We can all agree that inventory visibility is important, but why do we need a blockchain for this?
Today, many organizations build direct interfaces to send information to their many suppliers and customers. This has created a popular dish known as API Spaghetti – a complex network of point-to-point integrations that make it difficult to get consensus on the current state of inventory levels without extensive reconciliation methods.
A traditional solution may be to establish new data standards, define a set of APIs, and build a central database that can serve as an all-seeing control tower in a small ecosystem where it’s just you and a few friendly organizations that may work.
But what happens when the ecosystem expands? Could you build a central repository when you don’t trust or even know who all the players are?
A gatekeeper and stringent controls would need to be established and you now have consolidated a lot of risk in one place. Over time, it would be difficult to enter, exit, or change this central repository.
Before we go further, let’s step back and ask, what is inventory visibility in the first place?
Inventory is a count of our products, how much we have, and where they are located. Products are both scarce and consumable. To track products in a digital supply chain, we need a system that reflects those qualities. One, where it is impossible for a product to be in two places at once or in other words impossible to be duplicated and two, once a product is used it cannot fall back into circulation.
We need a system that can ensure digital scarcity. Blockchain was created to manage digital scarcity and maintain state among a community of participants who do not know, trust, or even interact with one another.
Products are categorized as whether they are serialized or not as individual assets. A convenient term for that finite digital asset is a token. For inventory use cases, tokens can be used on a blockchain which represent products. Tokens can be created, moved, and consumed.
With these simple functions, we can allow for entire supply chains to be created digitally on a common network. Tokens are important because we can count them and we can transfer them between wallets as ownership or custody if the product changes.
Designing a single centralized system to govern a global supply chain network would not only be difficult, it will be costly and with high risk. When the blockchain is sufficiently decentralized, data cannot be manipulated and a more transparent and tamper-proof inventory management system is created.
The question is not, do we need blockchain for this, it is, why would we do this without a blockchain?
At present, the Asia-Pacific blockchain technology market is expected to grow at the highest CAGR (54%) during the forecasted years of 2018-2023 and is expected to earn a revenue of USD 4.59 billion by 2023. APAC has been witnessing the fastest adoption of blockchain technology in the last couple of years. It is expected that Asia pacific will attract significant volumes of venture capital investments for innovations in blockchain.
