This guest blog post was written by Jake Legatt and Mara Pattison, both sophomore Industrial and Management Engineering majors at RPI. They spent the spring 2017 semester exploring blockchain technology and how it could change supply chain design and operations.
First, let’s have Mara and Jake introduce themselves.
I am Mara Pattison and I am currently a sophomore Industrial and Management Engineering major with an Industrial and Organizational Psychology minor. I am from Tenafly, New Jersey. On campus, I am the Undergraduate President of the APICS (American Production and Inventory Control Society) RPI chapter which is a professional supply chain organization. I am also the current president of RPI Women’s Club Soccer and serve on the Panhellenic Association as the VP of Finance. This summer, I will be working at New York Life Insurance Company in NYC as an IT Service Management Intern.
I am Jake Legatt from Randolph, New Jersey and I am currently a sophomore Industrial and Management Engineering major with a minor in Industrial and Organizational Psychology. As far as campus involvement goes, I am the Secretary of my fraternity, Chi Phi, as well as the Vice President of Rush. In addition, I am the Secretary of Green Greeks, a club dedicated to making the Greek life on campus more environmentally friendly, and involved in APICS. This summer, I will be continuing research with Dr. Pazour.
Now let’s get into what they discovered on their journey. This blogpost is entitled, “The First Step to Exploring Blockchain Technology.”
If you have no idea what blockchain is, press here for a simple explanation of blockchains that even our grandmas would understand!
So now that you know a little bit about blockchain, we’ll go into some more details about what we have done over the semester.
First, we started researching blockchaining to understand the benefits of implementing blockchains in supply chain management. Blockchaining is a digital ledger that records transactions made in cryptocurrency both publicly and chronologically. Since it is a permanent trail of information, blockchains allow businesses to capture information from a large group of independent entities, in a decentralized manner. Blockchains can benefit the supply chain by enabling a way to obtain full documentation of a product’s journey, so that you could know information about its manufacturing stages to the sale of the product. The implementation of blockchaining would also help companies cut back on time delays, reduce cost and complexity of cross-enterprise business processes, reduce human errors that commonly occur in transactions and most of all create a new style of decentralized digital interaction.
After doing some research on blockchains, we decided to take an active role by playing with a system called Ethereum. Ethereum as their website states is a “decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.” Anyone can use this application to make transactions. A public digital ledger is also available for anyone to see. Below is a list of all transactions at the time in Ethereum. As you can see, each transaction has a block number associated with it. A new block number is formed with every transaction and when you press on the block number, you can see all past information as seen in the second image.
So, how does this all relate to supply chain management? Here we will provide you with a real life example of how blockchain is implemented into a supply chain. We will use the process of a fish being caught by a fisherman all the way through to its final sale to a customer. This example is taken from Provenance (https://www.provenance.org/tracking_tuna_on_the_blockchain).
In order for the blockchain to work, the fisherman must register through the Provenance app. As seen in the image below, registration is required and only registered fishermena are verified and can record transactions. There are advantages for the fisherman too, for example, they are able to use text messages which does not require having access to a smartphone or the internet.
To start off the blockchain, the fisherman must send an SMS to register their catch. Each SMS creates a new asset to blockchain, and is given a Permanent unique ID in the system that takes the form of an address on the blockchain. More than a simple identifier, fetching the data stored at that address on the blockchain allows other independent downstream entities to access details about a particular item.
Next, the fisherman transfers his or her catch to a supplier. This creates both a physical transaction (of the fish) and a digital transaction (in the ledger of the blockchain). Now, the item originally owned by the fisherman is linked to the supplier. The identities of the fishermen are saved in a list of previous owners held on the blockchain.
Next, the supplier sells the fish to a factory where a barcode is assigned to the fish, this barcode is hooked to a the decentralized ledger, allowing all past information about a specific fish to be captured. In the factory, the fish will be transformed into different products such as tuna fish or raw tuna. After the product is made, a double check is performed to make sure the specific contract was followed, including what is put into the tuna.
From there, each product is assigned a barcode and shipped to the designated location, whether that be the supermarket or a restaurant. People can scan the barcode to see exactly where the fish came from and can therefore track the steps of how it got to the customer. This is enabled because blockchains are able to “back-link” information.
In this example, some benefits of blockchains are having a way to trace back the origin of each product. Also, the store and customers have more detailed information about specific products. This could lead to changes by utilizing item-level information to determine when to put products on the shelf. The blockchain also enables chain of custody, which can lead to more trust with the wholesaler and supplier due to more transparency.
Ethereum is a public blockchain, but in this example, a private blockchain called a Consortium Chain is used. This means that not anyone can participate in this blockchain. A random fisherman cannot register and give his catch to a supplier. A Consortium Chain assumes there are a small number of validators involved that cannot collude. These validators can decide to censor certain information. In a public blockchain, there is no censorship.
In the future we hope to build our own blockchain and possibly apply it to some of Dr. Pazour’s existing research. As we have seen blockchain has many benefits in supply chain and we hope to continue researching and experimenting on this topic. Thank you Professor Pazour for including us on this research project and we cannot wait to continue working with you!