Weighing Costs, Sustainability, and Strategic Goals
To determine whether blockchain technology is a smart investment for your supply chain—whether you’re moving coffee, cheese, or chemicals—you need to assess three critical factors: cost, sustainability, and your ultimate goals.
Blockchain technology, initially championed for cryptocurrencies like Bitcoin, has evolved significantly since 2015. Early pilots promised cost savings, efficiency, and transparency, and today, enterprise-grade blockchain solutions are available for widespread supply chain use. With this abundance of options, the challenge has shifted from access to decision-making: Is blockchain the right fit for your supply chain, and if so, which platform should you choose? To answer this, supply chain leaders must evaluate three key considerations.
1. Cost: The Foundation of Your Decision
Blockchain systems record transactions as secure database updates, but these updates can vary widely in cost depending on the platform. For instance, a simple transaction like recording the movement of a shipping container might cost less than $1 on one platform yet reach thousands on another for the same volume of activity.
Understanding your transaction volume is crucial. Start by estimating the number of daily updates your supply chain requires—each product, container, or data entry counts as a transaction. When consulting with blockchain providers, ask about the underlying technology and its average transaction costs. If your supply chain includes goods requiring extensive transparency, such as Protected Designation of Origin (PDO) products, this step becomes even more critical.
Take the example of Fontina cheese producers in Italy. Blockchain helped verify the cheese’s origins, meeting PDO requirements, but the producers were cautious about potential costs. By carefully selecting a cost-efficient blockchain platform, they ensured the technology added value without overspending.
2. Sustainability: Balancing Innovation with Responsibility
As supply chains face increasing pressure to meet Environmental, Social, and Governance (ESG) targets, the environmental impact of blockchain becomes a pivotal factor. The energy-intensive nature of some blockchain platforms, like proof-of-work systems, can be counterproductive to sustainability goals. In contrast, proof-of-stake systems offer greener alternatives.
For example, Spanish company Finboot collaborated with energy provider CEPSA to implement blockchain in tracing vegetable oil used in biodegradable surfactants. By choosing a carbon-neutral blockchain, they aligned with sustainability objectives without compromising efficiency. Always verify the environmental credentials of a proposed blockchain solution to ensure it supports your ESG commitments.
3. Strategic Goals: What Does Success Look Like?
The final and most important consideration is your ultimate goal. Blockchain can enhance various aspects of supply chain operations, from improving traceability to boosting resilience. Take Lavazza, the renowned coffee brand, which used blockchain to track its La Reserva de Tierra Cuba coffee beans. This initiative provided customers with transparent, verifiable data on the beans’ journey from farm to cup, achieving both fair trade and sustainability goals.
Beyond consumer transparency, blockchain’s ability to securely manage sensitive records is invaluable. For instance, in pharmaceutical supply chains, blockchain helps prevent counterfeit medicines by maintaining auditable, tamper-proof records. Similarly, the technology can streamline regulatory compliance, protect against cyber threats, and optimize record-keeping costs.
Blockchain’s Role in the Future of Supply Chains
The supply chain sector is under constant pressure to adapt to economic and geopolitical challenges. A recent EY report suggests that enterprises are reshaping supply chain strategies to emphasize resilience, sustainability, and collaboration. Blockchain aligns perfectly with these priorities by delivering robust provenance tracking, early disruption detection, and improved stakeholder transparency.
Ultimately, selecting the right blockchain solution begins with defining your objectives. Are you looking to improve efficiency, transparency, or resilience? Once your goals are clear, analyze the costs and sustainability of potential platforms. By focusing on these three factors, you can confidently evaluate blockchain’s role in transforming your supply chain operations.
