Benefits of blockchain pilot programs for risk management planning

Through 2022, 80% of supply chain blockchain initiatives will remain at a proof-of-concept (POC) or pilot stage, according to Gartner.

One of the main reasons for this development is that early blockchain pilots for supply chain pursued technology-oriented models that have been successful in other sectors, such as banking and insurance. However, successful blockchain use cases for supply chain require a different approach.

“Modern supply chains are very complex and require digital connectivity and agility across participants,” said Andrew Stevens, senior director analyst with the Gartner Supply Chain practice.

“Many organizations believed that blockchain could help navigate this complexity and pushed to create robust use cases for the supply chain. However, most of these use cases were inspired by pilots from the banking and insurance sector and didn’t work well in a supply chain environment.”

This setback should not discourage supply chain leaders from experimenting with blockchain. Blockchain use cases simply require a different approach for supply chain than for other sectors.

From technology-first to technology roadmaps

Adopting a technology-first approach that exclusively targets blockchain infrastructure was the initial idea for use cases in supply chain, mirroring the approach of the banking and insurance sector.

However, this approach did not work, because in contrast to the highly digital-only fintech blockchain use cases, many supply chain use cases will need to capture events and data across physical products, packaging layers and transportation assets.

Additionally, supply chain leaders need to understand how these events can be digitalized for sharing across a potential blockchain-enabled ecosystem of stakeholders.

“Today, supply chain leaders have now started to treat blockchain as part of a longer-term technology roadmap and risk management planning. We see that many leaders are adopting a broader end-to-end view across their supply chains and map all requirements – from sourcing across manufacturing to the final distribution,” Mr. Stevens added.

“Having blockchain as part of an overall technology portfolio has created opportunities for internal collaboration across many areas that have a potential interest in blockchain, such as logistics and IT.”

Blockchain pilot programs

Though most blockchain initiatives didn’t survive past the pilot phase, they have provided fresh stimuli for supply chain leaders to conduct broader supply chain process and technology reviews.

“Many supply chain leaders that have conducted blockchain initiatives found that they now have a more complete overview of the current health of their supply chain. Their perception on how blockchain can be used in the supply chain also has shifted,” Mr. Stevens said.

“By going through the process of deploying blockchain pilot programs, they discovered what needs to change in their organization before blockchain technology can be leveraged effectively.”

Before starting another initiative, supply chain leaders should identify and establish key criteria and technology options for measuring and capturing metrics and data that can indicate an organization’s readiness to explore blockchain.

“In a way, blockchain is a collaboration agent. It forces an organization to continually assess on a broad scale if its structure and employees are ready to embrace this new technology,” Mr. Stevens concluded.

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