Way back in the early days of the internet, nobody seemed quite sure what it was or what its potential could be, but it seemed certain to be the start of something big. Exactly what that potential was began to emerge only over time, but it took pioneers to take early steps to put real, practical applications in place, and then build on those.
History is almost certainly repeating itself today with blockchain. Exactly how the whole shared ledger concept works is a technical maze of which only a few hold the map and understand how to read it. But more and more people are starting to realise that blockchain holds huge promise.
And I’m delighted to say that the Supply Chain Finance Community is taking a leading role alongside a number of other organisations to build real pilot projects using blockchain technology in the logistics sector. Note: real pilot projects, not theoretical papers. By the end of the two-year projects we will have executed real transactions using blockchain technology.
So what’s happening? It was agreed in mid-November that 16 organisations – including TKI Dinalog (the Dutch Institute of Advanced Logistics), Delft University of Technology (TU Delft), ABN Amro, the Port of Rotterdam, Royal FloraHolland, SmartPort, the SCF Community and others – will invest a total of €2.2m over the next two years to develop three concrete use cases that bring together operational information, financial flows and contracts.
These projects are extremely important to help us get a real understanding of what blockchain’s potential is. We are extremely proud that, with SCF Community backing, we have managed to find three groups with whom we are going to develop and implement blockchain applications. It will be deploying the very strong blockchain programming expertise of TU Delft and the network of the SCF Community.
As with the development of the internet, this isn’t only going to bring benefits to the parties that are in the programme. It is an open innovation project so it will allow others who are interested in the application of blockchain to connect, to tie in and to start thinking about their own pilot or demo projects – not only in the Netherlands but across Europe and around the world.
The logistics sector is worth around €55bn to the Dutch economy and employs more than 800,000 people. Blockchain technology could improve system reliability at lower cost and greater security than at present, improving track-and-trace capability and facilitating customs clearance. And blockchain could do so by eliminating the dependence on any one proprietary technology or platform.
The three pilots
The first case use pilot will use digital consignment notes to trigger smart contract finance for carriers. One frequent problem with current practice is late payment of invoices because of an inefficient mix of paper and digital processes. We are going to develop a real-world pilot that explores how blockchain can improve working capital efficiency across the supply chain.
The second case use pilot looks at asset-based inventory finance, and will examine not only how blockchain can help create inventory finance opportunities for large companies but also for SMEs, which are often beyond the reach of conventional inventory finance programmes.
And the third case use pilot will look at how blockchain can enable a circular economy, reducing the amount of waste caused by end-of-use products, in particular optimising the ‘return logistics’ so that products can be sent to locations where they can be regenerated.
These are all worthy aims, I’m sure you’ll agree. But they are not lofty, idealistic dreams. We really could be on the cusp of something revolutionary that will affect us all – in our business lives as supply chain finance professionals and in our private lives as consumers who want a better, more secure and less costly world.