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Where is the True Value in Blockchain for the Supply Chain?

October 15, 2018

A veritable horde of sources exist that proclaim the unique ways in which the Blockchain is already adding to supply chains and their capabilities.


Today, Coindesk published an article that claims the global consultancy KPMG disputes this case.


 In other words, KPMG has now publicly stated that current implementations of the Blockchain for supply chain do little other than allow companies to “track and trace,” in a more transparent manner.


Therefore, if this is taken as true, the overall media’s representation of the Blockchain in this area has been grossly over-exaggerated.


In response to this suggested gap in Blockchain utility, they have significantly changed the focus of their existing Blockchain R&D arm. In a precise sense, this means that they have moved from financial technology related research to research in the niche of global customs and trade.


As we all know, every process that involves entering or leaving an individual nation with any product involves multiple government agencies. With only this in mind, we could then ask: how does an inherently decentralized technology fit into such a picture?


Now, KPMG appears to believe that the answer is to offer these agencies private Blockchains, which are a technological option that has come under fire, as of late.


One chief way this is developing is that the private Blockchains that banks have are being questioned, due to how they seem to be fragmenting the Blockchain space even more.


If you are not quite clear on what this refers to, the general argument here is that with more private Blockchains in one industry, comes less knowledge of that industry’s ecosystem. This is said to be because customers as well as suppliers are split into Blockchains based on the specific company they are trying to interact with, instead of being able to do business with multiple companies at once.


While we are on the subject, as we have mentioned before, a Blockchain is supposed to be centralized, if it is truly built with Satoshi’s original goals in mind. In other words, Blockchain that is owned and kept private by one company is not truly a Blockchain, if you take this into consideration.


Even so, KPMG appears determined to push on forward. According to the previously mentioned Coindesk article on the subject, earlier this year they began looking at how the Blockchain could change the specific area of tax and tariff work, related to global trade.


Their first implementation of the Blockchain in these specific areas, ended up being involving it in what is called “a simple parts provenance exercise,” for a single aerospace part. Such an exercise, however, is not as easy as it may seem at face value. KPMG apparently told Coindesk that the whole process involved thousands of pieces to make the single part, which had to be procured from around 20 different sites.


Because this is true, we can actually begin to see how the Blockchain might be useful in solving such a problem, beyond tracking all of these components. For KPMG, the answer seems to lies in cutting the human element out of processes like duty drawbacks, for the most part.


In the context of the United States, a duty drawback is a situation in which by law, 99% of the payments made on goods imported into the country can be refunded, if they are then next, exported. According to KPMG, this process also applies in European countries in a similar fashion, though in both cases, it appears to be quite complicated.


First, they include just about every fee that is collected when goods are brought into a country.


Next, the terms of duty drawbacks do not seem to always include a 99% refund. In the situation described with this particular aerospace component, the true terms of these refunds may be said to change based on the countries from which its parts seem to have originated.


Because of all of this, one can quickly realize that if this entire situation was automated, every involved party would save a lot of time and money. As KPMG’s research develops, the key may be understood as whether or not they can quantify these factors for interested agencies. In addition to this, it will be interesting to see whether they can achieve any government buy-in.




By: BGN Editorial Staff










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