Everyone has heard of bitcoin, but it’s the technology underpinning the currency known as blockchain that’s revolutionizing efficiency and transparency across a wide range of industries. For the reverse logistics industry to take advantage, stakeholders need to agree on rules for governance, and on standards for data interoperability.
This article will offer guidance as to how blockchain can improve the reverse logistics sector, and on the steps we can collectively take to reap the full benefits.
Blockchain made simple.
When you hear the word “blockchain,” just replace it with “a big spreadsheet that no one owns that anyone can use.”
Bitcoin is just a “big spreadsheet” holding a bank ledger. Supply chains can use a “big spreadsheet” to hold a reliable and secure record of the transactions. But why should unrelated companies trust this “big spreadsheet”?
It’s trusted because cryptography verifiably ties each data record to its creator, and the data can never be changed. Furthermore, no single entity owns or controls the data. So where is it stored?
It’s decentralized. Any participant can hold a copy of this “big spreadsheet” by running a blockchain node, like running a web server. Blockchain software keeps all the nodes in synch. An incorrect or falsified copy will be rejected for not matching the consensus.
Blockchain is taking supply chains by storm.
Most supply chain dependant industries now have blockchain efforts under way.
Walmart now tracks leafy vegetables using blockchain, to improve food safety. Previously, tracing a salmonella outbreak from shelf to farm took Walmart almost 7 days. Blockchain brings it down to 2.2 seconds.
The city of Dubai is moving real estate transactions to the blockchain. Reams of paperwork, including the deed (proof of ownership) are loaded to the spreadsheet, verified, and can be transferred to a new owner. One day we might buy houses online as simply as we buy shares of stock on Etrade.
Everledger has created a blockchain for DeBeers and the other major diamond companies. A sort of “facial recognition for diamonds” lets them trace the provenance in order to fight conflict mining. The world economic forum is developing a similar system to track the provenance of cobalt, to fight child labor in the Congo.
IBM and Maersk, the world’s largest shipping company, now track a large portion of the world’s container shipments with blockchain. Maersk says that paperwork costs can equal physically transport costs. Blockchain automates this, saving thousands of dollars per shipment, even speeding transit times by up to 40 percent by reducing port delays.
Common estimates of efficiency gains across a supply chain are in the 25% to 50% range.
It’s inevitable that blockchain will also revolutionize the reverse supply chain for used electronics.
The first impacts will be on traceability.
By functioning as a sort of “trusted third party”, blockchain can enable authorized participants to:
1. Trace the provenance of any device.
2. Track its current and final destination.
3. Verify the origination and validity of any information.
4. Secure a complete history of all records and changes.
Like a “Carfax” for used electronics, Blockchain can permanently record the history of any asset.
The long-term impact will be more revolutionary
Blockchains typically support cryptocurrency (aka “money”) and can also run simple computer code, enablingunrelated (and untrusting) organizations to automate simple intercompany interactions such as:
payment is made THEN
notify the warehouse to ship”
a data sanitization report signed by compliant software is loaded THEN
pay the vendor.”
compliant test software detects the presence of a non-original component THEN
flag the item with an “authenticity warning”
With automated payments, no paperwork, and no credit card, paypal or exchange rate fees, it’s no wonder middlemen and banks are scared. Some believe that one day most business rules, both inside and between organizations, will be completely automated with blockchain, possibly leading to a fundamental change in the operational nature of business.
But this future won’t come to pass until businesses are comfortable using crypto, with simple tools to create smart business contracts in computer code. For now, supply chains are implementing blockchain just for efficiency, verification, and traceability.
Won’t blockchain be hard to learn?
Blockchain isn’t hard, it’s just new. And users don’t necessarily need to see much change at all. If you’ve recently purchased vegetables at Walmart, a diamond through DeBeers, or if your company shipped a container, you’ve probably already used the blockchain.
It’s the software providers who need to understand blockchain, to connect on the back-end. So the main adoption hurdle is to get the software providers to agree on the rules and standards. This is not an insignificant obstacle.
The early adopters in the examples above were quick to form because they have tightly controlled supply chains. Walmart, for instance, can require their farms and transporters to use their blockchain. Everledger only had to get a handful of diamond companies to sit at the table. Dubai can force adoption through regulation.
But the shipping industry has more stakeholders, more diverse interests, and no central authority. Recent news indicates the IBM/Maersk solution is facing difficulty bringing all the competitors to the table. We may face similar challenges. How might blockchain roll out if we can’t organize as an industry?
Here are the likely scenarios:
Most likely: fragmentation — it won’t work at all.
Numerous software providers such as ERP, test report, data wiping, and other systems, could each create their own blockchains. Add giants like eBay, Amazon, and Alibaba to the mix. How will a user choose?
Furthermore, using multiple blockchains just won’t work. Think about real estate. You can’t store the deed in two places; you can’t sell the same house twice.
Without a single agreed-upon platform, the large-scale benefits of blockchain won’t happen at all.
Possibility: an “outside system wins” — a poor solution.
If the blockchain of an unrelated industry becomes “the standard”, for example if IBM’s food blockchain jumps industries, it might let us track “bacteria counts per million”, but that won’t be useful to most of us. Tracking “cell phone lock status” might be more useful, but getting an an unrelated industry to make changes may be difficult.
Most dangerous: A central authority takes control
The worst-case scenario would be a single entity owning the playing field. Their primary incentive will likely be monetization of the network. Worse, certain manufacturers would likely build in back doors to obtain information for use in their fight to prevent consumers from repairing their devices.
A single blockchain protocol is the only workable solution.
Back when phones were invented, a common protocol allowed one phone brand to ring another. It’s the same with email, the internet… and now with blockchain. We need a standard. That’s why we formed OBADA, the Open Blockchain for Asset Disposition Alliance.
Since September 2017 OBADA has grown into an loose alliance of over 50 stakeholders, defining common rules on how it should work and how to connect. Stakeholders include:
• Organizations such as eReuse.org, Free ICT Europe, Repair.org, SERI, and the U.S. EPA.
• Trade associations, such as the RLA, ASCDINATD, ERC, and the SIA.
• The major ERP (inventory management) vendors.
• The major trading networks.
• Drive-wiping software and test repair companies.
• Academics, researchers, and other interested parties.
OBADA committees are making real progress in the areas of:
• Standards: The RLA Standards Committee (see sidebar) has taken a lead role. Blockchain Tech: An Ethereum prototype is in progress at eReuse.org in Spain, and discussions are underway to partner with established blockchain companies.
• API Development: Working API’s (JSON) connecting to a “blockchain simulator” are available at obada.io to provide simple web based tools for accessing blockchain data.
• A University Pilot Program is underway with Good Point Recycling of Middlebury, VT to provide chain-of-custody tracking for the data on disposed electronics from the University of Vermont.
• Sustainability: Pilots for the mobile space and for Chinese recycling companies are also being defined.
Specifications and code are open-source project and available to all. We invite any interested organization to take a look at github.com/obada-protocol.
How to get involved.
If you deal in hardware, ask your software vendors about their blockchain plans. Will their data integrate with other software?
If you’re a software provider, environmental researcher, or authority that needs access to the data, please get involved to make sure your requirements are met by the protocol.
To participate, ask questions, or just stay informed by listening in on the monthly call, please contact us at firstname.lastname@example.org.
We’re in a unique position to shape the direction of a remarkable form of technology and open up new business opportunities. Let’s not waste this moment.
Rohi Sukhia is founder and CEO of the wholesale trading network Tradeloop and helped form the Open Blockchain for Asset Disposition (OBADA) alliance. Rohi previously spent seven years in engineering sales and marketing at Intel and holds a BS in Electrical Engineering from Cornell.