INSIGHTS

Onboarding the blockchain

Published 2019-10-21

All industries are becoming more and more technology-driven. We are always looking for new technologies to solve old frustrating problems, or to give us a competitive edge in fast-moving business environments.

It has been predicted for a few years now that supply chain will be a great place to introduce blockchain technology. It is because of the blockchain's inherent characteristics such as transparency, immutable records, resilience against attacks etc.

When starting a blockchain project, it is for obvious reasons easy to focus on the blockchain technology itself. However, in this article, I will point out one area that is of specific interest when implementing a blockchain project. It has little to do with the technology and more to do with new challenges regarding business structures, business relationships and related interfacing technologies that arise because of the nature of blockchain technology.

The first challenge to look at is the onboarding/offboarding process to/from the blockchain. Imagine a complex supply chain with tier 3, tier 2 and tier 1 suppliers and several manufacturers. These relationships are not static. They can be quite dynamic. Let's say a number of these actors agreed to use a blockchain to track their interactions and the flow of goods from one to the other. It would be necessary for the parties to agree on how you would join and onboard the blockchain, as well as offboard. For the blockchain to function in a way that it serves the purpose of tracking the provenance of the goods that flow through the blockchain the on/offboarding process needs to ensure that only qualified suppliers can join. If any dodgy counterfeit supplier could join, the blockchain would not be able to serve its purpose. It could not provide the supply chain with integrity ensuring the provenance of the items flowing through the supply chain.

The challenge is similar to the "Know Your Customer" (KYC) regulation in the banking sector. Banks must ensure that they have thoroughly verified the identity of a new customer before opening a bank account. The regulation makes it harder for criminals to launder money or commit tax fraud. Who in the supply chain should have the role of enforcing the on/offboarding of suppliers? And take on the cost of that administration? If the question is answered from a business perspective, it is a great start. A dominant player in the supply chain, e.g. a huge manufacturer, may enforce the policy by stating - "if you want us to buy your products you must join the blockchain, and this is the process"! In heavily regulated industries there might already be suitable actors/regulators who can stipulate the rules and take on the verification and administration. It should also be in their interest. In many business domains, there are already purchasing portal that essentially provides the services of vendor auditing and verification. Regardless of the solution, it is a process and solution that must be defined and implemented when using blockchain for supply chain integrity and visibility.

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