Early agricultural success is driving blockchain into Australian supply chains

Technical validation and successful pilots are helping blockchain assert its value in streamlining supply chains that extend across the world.

Of all the applications for blockchain distributed ledger technology, its ability to revolutionise industrial supply chains was recognised early on and broadly embraced. And as early technology trials deliver promised efficiencies and transparency, growing global momentum is driving industry towards a blockchain-driven supply chain revolution.

Blockchain is particularly well suited for the dynamics of the industrial supply chain, which at its core is about tracking individual products – agriculture, primary resources, manufacturing, construction, technology, machinery, and other materials – from the point of production to the ultimate end consumer.

By 2023, research firm Gartner has predicted, blockchain will manage the global movement and tracking of $2.7 trillion ($US2t) worth of goods and services through supporting supply chains.

Australia’s well-developed agricultural sector – which accounts for 11 per cent of GDP and exports 70 per cent of its output – makes it particularly well suited to the adoption of blockchain, notes Joseph Liu, Director of the Monash Blockchain Technology Centre (MBTC), who flags supply chain projects as “the most important application of blockchain in Australia.”

MBTC researchers have been working with Monash University supply chain experts in faculties such as business and law, helping tailor research work into usable solutions – some of which have already been licensed by commercial adopters.

“Most of the research we have done is in applied areas,” Liu explains, “and not just theoretical work. Companies don’t want to wait for months to adopt this technology, because if they wait too long they will lose their lead on their competitors.”

Working towards interoperability

Each supply chain is different, and many overlap when key functions like manufacturing and logistics are outsourced to common service providers.

To bridge these gaps, supply chain participants have relied on complex electronic document interchange (EDI) software architectures that standardise the representation and exchange of data about products and their movements.

Yet EDI is simply an interface between back-end enterprise resource planning (ERP) systems, which each store their own version of data in their own back-end databases.

Blockchain data, by contrast, is highly distributed and available to all participants, with its accuracy based on the consensus of every involved entity. Its data architecture is not only scalable and immutable, but provides a trusted supply chain record that can dramatically improve data interchange, support dispute resolution, and speed governance activities like auditing.

Complemented by new data collected from enabling technologies – for example, Internet of Things (IoT) sensors monitoring temperature, humidity, vibration and other physical attributes – it becomes easy for any supply-chain participant to validate the entire history of any specific product.

“The applications here are not only around building the blockchain for some one thing,” explains Dr Jiangshan Yu, Associate Director (research) with MBTC, “but for creating an ecosystem around those applications.”

“Where there is an ecosystem where participants support each other, the technology can be deployed and used at a global scale.”

Blockchain at the national level

For simplicity’s sake, blockchain has generally been trialled and adopted within small communities of producers, distributors and consumers that have existing relationships.

The world-leading VinoTrust trial currently underway in South Australia’s Clare Valley, for example, has united over 100 vineyards and 12 regional wine companies to participate in a blockchain-driven system that combines grape tracking, weighbridge data, and live comparisons of yields to track grapes from the vine to the table.

Producers of citrus, nuts, beef, and other agricultural products have come onboard, trialling the use of clear and reliable blockchain data to monitor the movement of tonnes of primary products.

Early wins in these and other trials have steadily increased awareness of blockchain technology, pushing it to the national level after the Australian government this year published its formal National Blockchain Roadmap.

Designed to guide Australian industry towards a unified and effective approach to blockchain, the roadmap notes blockchain’s potential to add economic value to many types of businesses – encouraging Australian businesses to claim their part of the $238 billion ($US176b) in business value that Gartner believes blockchain technology will generate by 2025.

The value of Australia’s blockchain-related economic activity will surge as increasingly significant trading partners come online: the National Blockchain Roadmap cites, for example, Australia’s $2.89b wine export market – the fifth-largest in the world – as a key target for blockchain because it enables tracking, tracing, and brand-preservation capabilities like anti-counterfeiting.

Fast-moving blockchain technology poses its own challenges, however: with many pilots underway and new technologies emerging regularly, many early supply-chain pilots will need to be revisited as blockchain matures further.

“90 per cent of enterprise blockchain implementations will need to be replaced by 2021, Gartner has predicted, with Senior Research Director Adrian Lee warning of customer confusion “due to the lack of an industry consensus on product concept, feature set, core application requirements and target market.”

Helping to develop this consensus is a core focus for the researchers at MBTC and partner institutions like the University of Hong Kong, who are liaising with other blockchain centres of excellence to co-ordinate increasingly far-reaching efforts around standardisation.

Growing volumes of Australian exports to regional partners like China, Japan, Singapore, South Korea and Vietnam will make such partnerships even more important, because close collaboration across regional supply chains will deliver bigger benefits, sooner.

Top-level strategic planning reflects broad recognition of blockchain’s supply-chain potential, with a recent European Union analysis concluding that a range of blockchain-driven supply-chain use cases “have all achieved an initial, credible level of technical proof of concept.”

“Overall, this shows the viability of blockchain as a technology that could impact trade…. No major technological barriers exist for the use of permissioned blockchains in trade [and] the technological solution proposed also appears able to ensure data protection and compliance with data regulations.”

The Australian government’s interest in blockchain will drive the development of a collaborative blockchain strategy combining industry, the research sector and government in what Minister for Industry, Science and Technology Karen Andrews called “concrete actions” towards making Australia a “leading digital economy by 2030.”

The National Blockchain Roadmap Steering Committee will oversee this development, working with stakeholders and drawing on the expertise of centres like MBTC to help Australian supply chains cut costs and improve visibility of supply chains that often extend to far corners of the world.

“New technologies will enable increased scrutiny and produce-testing at any stage along the supply chain,” the roadmap notes. “As non-tariff trade measures such as these are estimated to be costing businesses up to three times as much as formal trade barriers, ensuring regulatory processes are streamlined will yield significant economic efficiencies.”