In an evolving retail environment where pricing power and control are being consolidated with large players such as Amazon and Walmart, consumer goods producers can either closely work with the giants, or look for ways to maximize efficiency from their supply chain. Retailers, suppliers and logistics teams will have to integrate their systems much more closely than they have in the past.
The blockchain is the solution Jason English believes. Mr. English is the vice president of protocol marketing for Sweetbridge, the blockchain alliance for a liquid supply chain. Using the technology behind cryptocurrencies like Bitcoin, Sweetbridge seeks to improve the efficiency and lower the cost of B2B transactions.
The blockchain at its core is a value transfer system, Mr. English explained. And as a value transfer system it must protect against hackers and technical failures. Because the blockchain is completely decentralized, all transactors are visible and their transactions shared across the distributed ledger as the parties interact. As trades are reported they are written cryptographically onto the blockchain, where all participating nodes confirm. Subsequent transactions are written on top of previous ones.
“It’s an immutable record,” Mr. English said. “It’s a shared system, so the ledger cannot be manipulated or changed by one party. They’d have to change thousands of systems at one time.
Mr. English said security is assured on a blockchain-based system because all of the information parties need to know is exposed on it. Yet the transactions are cryptographically sealed and specific names not visible. Participants receive transaction confirmations which provide immutable records that cannot be reverse engineered.
The technology can secure identities and create value faster by linking with existing systems, he said. All of the required data cannot exist on the blockchain, so the network needs to connect with systems of record that keep track of production, sales, shipping and other data.
As blockchain technology becomes better understood, governments, economists and business organizations are understanding the interplay between digital and fiat currencies and seeing how value can be created, Mr. English said. The Sweetbridge team also has international trade and finance experience so he is confident they can address regulatory issues related to cross-border commerce.
“The liquidity in the global supply chain is equal to two-thirds of global GDP and commerce,” Mr. English said. “If we can drive increases and improvements in that by making all partners more responsible and creating ideal situations and outcomes, we can drive economic improvement and GDP for companies and nations.
“In the end, supply chain optimization is a win-win.”
In the digital economy humans may be getting replaced on the factory floor, but they are crucial to interacting with the many processes related to supply chain management, Mr. English said. Planning, strategizing, and trade route optimization all need the human element.
The Amazons and Walmarts are increasing the leverage over supply chains and are making harder for other brands or retailers to sell around or through it, Mr. English said. Participating suppliers are under price pressure while being expected to deliver overnight.
“To compete brands need to communicate and share info in supply chains through source materials, manufacturing, assembly, shipping and stores,” Mr. English said.
Luckily current settlement processes offer plenty of room for improvement. Long settlement times mean it can take weeks or even months to settle accounts and that has serious financial implications.
“Paying interest on future revenue creates serious cash flow problem in an era of tight margins,” Mr. English said. “We want to increase liquidity in the supply chain so all partners can realize cash in a quicker manner.”
That can be accomplished in several ways, Mr. English said. Companies can borrow against existing accounts on the blockchain without intermediaries and without paying interest. Partners can confirm transactions and settle payments much more quickly. Increased capital means more money to invest back into the business and the economy.
While many are still skeptical of all things blockchain, they should note that the biggest players are quietly betting big on its future. That means a blockchain-based supply chain could soon be commonplace.
“The internet was once a new protocol too,” Mr. English said.