a more digital and efficient future for supply chains. As these efforts continue to develop, there is hope that the next wave of technological advancements will finally deliver on the promise of blockchain, transforming supply chains in ways that enhance visibility, efficiency, and collaboration across the global economy. The journey will be more complex and take longer than initially anticipated, but the foundation is being laid for a future where supply chains are more resilient, transparent, and adaptable to the ever-evolving demands of the global marketplace.
Thank you for this thorough and very understandable description giving a realistic push to the lesson that Past is Prologue"...........this time in a more successful and "open" way.
Posted by: Christopher Guy Caine | May 30, 2024 at 02:21 PM