The blockchain market has been the subject of a remarkable rise in recent years, with no imminent signs of this coming to a halt any time soon. In reality, the technology’s popularity is expected to continue skyrocketing. A report by Markets and Markets projects the global blockchain market to grow from its figure of $4.9 billion in 2021 to $67.4 billion by the year 2026 – this would represent a growth rate of 68.4 per cent during the aforementioned forecast period.

Blockchain applications and technology is already being utilised across a number of different industries. For example, the solution is used in the banking and wider finance industry as it provides an efficient and secure tamper-proof log of sensitive activities, helping to streamline money transfers and international payments. Elsewhere, the technology is used in the healthcare sector to improve access to medical information across stakeholders and streamline organisations’ workflows, while cybersecurity firms employ it as it eradicates the risk of a single point of failure, in addition to supplying improved levels of privacy and end-to-end encryption. Blockchain is also being touted as the technology that will drastically transform the way organisations conduct their business, especially supply chain management.

Positivity surrounding blockchain

To date, the logistics industry has been one of the main champions of blockchain technology. Evidence of this can be seen with leading global companies such as FedEx and Nestle piloting blockchain solutions in order to drive transformation concerning their sustainability and product safety programmes. In fact, per a recent survey of supply chain professionals conducted by MHI, 10 per cent of businesses are already utilising blockchain in some capacity, with 68 per cent of organisations intending to use the technology within the next five years.

What’s more, the sector has supported the solution since its early days. In fact, the Blockchain in Transport Alliance (BiTA) was founded over five years ago (in August 2017) by the biggest firms in the global logistics and transportation sector. Since then, the alliance has become the largest of its kind globally, with the association currently having an estimated 500 members in around 25 countries. The aim of the union is to boost the adoption of blockchain solutions within the logistics industry, through the development of industry standards, educating those within the industry on blockchain technology, and promoting the use of new solutions.

Adoption isn’t without its challenges

Although there is plenty of optimism surrounding blockchain, at this present moment in time, its adoption and application in most companies is small. In fact, through 2022, 80 per cent of blockchain initiatives will remain at a proof-of-concept stage, with only a small proportion of initiatives evolving towards full-scale deployment. This can be explained by the numerous challenges and difficulties when it comes to the adoption and scalability of blockchain.

Firstly, blockchain necessitates a large amount of storage. Generally, blockchain applications need this storage space as data which is generated within a supply chain network is automatically stored by all parties, for both record-keeping and validation purposes. As well as this, the technology also causes data bloat. In the supply chain, if data needs to be overwritten as a result of a change in order or shipment parameters mid-way through the supply chain process – an activity which is pretty commonplace – both original and revised data will be stored in the same data block which, over time, will create a significant volume of data bloat.

Adding to this, the technology can have a negative impact on the environment. Compared to traditional solutions, the amount of energy required to run blockchain solutions tends to be much higher. As such, this process is responsible for contributing a large amount of greenhouse gas emissions. While the industry is exploring energy conservation techniques, it remains the case that blockchains in their present form necessitate a significant amount of energy, causing the solution to have a high carbon footprint.

Elsewhere, blockchain requires companies to share their data with each other in a transparent manner. However, most organisations are reluctant to do this due to general distrust and competitive rivalry, with general concerns regarding whether external parties will ensure the data remains confidential. Further to this, there are circumstances in which blockchain can be inefficient and slow. For example, adding more parties to a system tends to slow things down, due to new transactions having to be validated by essentially all parties in a supply chain network.

When all these difficulties and hurdles are taken into account, it is unsurprising that Gartner placed blockchain for supply chains as one of its “peak of inflated expectations” technologies as part of its 2021 hype cycle for supply chain strategy, the reason for this being that it had “yet to mature and demonstrate a staying power”.

Taking a slow and steady approach to blockchain adoption

Before jumping headfirst into utilising blockchain technology to reshape their supply chains, organisations should give thought to beginning their journey with some initial proof-of-concept projects or pilots. Alternatively, businesses can join an existing project in partnership with other firms, which may even be more preferable for some organisations as it’ll help reduce costs.

For effective implementation of a blockchain solution, organisations should ensure that certain conditions are met from the outset. First and foremost, it is vital for all parties to come to an agreement regarding the exchanging of data with one another. This benefits all companies involved, while also ensuring that the cost-benefit trade-off is advantageous for the execution of the whole project from the outset and that there is an agreement between all parties for making investments which enable the blockchain technology to capture and share relevant data. In fact, the latter should feature investments which can easily amalgamate blockchain with the internal systems within a business so as to support supply chain management.

Although it looks like blockchain is set to play a role in supply chains for years to come, it must undergo significant development before it can be practically implemented by procurement and supply chain teams.