Questions

1.Benefits or disadvantages presented by the article

Subject Blockchain and logistics; the future of the supply chain

Germn Snchez CousoIBM Blockchain & Business TransformationConsultant

Blockchain,the technology for recording data that is behind the virtual currencyBitcoin,is all the rage. This new technology, which makes the transmission and storage of data more reliable by avoiding its modification once it has been recorded, is breaking into many sectors, but not everyone is clear about what it consists of and what benefits it can bring us.

1. How can blockchain help logistics?

To learn about the applications ofblockhainin logistics and in the business world, we interviewedGermn Snchez, an expert in Blockchain at IBM Spain, after his participation in theLogistics 2017fair. A walk for you to know the future of blockchain and the supply chain.

2. In what aspects of the business world will the blockchain have application - or is it already being applied?

The digital transformation in the world pushes us towards a much more collaborative environment. A very clear example is found in theInternet of Thingswhere events are propagated from devices that may be located in vehicles or in appliances in homes. To cite an example, perhaps in the future we will not buy these appliances but the service they offer us.

Everything indicates that the future of business and the relationship between people will be much more digital and a technology likeBlockchainwill facilitate the recording and storage of what happens.

3. One of the difficulties for the traceability of logistics is the lack of trust between actors and companies. How can blockchain help this?

Its added value lies precisely in its technological characteristics, where we find, in a very prominent way, theimmutability of the information stored in the blockchain network. This means that network participants have confidence that information remains unchanged over time, eliminating the need for information audits or mandatory third-party oversight.

In addition, it is also guaranteed that the established rules, whether operational, commercial or business in general, have been faithfully respected without the need for an obligatory audit. And finally, in the extreme case of requiring the presentation of evidence of the flow of a transaction, such as the signing of a contract, these can be extracted causally, in the order in which the events happened, for their usefulness in each case that was necessary.

"Demonstrating authenticity and transparency is essential in the world of consumer products and distribution companies"

4. What projects on blockchain and logistics has IBM already launched and which ones do you have for the future?

IBM and Maersk have reached an agreement to develop a solution with blockchain technology in Hyperledger Fabric, to givetransparency and end-to-end security to the supply chain, obtaining advantages for all partners with cost savings in paperwork, reduction of fraud and errors, streamlining operations and opening opportunities to more players in the global and cross-border chain.

A simple shipmentof refrigerated goods from East Africa to Europecan pass through about 30 people and organizations, along with more than 200 interactions and communications, Maersk observed in 2014, generating dark and difficult to control areas.

In addition, if one takes into account that 90% of the products of world trade are transported annually by the maritime transport industry, the agreement of IBM and Maersk to applyblockchaintechnology in the management and tracking of the tens of millions of containers that are in transit around the world acquires special relevance.

IBM hosts the solution on the IBM Cloud high-security network. This project addresses thebottlenecks of the supply chain,which Maersk knows well, and regulatory barriers, two fragile points in world trade. The blockchain solution developed by Maersk and IBM is based on the Linux Foundation's open-source Hyperledger Fabric and is expected to be widely available to support different parties in a shipping industry ecosystem later this year.

Soon we will be able to make more projects like this public.

5. In your presentation at Logistics 2017 you commented that the blockchain makes information no longer have to be point-to-point. How does it work?

This technology presents original novelties that can allow important changes in the digital relationship between people and entities. These novelties incorporate thedecentralization of informationand therefore, an increase in informationsecurityin two important factors.

The first factor, which is all the systems that are part of the network, the users members of the network, who guard the data safeguarding the integrity despite the fact that other members may lose all the information. Currently, centralized systems areresponsible for guarding the stored data, which impliesthat they bear the inherent costs, which are greater both in the higher the desired level of protection against failures or computer attacks, to name a few examples that impact on the cost of centralized services.

The second factor is precisely thereduction in the cost of transporting and storing information. In a decentralized network system, both are provided by the same members of the network that with their systems allow communication between them as well as a secure, persistent and guaranteed repository against failures.

6. What are the advantages that blockchain can bring to logistics?

Blockchainhas the potential to transform how industries conduct business transactions, including commercial ones. This will require the creation of an ecosystem where the entire industry, or a part, works under a new model of collaboration, allowing companies to benefit from the effect of the blockchain network. To facilitate the creation of these new ecosystems, IBM has actively collaborated as one of the world's leading contributors. IBM has developed solutions and tools aimed at reducing the time needed to move from idea to execution.

7. The investment for the blockchain to encompass the entire supply chain can be important. How is the return on investment achieved?

Demonstrating authenticity and transparency is essential in the world of consumer products and distribution companies, especially if the items are of great value. Some estimates claim thatfake productscan cost the global economy up to$250 billiona year.

Blockchainis the right technology for tracking high-value luxury goods, in which buyers require origin information and ownership history, as current paper-based processes are not able to prove the authenticity of products.

By incorporating photographs, analysis and inspection results into the blockchain chain,reliability in authenticityand total trust can be achieved.

'Consumers are increasingly asking for information about the place of manufacture and content of the products they purchase.'

8. So far the main advantages of blockchain for logistics have been related to traceability. Are there other sections where I can help?

Indeed, one of the biggest potentials for utilizingblockchaintechnology is to solve the problems that the supply chain has faced for decades,reducing historical distrust between different organizations, including the fear that information could be transmitted to the competition.

Supply chains are increasingly complex, still plagued by inefficiencies and rely heavily on paper documentation and manual processes, blockchain offers the transformation opportunity for companies to reinvent their processes and better integrate with participants in the supply chain, achieving:

• Saving time and money.
• Reduction of business risk.
• Increasedtrust and transparencybetween suppliers, employees and consumers.
• Have an'end to end' traceabilityof the value chain, available to the participants of the value chain.

9. Security also appears as one of the features of the blockchain. How does this translate to logistics?

Consumers are increasingly asking for information about the place of manufacture and content of the products they purchase. In the United States, an estimated 48 million foodborne illnesses occur each year, of which 128,000 require hospitalization. Regulatory authorities are increasing control requirements to improvefood safety.

Blockchainmakes it possible to digitally track products at every stage of the value chain, from suppliers to consumers. Digital product information, such as place of origin, batch number, expiration date, or storage temperature, is immutably recorded on the blockchain. In addition, it has the advantage that the stored information has been agreed by the network components, which guarantees the accuracy of the information.

"By 2020 we expect nearly two-thirds of the consumer products and distribution industries to have blockchain fully operational."

10. Until now, blockchain and logistics experiences have been limited to very large companies and concrete projects. How long could it be used on a wider scale?

In 2018, a considerable boost in blockchain implementations for companies in the distribution and consumer products sector internationally is expected.By 2020 we expect nearly two-thirds of theconsumer products and distribution industries to haveblockchainfully operational.

11. Is it true that Walmart managed to reduce from seven days to two seconds the time needed to check the traceability of a food?

Yes: 2.7 seconds.

12. According to Ginni Rometty, CEO of IBM, blockchain will do for transactions what the internet did for information. Do you think so?

Beyond the value chain,blockchainrepresents a new way to collaborate and conduct business. The trust andtransparencyit provides makes blockchain the ideal solution for multiple usesbetween collaborating companies, as well as between isolated departments that require complex transaction reconciliation processes, such as:

• Paymentprocessing.
• Dispute management.
• Management of loyalty programs.
• Management of commercialpromotions.

Any instance where there are duplicate tasks and data, or reliable data is missing, is conducive to the application of the blockchain.

13. Anything else you want to add about blockchain?

In essence,the end customer will fundamentally perceive an increase in the level of service. Although for this you may have to make some adaptation effort, which may be similar to the current use of mobile applications; you have to download them, install them, answer some questions to proceed with the registration of the service as a user and then use them.

But the reward of this adaptation will be that users will have a much more efficient, secure and transparent service, thanks to the fact that all the participants of the ecosystem will be connected thanks to blockchain networks.