Blockchain has gained traction in many industries. Twenty-four proof-of-concepts (PoC) or pilot programs in the industrial sectors have emerged recently. These PoCs and pilots are generating clear business benefits for the participants to justify the associated investments. ARC Advisory Group expects many of these consortia to continue and new ones to be created.
Owner-operators should join an existing blockchain PoC if available for your industry. Enterprise software suppliers should examine their software for ease of integration with a blockchain application and, if complex or inelegant, fix it.
Industrial Blockchain Pilot Programs
Blockchain has gained notoriety as a software component for cryptocurrencies. It can manage ownership without a central authority in a distributed, peer-to-peer network among entities that may not be trustworthy. This strength has gained the interest of the business community and applications are emerging in the industrial and supply chain areas.
ARC examined PoC trials and pilots in the industrial domain areas – most starting in the past six months. Some PoCs are just beginning, with websites explaining a clear purpose to help recruit members. Most have grown to become active consortia conducting transactions among multiple participants in the target industry.
Common PoC Attributes
Common attributes in these pilot programs include:
- Independent entities with common interests and shared pain points
- Improve operational performance by sharing data
- Each POC typically has a leader that initiates the consortium, but all participants invest in and benefit from the collaboration
The most mature PoCs involve track and trace in the food supply chain, which has a strong business case. The supply chain from farm to table has come under more detailed scrutiny by the US FDA and other regulatory bodies due to improved access to healthcare data and analytics. Recently, food borne illnesses in one-person-per-million were detected and drove a recall – a good thing for the general population. But for businesses, the average direct cost of a food recall is $10 million. Companies have responded by adopting blockchain for track and trace to be able to identify the source of contamination and limit the size of the recall to reduce the cost.
The next PoCs in maturity involve global trade and logistics to replace manual systems involving FAX, email, and phone calls. Business processes are often siloed without visibility among trading partners. Blockchain provides a secure way to execute transactions rapidly at lower cost.
Strengths of Blockchain
Blockchain software encompasses three major components:
- Multiple layers of cryptography that prevent altering and enables trust
- Distributed ledger with multiple copies to identify any alteration
- Logic for decentralized governance with no central authority or broker
To improve transaction speed and lower overhead costs, other versions of blockchain have emerged. The changes involve restricting write and read access to approved, trusted participants, i.e., private and permissioned. Currently, four approaches are available.
The multiple layers of encryption, logic, and a distributed database assures validation and data integrity so the shared information can be trusted, even if some of the participants are untrustworthy.
The decentralized governance in blockchain removes the need for a central authority or third-party intermediary like a broker. These types of entities typically silo the data with limited access by others and require manual methods for sharing (FAX, email, or letter). Blockchain provides immediate electronic access, providing high visibility among the participants.
Blockchain provides the infrastructure for applications to manage ownership across a peer-to-peer network. Managing ownership includes:
- Identify the asset
- Identify the owner
- Secure transfer of the asset from one owner to another
- Visibility by all participants
- Unknown number of peers with unknown trustworthiness
Key Blockchain Pilots for Industry and Supply Chain
ARC examined 24 PoCs and pilot programs in the aerospace, automotive, chemical, food & beverage, logistics, mining, oil & gas, pharmaceutical, and power industries. Summaries of a few major PoCs follow.
IBM Food Trust
The IBM Food Trust’s objective is to ensure food safety among growers, processors, distributors, and retailers. Founding members include Dole Food, Driscoll’s, Golden State Foods, Kroger, McCormick and Co., McLane Company, Nestle, Unilever, and Tyson Foods. This blockchain application traces products securely in seconds digitally vs. weeks for paper-based methods. It is used to identify the source of a foodborne illness to narrow the size of the recall to truly contaminated products to reduce costs.
European Institute of Innovation and Technology (EIT) Food is a European partnership including 50+ organizations to improve trust and transparency of food sources. It is European Union-supported with participation by food companies, research associations, and educational institutions. The pilot exchanges information on products in the supply chain for track and trace.
Walmart Fresh Foods
Since foods like lettuce, spinach, and fruit are typically consumed raw, contamination is prone to cause sickness. This blockchain program has reduced the time to identify a food’s source from seven days to 2.2 seconds. The pilot finished in December 2018 and is being expanded to 100+ farms.
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Keywords: Industrial Blockchain, Proof of Concept, Track and Trace, Supply Chain, ARC Advisory Group.