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Blockchain: The Next Generation in Food Supply Chain

by Aristides Smith  07/17/2018

As a leader in supply chain management, Next Generation Logistics (NGL) has been following the trends in TMS technology and wider supply chain technology for the past three decades. So to better understand the impact emerging technology has on the supply chains of the small to medium sized businesses (SMB) we serve today, NGL actively monitors the latest developments in areas like artificial intelligence (AI), robotics and virtual reality. While there is a lot of hype in all the emerging technologies that are part of digital transformation discourse today, perhaps none has captured our attention more than blockchain.

What is blockchain and why now?

The idea around blockchain was first documented in 2009 by Satoshi Nakamoto, the name used by an unknown person or people who authored the seminal paper called Bitcoin: A Peer-to-Peer Electronic Cash System. The goal was centered around creating a network to freely trade in digital currency without the need to go through a financial institution. At its core, Bitcoin established the first peer-to-peer system using decentralized shared database and cryptography to establish trust without intermediaries, otherwise known as blockchain.

Fast forward ten years, and blockchain technology has brought with it an enormous amount of attention that essentially falls into two camps.

One blockchain camp is the cryptocurrency miners and investors. Starting with Bitcoin, today +1000 cryptocurrencies are actively traded on digital currency exchanges. With ROI returns often exceeding 1000%, cryptocurrencies have created a feeding frenzy for speculators looking for the next big Initial Cryptocurrency Offering or (ICO). Today even market exchanges like the CBOE and CBT offer futures contracts on Bitcoin. But for those of us that remember, the development of Bitcoin and later altcoins in these markets is reminiscent of the early days of B2B exchanges in the late ‘90s. Yet to be proven as a true alternative to sovereign currency such as Euros, Yen or US dollars, many market pundits speculate the cryptocurrency market bubble led by Bitcoin may be ready to burst.

The other blockchain camp is being led by pioneering technology companies that are building the foundations for revolutionizing both product and service industries globally, but by taking blockchain far beyond its use as a digital currency mechanism. One example of this innovation was the development of Ethereum. As per market valuation, the ETH - the Ethereum Currency - ranks second among all the top cryptocurrencies ever, but as a blockchain platform, it was purpose built for creating smart contracts or computer code stored within a blockchain, which can encode self-executed contractual agreements. Another innovation is the use for application development to create dapps. Serving as alternatives to today’s existing web applications, dapps are applications that can run securely protected in decentralized fashion across a blockchain network of nodes.

Investment in Blockchain

Innovations like these have sparked the imagination of both the investor and developer communities alike, fostering investment in numerous blockchain use cases and pilots in many fields including finance, health care, insurance and, of course, supply chain. The march of investment from both corporations and venture capital firms is manifest. Given all this activity in blockchain, research firm IDC expects blockchain spending to grow at a robust pace over the 2016-2021 forecast period with a five-year compound annual growth rate (CAGR) of 81.2% and total spending of $9.7 billion in 2021. Others like Gartner estimate the business value-add of blockchain will grow to slightly more than $176 billion by 2025, and then it will exceed $3.1 trillion by 2030.

Today leading blockchain platforms have emerged beyond Ethereum, like Hyperledger, Corda and Ripple. Global technology giants like IBM, SAP and Microsoft have partnered with these platforms to expand their technology footprints. Some of the most recognized pilots include Maersk - IBM establishing a joint venture to provide more efficient and secure methods for conducting global trade using blockchain technology. Another is Walmart and a group of food giants to explore how to apply blockchain technology to their food supply chains.

What blockchain means for NGL and SMB supply chains

While all this sounds great for large players with deep pockets, what does this mean for small and medium sized companies (SMB) and their supply chains? Part of the challenge is simply about education. When SMBs hear about new innovations like blockchain, they want to jump right in without understanding what it is and the potential impact on their existing IT infrastructure.

In this regard, a recent Gartner survey shows that only 9 percent of companies have already invested and deployed or are experimenting with blockchain, while 43 percent have it on their radar but have no action planned. Moreover, a whopping 34 percent have no interest! The reality is that companies of all sizes want to establish a competitive advantage in their marketplace, but often don’t have the right information or partner as a place to start.

According to Ari Smith, CEO and President of NGL, “As a founding principle of NGL thirty years ago this August, we’ve always advanced the cause of clients by helping them innovate supply chain strategies against their larger competitors. Today, we are continuing that tradition by investing in development and education of blockchain for food logistics supply chain.”

While still in its early stages, blockchain promises to become the next disruptive technology that must be addressed by SMB executives today. But just like any new technology, it is done with proper planning and insight. NGL isn’t just talking about blockchain, but is playing a active part in its development and use as a leader in the food supply chain industry. For NGL, blockchain today means several things.

  • First, blockchain does not exist in a silo. Like any technology, blockchain will need to be woven into the fabric of the wider IT enterprise like ERP and MRP systems. In this regard, NGL is developing blockchain on its existing Microsoft technology using tools like Azure Blockchain Workbench. Rob Ramsey, Director, Software Development at NGL notes, “Our blockchain strategy enables us to leverage our deep investment in Microsoft technology. This means pre-built integrations to the cloud services needed for application development such as associating blockchain identities, triggering smart contracts with service bus and event hubs, and messaging into formats expected by native APIs on leading blockchain platforms like Ethereum.”
  • Second, the emergence of Internet of Things (IoT) as a disruptive technology, is very closely aligned to blockchain for use in supply chain logistics. Use cases for IoT are actively being developed to help organizations improve compliance to contracts and real-time access to logistics information for monitoring against conditions such as product source, quality and temperature control. John Riske, Vice President, Business Development notes, “When IoT is linked with blockchain and other technologies like cloud apps, data storage and warehousing, and AI, it will be a game changer. The potential of these technologies working in concert will make it possible to realize new levels of cost savings from optimized shipping and network distribution, minimized shipping costs and improving visibility to advanced landed cost reporting.”
  • Third, to function effectively and efficiently today, supply chains require new levels of data and information transfer. Today NGL partners with EDI providers to create "plug & play" transportation EDI transaction sets such as EDI 204, 990, 210 and 214. While NGL supports these EDI documents, the traditional challenge of EDI is its reliance on intermittent point-to-point modem communication that’s often been cumbersome, expensive and simply doesn’t allow for accurate information that is consistent, normalized and in real-time. “To remedy these challenges, NGL is partnering with industry leaders like Project 44 to find new levels of data efficiency and effectiveness, by replacing traditional EDI with open APIs and blockchain technology,” notes Mr. Smith.
  • Last, but not least, NGL is playing an active role in the blockchain community. Today NGL is proud to announce its membership in the Blockchain in Transportation (BiTA). The goal of BiTA is to provide a forum for technology standards and commercialization in the freight and transportation industry. As the largest commercial blockchain alliance in the world, BiTA brings together companies that generate over $1 trillion dollars in revenue. Participation in BiTA will help NGL stay ahead of the latest blockchain standards by participating in their upcoming events like BiTA Fall Symposium in Garland TX.

    As we look forward to 2019 and beyond it is becoming clear to us that change is on the way and blockchain is pivotal to this evolution. So, over the next few months NGL will be sharing some of our thoughts on blockchain through a series of blogs on blockchain topics. In the meantime, is blockchain all that it’s made out to be? Will it truly revolutionize your business? What challenges do you anticipate with blockchain?

    Let us know your thoughts …

Next Generation Logistics Inc. offers DynamicsTMS® 365 software solutions as well as other services to enhance your processes and your bottom line. To learn more, visit us online or give us a call at 847-963-0007.