By Jen Massing Harris, Co-Founder and Marketing Operations 

There’s no doubt that there is a lot of buzz around blockchain among those involved in the supply chain and trade finance world. We know this from the many conferences, seminars and other events that Chain Business Insights’ Co-Founders and Research Principals have been asked to participate in during the past few months. We like to get out as much as we can to engage with the community and find out in person what their interests, questions and concerns are regarding this transformational technology. Below are some key memories and takeaways from recent events.
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World Trade Council, Austin Chapter– We presented an introduction to blockchain to this group that focuses on international trade. While most of the attendees were very new to blockchain, we were impressed by how quickly they caught on. One person picked up on blockchain’s immutability aspect, asking how the “right to be forgotten” aspect of Europe’s General Data Protection Regulation (GDPR) would work in a blockchain world. The answer of course is to combine the functionality of traditional databases and blockchain, and to ensure only a subset of data is stored in the latter. ​

By Ken Cottrill, Co-Founder and Research Principal ​

​As someone who struggles to remember names, the notion of remembering 380,000 seems other-worldly.
 
In a recent company announcement Starbucks’ Director of Traceability, Arthur Karuletwa, says: “since its beginning, Starbucks has known the names of the farmers within its supply chain, including the more than 380,000 farms it worked with last year alone.”
 
Of course, Starbucks has a high-powered IT system to keep these names on file and retrieve them when necessary. But the broader point is that not every company is as diligent about maintaining relationships with small-sized suppliers. For many companies, myriad small supplier farmers and manufacturers tucked away in remote areas of developing countries underpin their operations yet are largely anonymous. 
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Think of each smallholder as a pixel in an intricate supply chain picture. If many pixels are hazy or invisible, the overall picture is blurred. It’s very difficult to get a clear idea of what is going on when the image is unclear. In other words, it’s difficult to achieve high levels of traceability and visibility when a large portion of the supply chain is ill-defined.  
 
That’s changing as distributed ledger and other technologies make it possible to connect with large networks of suppliers and track them individually, and consumer demand for supply chain transparency becomes irrepressible.

Starbucks has launched a pilot program with select coffee farmers in Costa Rica, Colombia and Rwanda to “develop next-level data technology to log and share real-time information along the journey of coffee beans with the aim of driving positive impact to smallholder farmers within its supply chain.”
 
The Starbucks pilot will use “traceability technology” – or blockchain technology – to take bean-to-cup transparency to the next level. And the coffee retailer will make the results of its two-year pilot publicly available.

​Welcome to the March issue of Chain Business Insights’ Blockchain/Supply Chain Management Vendor Focus.
 
This month, we have news and analysis for you regarding R3 and TradeIX, DNV GL and VeChain and Ambrosus. In addition, the “worth noting” section mentions CargoX, FR8, Open Port and Zemit. Of course, we’ll give our own insight into specific developments as well as the broader market dynamics. This is actionable intelligence, so let’s get stuck in.

​One of the big promises of blockchain is to store and share data gathered from IoT devices. Putting sensors on equipment enhances track and trace capabilities, and enables actors along the supply chain to monitor conditions while goods are in transit, thus lowering risk. Storing the data on a blockchain not only provides a single view of the truth, but also prevents data from being falsified.
 
This is of great interest to those involved in cold chains. A cold chain or cool chain is a temperature-controlled supply chain. An unbroken cold chain is an uninterrupted series of refrigerated production, storage and distribution activities along with associated equipment and logistics, which maintain a desired low-temperature range.
 
Consider the pharmaceutical cold chain as an example. Many vaccines can lose potency if exposed too long to temperatures outside the recommended range of 2 to 8 degrees Celsius. In a literature review of 45 studies that assess temperature monitoring of vaccines in various regions of the world, UNICEF found that 33.3% of storage units in wealthier countries and 37.1% in lower-income countries contained vaccines that had been exposed to temperatures below recommended ranges. The proportion of vaccine shipments found below recommended temperatures was 38% in wealthier countries compared to 19.3% in lower-income countries. That means a huge amount of product is wasted, and large patient populations aren’t getting inoculated, which may result in a health hazard.

Few images can be as incongruent as that of refugees in the Azraq camp, Jordan, staring into an iris scanner to confirm their identities before purchasing food in the camp supermarket.
 
This is how 10,000 refugees in the camp can get food relief, courtesy of a payment system developed by the United Nations World Food Programme’s (WFP) Innovation Accelerator in Munich, Germany. The biometric identity check system affords the camp’s refugees access to a food stipend from the WFP.
 
Unbeknown to the shoppers, sitting behind the scanner is a blockchain-based management system that delivers aid supplies faster, cheaper and, crucially, more secure in a supply chain rife with corruption, according to the WFP.
 
Welcome to the brave new world of food aid programs.

Blockchain-inspired innovation could not have come too soon to this world. An estimated 30% of all the development funds that support international relief programs fail to reach the intended recipients owing to third-party theft or mismanagement. A host of fees and costs syphon off funds flowing to the needy.

​Welcome to the first Chain Business Insights vendor update of 2018. A lot is happening in the blockchain meets supply chain world, and we’ll highlight some key developments below. Usually, this update is a pay-per-view post (or free for our clients of course), but since we’re still in beta mode and would like early feedback, we’re making it free to all one final time. We’re keen to receive comments, and if you’re working on something that you feel merits inclusion, please contact us.

In this roundup, we have news regarding IBM and Maersk, Viant, Provenance, Chronicled, OriginTrail and Streamr.

IBM and Maersk

IBM and Maersk announced that they’re forming a joint venture company to develop and commercially operate a set of blockchain applications to “accelerate the digitalization” of global trade processes. The IT and shipping giants first began collaborating in June 2016.

The as-yet-unnamed JV expects to launch products within six months of receiving required regulatory approvals, and these will initially focus on:

– providing end-to-end supply chain visibility, allowing all players to exchange shipment event information in real time; and

– digitizing paper trade documents and automating processes using smart contracts, to reduce the time and cost for cargo clearance.

By Co-Founders and Research Principals: Ken Cottrill, Sherree DeCovny and Pete Harris ​​​​​

Since we published our Blockchain meets Supply Chain eBook last April, we’ve had conversations with many professionals in supply chain, logistics, manufacturing and finance. Along the way, they’ve asked how we think blockchain’s adoption is going to play out in the near to medium term. With that in mind, our research principals have put together the following 10 predictions for 2018:

From Ken Cottrill:

1. As more companies become familiar with the technology and gain an understanding of how it can deliver value in the supply chain, proof-of-concept activity will surge in 2018. An increase in the number of industry initiatives will fuel this development work.

2. Blockchain development projects that tested the technology in key areas such as trade documentation and product track and trace in 2017 will move to the pilot stage in 2018. The first live applications will emerge. 

3. Increasing interest from regulators in the growth of Bitcoin will spill over into other applications areas such as supply chain. The participation of regulators will add impetus to blockchain’s progress in areas such as the development of smart contracts.

​Traditional trade documents such as the Documentary Letter of Credit (LC) are in decline in cross-border commerce, so why are companies investing time and money in developing blockchain solutions that digitize them?
 
For example it was reported recently that global financial group BBVA used blockchain technology supplied by Wave to reduce the time taken to complete an international trade transaction from seven to 10 days to just 2.5 hours. The transaction involved the export of a shipment of tuna from Mexico to Spain, and payment was made using an LC issued by BBVA in Spain and processed by Bancomer in Mexico.
 
LCs have been around a long, long time. In international trade, an LC is basically a commitment by a bank on behalf of a buyer that payment will be made to the exporter provided that the terms and conditions are met, as verified through the presentation of all required documents.
 
The last phrase encapsulates the problems with LCs. The need to present documents to facilitate trade payments makes the process vulnerable to fraud and error. It’s also a relatively slow, expensive and unwieldy way to conduct business internationally. 
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Ocean shipping company Maersk estimates that the costs associated with trade documentation processing and administration represent up to one-fifth of the actual physical transportation costs. In 2014 Maersk looked at a simple shipment of refrigerated goods from East Africa to Europe, and found that the transaction involved some 30 people and organizations and more than 200 different interactions and communications between them.

Welcome to the latest vendor update, curated by Chain Business Insights, in which we focus on recent significant news from the blockchain meets supply chain world. Usually, this update is for our clients only, but since we’re still in pilot mode, as it were, we’re making it free to all. Don’t get used to it! Also, if you are doing something that you feel merits inclusion, we want to hear from you, so please contact us.

In this roundup, we have news for you regarding BiTA, IBM, SAP, ShipChain and Sweetbridge: 

BiTA

This industry group is just months old and already it has an expanded mission and a new name to match. The Blockchain in Trucking Alliance is now the Blockchain in Transport Alliance, with a focus on “development of blockchain standards and education for the freight industry.” No biggie then.

2017 was supposed to be the Year of the Blockchain Pilot in the financial services industry, but it didn’t quite pan out like that.
 
What blockchain lessons can the supply chain community learn from the financial markets?
 
Several industry panels at the Blockchain for Wall Street conference on November 14, 2017, in New York City, took a retrospective view of their efforts to advance blockchain solutions during the year. They reported significant achievements in many key areas, but patchy progress towards the completion of fully-fledged pilots.
 
In their defense, the task of changing multi-trillion-dollar, heavily regulated banking systems is not to be taken lightly, especially when the existing technology – albeit now quite old – functions well. Also, there was a general acceptance that the industry is a comparatively slow innovator.
 
Still, the lack of successful pilot completions this year underscores just how challenging it is to implement a highly disruptive technology. 

The cannabis industry is highly decentralized because of the regulatory mandates on both the state and municipal levels. It’s fast growing: North American marijuana sales grew by 30% in 2016 to $6.7 billion, according to Arcview Market Research. It’s still emerging from the black market, which creates uncertainty about the industry.
 
Financial institutions see an opportunity to serve businesses along the cannabis supply chain, but they’re concerned about the risk, particularly because the substance is constrained at the federal level. In 2014, the Financial Crimes Enforcement Network (FinCen) issued guidance clarifying customer due diligence expectations and reporting requirements for financial institutions seeking to provide services to the cannabis industry. Yet many financial institutions don’t have the knowhow, sophistication or technology to execute on the guidance. To this end, cannabis is primarily a cash business.
 
Lamine Zarrad, a former U.S. Marine and bank examiner at the U.S. Treasury’s Office of the Comptroller of the Currency (OCC), formed Tokken to fill help this gap. He developed the Tokken mobile wallet, which consumers can use at participating retailers. At the point of sale, money is transferred from the consumer’s chosen payment account into the Tokken system. The transaction is recorded on Tokken’s blockchain-based indelible ledger, and the balance is issued to the retailer.

The perennial problem of truck driver shortages is back with a vengeance. Technologies such as blockchain could help fix a problem that puts a brake on the U.S. economy.  
 
“Simply – without trucks, America stops,” says the American Trucking Associations (ATA).
 
They are not exaggerating.
 
Trucks transport more than 70% of all the freight tonnage moved in the U.S. To move 10.5 billion tons of freight annually requires more than 3.4 million heavy-duty trucks and over 3.5 million drivers, estimates ATA.
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Drivers are in short supply for a variety of reasons. Wages in the business have not kept pace with other industries while costs have increased. Other factors include extended periods away from home, the stresses and strains of meeting ever-tighter delivery windows, and a general lack of respect for the profession. Drivers also must contend with tighter regulations governing their hours of service. 

Technology can’t solve these problems – but it can make truck driving more palatable and perhaps slow the flight away from hauling freight as a career by freeing up drivers’ time. 

Welcome to the new monthly update from Chain Business Insights, in which we focus on news and developments from blockchain technology vendors operating in the supply chain space. Usually, this update is for our clients only, but since this is a pilot posting, as it were, we’re making it free to all.
 
A lot is happening in the blockchain meets supply chain world, and each month we want to highlight what is important. If you are doing something that you feel qualifies for inclusion, we want to hear from you, so please contact us.
 
This month, we have news for you regarding IBM, Ambrosus, Provenance, Ripe.io, R3, TradeIX, Cisco and the Trusted Internet Alliance, Oracle and SAP. Let’s get going, starting on a few developments related to food supply chains (which we dived deep into in some recent research) …