Blockchain has been heralded as the technology that will ultimately provide us with supply chain transparency. However, industry experts have their doubts. The technology has many key advantages, but there are valid reasons why blockchain is more likely to support rather than be the solution to maximum supply chain visibility. “Blockchain is just a protocol. It’s an advancement in cryptography that makes storing and certifying records easier. That doesn’t mean it’s the magic bullet for every industry, according to Skalex GmbH, a German blockchain software company. Moving toward a truly transparent supply chain economy will require advances in other technologies as well, according to Skalex. For blockchain to be effective, there will have to be buy-in from each supplier throughout the entire supply chain - and a willingness to share supply chain data with the public at large. That could be the biggest challenge. Everyone talks about greater transparency, however few companies want to make the leap to making their supply chain data totally public. <h3>Potential Benefits for More Transparent Sourcing</h3> • Replace manual processes. Outperform current software used for supply chain management that still requires some manual input. • Better traceability through each step of the supply chain – something that’s currently challenging for products like apparel that have a very complex supply chain. This is especially critical since often times parts of the apparel supply chain can be ‘unknown parties’. • Less time can be spent validating data and more can be spent on delivering goods and services—either improving quality, reducing cost, or both (Deloitte) • Reduce losses due to gray market or counterfeit goods. • Improve visibility and compliance over outsourced or contract manufacturing. <h3>Obstacles for Industry</h3> • Cost. Bitcoin pays people to validate each block on the chain. • Bitcoin pays people to validate each block or transaction, and requires people who propose a new block to include a fee in their proposal. Such a cost would likely be prohibitive in supply chains because their scale can be staggering, according to a report from McKinsey & Co. • Example: “In a 90-day period, a single auto manufacturer would typically issue approximately 10 billion call-offs just to its tier-one suppliers. • “Also, together all of those transactions would significantly raise demand for data storage, an essential component of blockchain's distributed-ledger approach. In addition, creating and maintaining numerous copies of data sets would be impractical in the supply-chain environment, especially in permissionless blockchains,” added McKinsey & Co. • Blockchain can help with managing and securing certifications from third-party suppliers about their processes and material, but it can’t perform the inspections for you. • Compliance, particularly workplace safety and payment of minimum wages requires hands on supervision. Blockchain won’t stop unscrupulous vendors from passing off fake certificates of compliance. It won’t pick up on false product labelling either. “Blockchain will play an important role as a <strong><em>protocol for verifying information</em></strong>. However, it won’t revolutionize supply chains on its own, and moving to blockchain will require additional technologies and process changes,” according to Skalex. <h3>The Growing Role of IoT and RFID</h3> Chief among the necessary technological advancements is the <strong><em>internet of things</em></strong>. To make it practical to track complex supply chains, we’ll want the products to track themselves. It would be time consuming and introduce too much overhead for employees to scan or sign each product. Advancements in <strong>RFID chips</strong> and other sensors could make it so that we can track the location of items within a factory or in transit at any time. Many companies are already using these <strong>IoT technologies</strong> and seeing massive benefits in efficiency and transparency, without the need for a blockchain. In order for a blockchain solution to make sense, there needs to be corporate buy-in from every company at every step along the way in the process, from resource procurement to manufacturing to delivery. It’s possible to use blockchain at a smaller scale, but it really starts to make sense at a large scale. The difficulty is getting that many independent players on board, trained, and ready for such a project would be an enormous undertaking. The blockchain technology would need to be well proven and show a clear business benefit worth the investment. So far, we don’t really have that kind of convincing data for blockchain in these industry use cases. Transparency will continue to be a key consumer concern and thus a growing priority for brands. However increasing transparency will be something that for most companies will evolve over time. Unfortunately, there is no one-size-fits-all solution. Each company will need to find the right solution for itself.