Blockchain in Supply Management: A Misplaced Revolution?

September 18, 2023

In the relentless tide of technological innovation, few terms have shimmered as much promise — and instigated as much debate — as blockchain.

Interestingly, Satoshi Nakamoto, the pseudonymous creator behind bitcoin, never used the term “blockchain” in the original white paper, instead referring to it as a “chain of blocks.” Over time, the community coined the now-ubiquitous term “blockchain” to describe this foundational technology.

Once lauded as the backbone for revolutionary cryptocurrencies like bitcoin, which boasts a stellar record of 100-percent uptime, a feat even billion-dollar infrastructures do not always achieve — blockchain’s potential is now flaunted across a spectrum of industries. Chief among these proposed applications is supply chain management.

However, the looming question remains: Is blockchain genuinely revolutionary for supply chains or merely a byproduct of technological euphoria?

A Certain Magnetism

Blockchain’s allure for supply chain management is undeniably magnetic. It vows three Ts — transparency, traceability and trustworthiness — tantalizing to any logistics or supply management professional.

Yet, as the gears shift from theory to practice, does blockchain indeed satisfy these towering expectations? Or are we trapped in the siren song of “linkedfluencers” and consultants whose primary allegiance is to their profit margins, not the evolution of the industry?

In their Harvard Business Review piece, “The Truth About Blockchain,” authors Karim Lakhani and Marco Lansiti highlight the intricate challenges tethered to blockchain’s business adoption. Their insights delineate the chasm between blockchain evangelists’ grand promises and the sobering, pragmatic business landscape.

These authors contend that embracing blockchain is not a mere technological pivot; it’s a seismic paradigm shift demanding radical reinvention of business processes. It’s not merely grafting a tech solution onto extant structures. It’s radically reshaping them. Such transformation is not only ambitious but riddled with costs and delays.

Yet, during these times of technological frenzies or hype cycles, firms often garner premium valuations, propelled by venture capital funding. Venture capitalists, enamored by the shimmer of potential breakthroughs, sometimes overlook the granular realities. A 2017 report from Bitcoin Magazine emphasizes this sentiment, highlighting the buzz around blockchain’s applications in trade and supply chain source.

All too often, as innovations like Internet of Things (IoT), artificial intelligence (AI) and blockchain emerge, a cadre of proclaimed “experts” saturates the internet and platforms like LinkedIn. Their pitch? Promises of revolutionary shifts that tend to gloss over challenges, compatibility issues and tangible returns. Their ambition? Secure the deal, ride the crest of the wave.

This isn’t an indictment of genuine pioneers in the domain. Still, it’s crucial to recognize the “trilemma” — that achieving scalability, decentralization and security simultaneously in blockchain is a near-impossible feat — as cited by Vitalik Buterin, co-founder of Ethereum, a decentralized blockchain network.

To provide some clarity, think of a blockchain fork as a pivotal decision point. A soft fork is akin to updating the rules of a game without making the old versions unplayable, while a hard fork is like creating a new game based on the old one, compelling players to decide which version to play.

Notably, in the wake of the DAO (decentralized autonomous organization) hack, even Buterin chose the latter approach, a hard fork. This resulted in the emergence of two distinct blockchains: Ethereum (ETH) and Ethereum Classic (ETC). Such a move, though taken to protect users’ funds, was contrary to the foundational promises of blockchain and its immutable ledger.

Pros and Cons

Discernment in this arena is vital. While blockchain brims with potential, it isn’t a panacea. The essence lies in nuance, probing questions, and a skepticism of universal solutions peddled without organizational context.

Skepticism is not the nemesis of innovation — it’s a crucible. It ensures judicious adoption, shielding sectors from misaligned ventures and spotlighting truly transformative innovations.

The dialogue around blockchain in supply chain management yearns for equilibrium: a harmony between its potential and pitfalls, its proponents and critics, its evolution and reflection. Supply management professionals have an obligation to approach blockchain with a blend of enthusiasm and prudence. This ensures the pursuit isn’t just about the next technological marvel, but about genuine, enduring industry advancement.

The blockchain narrative, unfortunately, often is divorced from the technical realities it purports to revolutionize. The loudest voices championing its marvels aren’t always rooted in the technical trenches — they’re not the programmers fluent in intricate syntax or the network designers who grapple with systemic complexities. Instead, it’s often opportunists from diverse markets who seem to be steering the discourse, often sidelining the genuine technical experts. The result? A flurry of lofty promises, draped in jargon but lacking substantive real-world applications.

When sifting through the clamor, a discerning approach becomes paramount. It’s not just identifying genuine technological potential but recognizing that genuine innovation isn’t fueled by rehearsed rhetoric but by grounded, transformative solutions.

(Image credit: Photo by Cuellar/Getty Images)

About the Author


About the Author

Thomas Dent, MBA, CPSM, CPSD, CPIM, CSCP, is a seasoned supply management  professional, specializing in  inventory management and  technological innovation.