INSIGHT: Blockchain pilots testing applicability

LONDON (ICIS)–“We like what we see so far and are identifying areas of clear applicability of the technology,” said CTO of Elemica, Arun Samuga, last month on completion of a blockchain pilot project involving BASF and Evonik.

The technology offers promise but has yet to prove capable of delivering value in the supply chain. Potentially disruptive it is that “clear applicability” that is being tested in chemicals and other sectors.

Elemica wants to offer blockchain as a service, David Cahn, the company’s global marketing director, told ICIS recently. The pilot project lasted 4-5 months and was a “first phase” of the digital supply network’s blockchain initiative.

The two chemical companies tested the specific distributed ledger approach around the purchase of raw materials from each other, placing orders across a blockchain. A next phase would be to expand to other B2B (business-to-business) processes on the sell side and in logistics.

Companies are looking into blockchain as an emerging technology that could offer business the next steps in speed of order processing and supply chain efficiency.

Blockchain based platforms are emerging, like IBM and Maersk’s TradeLens, and the post-trade management platform Vakt, which has attracted investment from big oil, from traders and major banks.

Elemica was established in the very early 2000s, in the heat of Y2K optimism, with a group of global chemical companies looking into how they might effectively outsource business processes.

New platforms, public and corporate were created around the same time to buy and sell chemicals. Acquired by private equity in 2016, Elemica now is more a software services company which, Cahn said, has been growing phenomenally fast. About 98% of the largest chemical companies are on the Elemica network, he said.

Elemica can see supply chain patterns changing on its network that tend to confirm what is happening in the wider world, whether on the political front – think trade wars or strikes – or physically, in the operating environment – think hurricanes or Rhine River water levels or even the impact of significant capacity expansions.

And apart from this ability to look across the bigger picture it is developing products that address specific tracking and tracing issues for suppliers and purchasers big and small.

Blockchain could radically change the way transactions are conducted. A relatively new technology, it has already proved to be an effective transaction and tracking tool.

According to the World economic Forum (WEF), revolutionary uses of the technology are being explored in almost every sector, from energy to shipping and the media.

The WEF has an ongoing ‘Blockchain and Distributive Ledger Technology’ project. It has developed a framework to help executives adopt a common sense approach to the technology. “For any organisation, blockchain technology should not be a goal in itself but a tool deployed to achieve specific purposes,” it says.

Elemica worked with a digitalisation company, crossinx, to test blockchain technology in chemicals. BASF and Evonik are both expected to be speakers at the network’s ‘Disruptive Supply Chain Innovations’ conference in Germany on 16 April.

The pilot project was a learning curve for all the participants, Cahn said, as it looked at ways of handling smart contracts better.

The technology has proved to be very costly but it is believed that costs can come down over time. ”Things are going to get faster, better, easier,” Cahn told ICIS.

The next steps would be to expand the piloted ideas to multiple companies, although blockchain technology currently is probably more of a tool that is looking for a problem to solve rather than vice versa.

The technology is, however, part of the broader digital transformation underway across business that will radically change business processes, first internally and then in relation to the external environment. Every business finds itself hitched to this digital transformation wagon.

“The success of the blockchain pilot project shows that the new technologies brings value to supply chains and businesses through the sharing of information, workflows and economies.” Elemica said in a January statement. Blockchain was used to support a ‘many to many’ architecture.

“Blockchain technology can be used to break supply chain data out of silos and reveal this information to all trading partners regardless of the network they are connected to,” it added.

“Our goal is to use the blockchain to automate document exchange along the supply chain and make it more transparent,” said crossinx CEO and founder, Marcus Laube.

Insight by Nigel Davis