I must admit to being something of a
skeptic on the blockchain. The first I really became aware of the technology
was a decade ago, when the first hype cycle for bitcoin was raging. For me,
writing in “A skeptical look at Bitcoin” (Mihelic 2013), I argued that bitcoin
itself did not fulfill any of the three basic definitions of money. Instead, it
acts like a commodity or an equity, but the difference is that there is not
cash flow except for the new people coming into the space, and that is
problematic if you want people making transactions and treating the technology
as a currency. Bitcoin and related protocols have not sold me, despite their
incredible appreciation in dollar value. I have learned more in that there are
also limits to how fast you can make transactions and the cost of these
transactions with the proof of work protocol. Some of these issues have been
worked on with different protocols that make the transaction less computation
heavy.
The ideal blockchain is one where you
have a need for two parties that function as equals in an exchange but there
might be limited trust, and this is a transaction where you want the details to
be immutable. The very nature of the ledger is that the history is there
embedded in the chain. This transparency is good in that there is no need for
middle-people and the market can clear and exchanges or contracts are executed,
and the people move on. This exchange is recorded, but there is a potential for
distance in not knowing who the actors are. There is a balance between
transparency and anonymity. Using a cryptocurrency based on the blockchain is
thus the primary possible use case, especially for something like remittances.
Unfortunately for the boosters, it feels as if cryptocurrencies are actually
exchanged for goods or services the anonymity is the prime benefit, using the
technology for ransomware or drugs and not for something like remittances. Ultimately
the blockchain feels like a cool and interesting technology chasing a use case.
In a lot of ways you could use an ordinary currency or an SQL-based Access
database for a lot of the things people trumpet as uses for the blockchain.
However, blockchains do have their
uses, even if only in niche cases. For example, the video “Blockchains: how can
they be used?” covers using blockchain technology to prevent odometer fraud (2018,
1:10). It is the perfect example because you have two or more parties at the
same basic level of power, and you want that transparency so that everyone can
track the mileage of a car – from the insurance companies and mechanics to a
future purchaser of the used car. It’s a niche case and as the second example
of a way that blockchain be used, it is not very overwhelming. The problem with
this is that it still needs centralization and coordination to work. To really
make blockchain work, you need people to want to coordinate their efforts or
you need some sort of centralized director. The niche cases of blockchain thus
will work best if siloed in one company or industry that has these existing
incentives.
One company that has the power and
incentives to work on these niche cases is Walmart. Aside from everything else
they do, and their giant footprint in the digital retail space, they have over
a quarter of the market share in the US grocery market (“CEOS,” 2022). This
means that they are basically responsible for coordinating the feeding of 80
million Americans every year. That
Walmart manages has managed to do so as they have grown is a marvel of
efficiency, but there are always more places to be more efficient. Using the
blockchain in their supply chain management will have multiple advantages, in
an initiative called by McKeen and Smith as a “Business Improvement,” where the
goal is to “reengineering initiatives to help organizations streamline their
processes and save substantial amounts of money by eliminating unnecessary or
duplicate activities” (2019 p. 23).
Currently many retailers use the UPC
codes, which identify which specific group that an item belongs to, but the UPC
just shows that item as part of a set. With blockchain technology, every single
individual item will be able to be tagged with a unique identifier. Either it
can be scanned at different points, or it can take advantage of technology like
RIFD chips which will allow the item to be tracked in real time and not rely on
scanners. This technology may be cost prohibitive at scale for less expensive
items, but it does have the benefit of not needing the human labor in the loop
every time an item needs to be scanned and inventoried. A company with the
scale of Walmart will have the ability to find the break-even point and
implement the technology, and additionally this connects to the internet of
things which as it scales will help drive company costs down.
Once the tagging and blockchain are
implemented, Walmart should be able to see several business improvement
benefits. Most of these will be clear to the bottom line, while others will be
less tangible. First, the entire supply chain will be visible to the blockchain
system in real time. The company will be able to see where things are moving
well and places where things are sitting around causing bottlenecks. This will
help them be able to be smarter in their purchasing and to be able to reduce
prices to move out stale inventory and hopefully reduce the cost of storage as
having real time tracking means that just in time purchasing is more feasible.
If there is one thing worse than having too much inventory, it is not having
the inventory your customers want to buy.
A blockchain based system is also more
secure. The ledger is permanent, so any potential malfeasance in terms of
faking the inventory count is lowered. The real time tracking also means that
you know where your items are until the moment that the leave your store. If
you are Walmart, you want that item to have left the store through the act of
purchasing, and not by leaving surreptitiously through the front or back door.
The blockchain supply chain will lower shrinkage from your customers and your
employees.
Finally, the blockchain based
inventory system will make your customers safer. The news often has frightening
information about some sort of vegetable that has some sort of contamination
that makes it unsafe for consumption. This is scary because often these recalls
are extremely broad, making you throw out your spinach that might be perfectly
fine, but that you dispose of it out of caution. A more robust inventory and
supply chain solution will allow Walmart to be able to identify that supplier
and to remove their products from the stores immediately. There would be a
greater benefit if Walmart could use their power to push tagging and
identification out to their suppliers so they could track any potential issues
to a single box of grapes, but that is an initiative that might be for down the
road as it exists on the edge of the company’s silo. The swift and targeted
removal of tainted produce will not just save money, but will help generate
goodwill from the customer base, as they learn that Walmart can be trusted to
have fresh and safe produce.
There may be other benefits from the
implementation of a blockchain for supply chain and inventory tracking at
Walmart, but of the potential business improvements that we looked at, all
should have a positive effect on the bottom line of the business, and help grow
the business as customers know that Walmart will continue to have what they
need, when they need it, and at competitive prices because of the efficiencies
that they gain from their investments in technology.
References
Bitter, A.
(2022, December 1). CEOS from Kroger and Albertsons say they're worried
about competition from Amazon, but the e-commerce giant barely makes up 1% of
US grocery sales. Business Insider. Retrieved January 29, 2023, from
https://www.businessinsider.com/walmart-kroger-still-top-grocer-challengers-amazon-gopuff-2022-2
McKeen, J.
D., & Smith, H. (2019). It strategy et innovation. Prospect Press.
Mihelic, J. E.
(2013, November 28). A skeptical look at Bitcoin. Econ Autodidactic.
Retrieved January 29, 2023, from
https://econautodidactic.blogspot.com/2013/11/a-skeptical-look-at-bitcoin.html
Simply
Explained. (2018, May 29). Blockchains: How can they be used? (use cases for
blockchains). YouTube. Retrieved January 29, 2023, from https://www.youtube.com/watch?v=aQWflNQuP_o
