Home » INSIGHTS » Can Blockchain Replace EDI in The Supply Chain? – Part 1

Can Blockchain Replace EDI in The Supply Chain? – Part 1

Some see electronic data interchange (EDI) as a likely target as blockchain finds its place in the B2B world. Few technologies have ever given rise to the same hype as blockchain. But under the ginned-up excitement, interest in distributed ledger technology is genuine and goes far beyond the best-known realm of cryptocurrencies in blockchain to a multitude of practical uses across a wide range of industries.

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“Everyone is looking into it and doing pilots,” says Hewlett Packard Enterprise chief technologist Matthias Roese. That interest is reflected in projected expenditure on blockchain technologies growing at an annual compound growth rate of 81 percent and reaching $10 billion worldwide by 2021, according to Bill Fearnley, IDC’s Research Director for blockchain strategies.One area where blockchain can have an impact is the supply chain, especially as a potential successor to electronic data interchange (EDI) for fast and seamless transmission of contractual information between parties. “Supply chains are the case of killer use,” Fearnley said at the Boston conference of IDC Directions 2018.

Increased visibility, less risk

The immutability of changing a blockchain transaction once recorded ensures the integrity of supply chain events, which is a major advantage for manufacturing companies. An exact record of what happened during the production process would greatly benefit from troubleshooting the quality of the product and could provide an effective tool to counter fraud and theft.

“Blockchain provides greater visibility and control from shipment to receipt for buyers and sellers, ultimately reducing the risk of fraud,” says Marcell Vollmer, SAP Ariba’s chief digital officer. According to Vollmer, the promise of integrity by Blockchain will play a role in the supply chains of industries where the knowledge of the raw material source is critical. “The provenance of goods is given transparency and visibility. People want to know what they buy, “he says.

In industries as disparate as diamond mining and palm oil production, provenance plays an important role, Vollmer says. Many firms that use palm oil in their products want to ensure that the substance is produced sustainably, through fair trade and without the use of child labour. Blockchain technology can add a significant layer of moral assurance to consumers of products containing palm oil by tracking the palm oil from the farm on which it was produced, Vollmer explains.

Similarly, mines that violate ecological or employment laws produce some gems in the diamond industry. According to Vollmer, diamonds produced by legal mines can be given invisible numbers to the naked eye and recorded in a distributed blockchain ledger that can determine the provenance of the precious stones from the mine to a finished piece of jewellery.

Blockchain’s fundamental integrity could also yield gains in other areas. “Improving your data will enhance your analysis,” Fearnley says. “Then you can add AI, machine learning, and fraud analytics.” For example, business fraud management, which relies heavily on analytics, is likely to see an influx of blockchain technology in the coming years.

Keep watching this space for more.

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