Is the supply chain ready for blockchain? Not yet, says Gartner

Tech-first pilots are missing the mark in the supply chain, but efforts haven't been wasted.
28 January 2020

Blockchain is touted as enabling traceability for products. Source: Shutterstock

We are not lacking exciting, transformational visions for how blockchain will transform the supply chain, adding new layers of security, traceability and transparency. De Beers wants it to end the market for blood diamonds, Starbucks wants it to tracks coffee from farm to cup, and Walmart thinks it can help stop food contamination outbreaks.

But even among high-profile, well-banked organizations such as those above, full-scale deployment remains a long way off the majority. And, despite the retail sector being hellbent on investing in the technology, we won’t see blockchain’s real impact on the supply chain for at least the next few years – at least according to Gartner.

In a new report, the firm predicts that 80 percent of blockchain initiatives will remain at proof-of-concept or pilot stage through 2022. One of the key reasons for that is because early pilots have pursued technology-oriented models that have shown to be successful in other sectors, such as banking and insurance. 

Many organizations have believed they can take the same approaches and apply them within the supply chain but pilots in general “didn’t work well.”

“Modern supply chains are very complex and require digital connectivity and agility across participants,” said Gartner Supply Chain’s Senior Director Analyst, Andrew Stevens.

The key problem, he explained, is firms seeking to mirror the approach of the banking and insurance sectors’ “digital-only fintech use cases”. Supply chain applications instead need to capture events and data across physical products, packaging layers and transportation assets.

But that’s not to say that efforts so far have been wasted. 

Many supply leaders that have dived headfirst into blockchain initiatives have earned a more complete view of the current health of their systems in the process, Stevens explained, and perceptions of how it can be used have shifted as a result. 

“By going through the process of deploying a blockchain pilot, they discovered what needs to change in their organization before blockchain technology can be leveraged effectively.”

Before starting another initiative, it is key to identify and employ the technology and criteria to analyze an organization’s readiness to explore blockchain, and that means avoiding a ‘technology-first’ approach. 

“In a way, blockchain is a collaboration agent,” Stevens concluded. “It forces an organization to continually assess on a broad scale if its structure and employees are ready to embrace this new technology.” 

Taking a good few steps back to reevaluate the technology may be exactly what supply chain players need. Gartner research from last year predicted that by 2023, 90 percent of initiatives in the sector would suffer “blockchain fatigue” due to a lack of strong use cases.

This outlay was in part down to the sector’s “overly ambitious scope and a misunderstanding of how blockchain could, or should, actually help the supply chain,” said Gartner Senior Principal Research Analyst, Alex Pradhan.

“Inevitably, this is causing the market to experience blockchain fatigue.”