Blockchain
WHAT IT IS, HOW IT WORKS, AND WHAT IT CHANGES FOR SUPPLY CHAINS
Blockchain continues to attract strong interest across industry because it addresses a recurring business problem: multiple parties need to share the same transaction record, but they do not fully trust each other, and they want auditability without heavy reconciliation.
In practical terms, a blockchain (more broadly, a Distributed Ledger Technology – DLT) is a shared, tamper-evident ledger where transactions are recorded in a sequence of “blocks,” time-stamped, cryptographically linked, and replicated across multiple participants. Once validated and appended, records are extremely difficult to alter without detection—provided the network governance and key management are sound.
Important nuance for 2026: most supply-chain deployments use permissioned networks (known participants, controlled validators) rather than open public blockchains.
Blockchain in one sentence (business definition)
A blockchain is a shared system of record that lets independent organizations write, verify, and read the same transaction history with built-in integrity controls, reducing disputes and reconciliation effort.
How does it work (plain English)
Blockchain security relies on three combined mechanisms:
- Cryptographic identity (public/private keys)
Participants sign transactions with a private key. Others verify authenticity using the corresponding public key. This enables non-repudiation and controlled authorization. - Consensus (agreement on “the truth”)
Instead of one central bookkeeper, multiple nodes agree on which transactions are valid and in what order.
- Public networks may use Proof-of-Work or Proof-of-Stake.
- Enterprise networks often use validator sets and Byzantine fault-tolerant approaches for performance and governance.
- Immutability by design (tamper-evident chain)
Each block references the previous one. Changing past data would require rewriting history across validators—detectable and operationally infeasible under proper governance.
Critical reality check: blockchain proves who submitted what and when—it does not guarantee that the underlying real-world data is true. That is the “oracle problem”: garbage in, garbage out.
What does this mean for manufacturers (simple terms)
Blockchain can move information (and potentially value) from Party A → B → C → … → Z with:
- Shared visibility of the same record (no competing spreadsheets)
- Audit trails that are hard to manipulate after the fact
- Automation via smart contracts (rule-based triggers)
This becomes valuable when you need to prove, quickly and credibly:
- provenance and traceability (ingredients, batches, serials)
- compliance status (certificates, inspections, chain-of-custody)
- handover events (production complete, packed, loaded, delivered)
- entitlement (who can claim goods, documents, or payments)
Where blockchain actually delivers value in supply chains
1) Document digitalization (high ROI when legally recognized)
A major friction point in global trade is paper-based transferable documents (notably Bills of Lading). Industry standardization and legal reforms are accelerating the move to electronic transferable records and eBL interoperability. (dcsa.org)
- DCSA maintains standards and adoption guidance for Bill of Lading data and interoperability. (dcsa.org)
- DCSA notes that as of 2025, ~11% of bills of lading are issued electronically, showing progress but also a long runway to scale. (dcsa.org)
- Legal recognition is advancing: the UK Electronic Trade Documents Act enables legal recognition of key trade documents in electronic form (from September 2023). (Legislation.gov.uk)
- UNCITRAL’s MLETR adoption status shows growing jurisdictional coverage (including France in 2024 and the UK in 2023). (uncitral.un.org)
Consultant takeaway: for many shippers, the “blockchain value” is less about crypto and more about trusted digital documents + interoperability + legal enforceability.
2) Traceability and anti-counterfeit
Useful where you must demonstrate chain-of-custody or authenticity (pharma, food, high-value components, regulated materials). The ledger supports a defensible audit trail—if scanning/serialization discipline is enforced.
3) Dispute reduction and faster exception handling
When multiple parties share the same milestone events (handover, loading, delivery, temperature excursions, damage reports), you reduce time lost to “which version is correct?”
4) Governance and transaction-cost reduction (when designed properly)
In multi-tier networks, shared records can limit opportunistic behavior and reduce reconciliation overhead—but only when:
- governance is clear (who can write what)
- data standards are enforced
- integration with ERP/TMS/WMS exists
What blockchain will NOT fix (and what to do instead)
- Bad master data / weak process discipline → fix data governance first.
- Lack of standards → adopt common schemas and document models (do not build custom islands).
- No legal recognition for transferable documents in a corridor → validate legal framework by trade lane.
- No incentive alignment → define who pays, who benefits, and how value is shared.
- Privacy concerns → use permissioned networks, role-based access, and store sensitive data off-chain with hashes on-chain.
2026 “decision filter” (use this before investing)
A blockchain/DLT initiative is typically justified when you have all of the following:
- 3+ independent parties must write/verify the same transaction history
- High cost of disputes / reconciliation today
- Need for auditability (compliance, provenance, liability, finance)
- Clear governance model (validators, onboarding, access rights, liability)
- Data capture discipline (serialization, scanning, event validation)
- Integration plan with ERP/TMS/WMS and document systems
- Legal review for transferable documents and cross-border enforceability
If you cannot check most boxes, a well-designed centralized platform (with strong controls and audit logs) may outperform blockchain on cost and speed.
Use-cases matrix — blockchain / DLT in supply chains & trade
Core principle: treat blockchain/DLT as a shared system of record for multi-party workflows. If your problem is primarily internal (one company, one ERP), blockchain is usually the wrong tool.
Matrix: where it fits, how to qualify it, and why it fails
| Use case | Where it creates value | Fit criteria (when DLT makes sense) | Typical pitfalls (why it fails) | MVP design choices (what “good” looks like) |
|---|---|---|---|---|
| Traceability (provenance / chain-of-custody / anti-counterfeit) | Shared, tamper-evident history of events across tiers (batch/serial, custody transfers, transformations). Faster audits, fewer disputes. | 3+ independent partiesmust write/verify events; high cost of disputes/recalls; regulated product or high-value IP; strong serialization/scanning discipline; clear ownership of “truth” per event. | “Oracle problem” (bad scans, fake inputs); no consistent identifiers; weak onboarding (suppliers don’t adopt); privacy leakage (commercially sensitive flows); no process enforcement → ledger becomes a museum of bad data. | Permissioned network; standard IDs(GTIN/serial/batch); event schema + validation rules; store sensitive docs off-chain, anchor hashes on-chain; clear governance for who can write each event; exception workflow (reject/replace events) with audit trail. |
| Documents (eBL, certificates, commercial docs, chain of title) | Reduce paper friction, courier delays, document fraud, and reconciliation. Enable interoperability and legal recognition for electronic transferable documents. | Your corridors/jurisdictions support or are aligned with electronic transferable records frameworks; banks/carriers/consignees can accept electronic docs; you need transfer of title and controlled possession; high volume repetitive flows. | Legal mismatch by country/lane; platform lock-in; “digital PDF” without controlled possession; non-standard data → manual re-keying persists; counterparties refuse adoption. | Start with data standards + interoperability (avoid custom islands). Track eBL adoption and interoperability milestones: eBL usage is growing but still far from universal (e.g., DCSA cites ~11% electronic issuance as of 2025). (dcsa.org) |
| Trade finance (L/C, collections, receivables; digital presentation) | Fewer documentary discrepancies; faster presentation/examination; better alignment between logistics events and payment triggers; improved auditability for banks. | You use documentary trade regularly (L/C, collections); high discrepancy costs; banks support electronic rules; you can standardize document data and presentation workflow. | Banks don’t accept the electronic process; mismatch with ICC rules; “smart contract” triggers without bank-grade controls; weak identity/key custody; inconsistent doc data between shipper/forwarder/bank. | Align with ICC frameworks for electronic presentation (e.g., eUCP v2.0, in force since 2019) and build controls around completeness, time stamps, and audit trail. (2go.iccwbo.org) Use ICC DSI KTDDE to shift from documents → standardized data elements. (icc-dsi) |
| Customs & security filings (data sharing / pre-arrival requirements) | Reduce rework and delays by synchronizing shipment data across shippers, forwarders, carriers, and brokers; stronger audit trail for who submitted what/when. | Your key lanes are sensitive to data quality and pre-arrival filing; you have repeated handoffs where data is retyped; you can enforce a single “source-of-truth dataset” shared by parties. | Customs systems are not blockchain-native (integration still required); “ledger” doesn’t fix bad HS codes/values; governance unclear (who is liable for the filing); over-engineering instead of fixing master data. | Use DLT only as shared evidence + change control, not as the customs filing system. Build to regulatory requirements such as EU ICS2 (Release 3) and enforce data quality gates before filing. (Taxation and Customs Union) Use established cross-border data standards (WCO Data Model). (wcoomd.org) |
| ESG reporting (transport emissions, chain-of-custody, due diligence evidence) | Auditability of inputs (activity data, lane legs, energy source claims); reduce greenwashing risk; improve assurance readiness; tighter supplier evidence management. | You must report value-chain impacts; you need verifiable evidence, not just estimates; multiple LSPs provide fragmented data; you can standardize method and require supporting documents. | Confusing “audit trail” with “accuracy”; inconsistent methodologies across LSPs; missing primary activity data; too much on-chain data (privacy and cost); no assurance model. | Standardize methodology first (e.g., ISO 14083 for transport chain emissions; GLEC Framework aligned to ISO 14083). (ISO) Use ledger for evidence integrity + versioning, not for heavy calculations. If maritime is material, ensure your commercial model accounts for EU ETS phase-in reaching 100% by 2026. (Climate Action) |
“Fit criteria” scorecard (fast go/no-go)
If you score < 6/10, do not lead with blockchain—fix process and data first.
- Multi-party reality: 3+ independent organizations must write/verify the same record
- High friction today: disputes / reconciliations / delays are expensive and frequent
- Standard identifiers exist: shipment IDs, batch/serial, party master data is stable
- Data capture discipline: scanning, event logging, exception handling are enforceable
- Governance is defined: who can write what, liability, onboarding/offboarding, audits
- Interoperability matters: you must avoid platform lock-in (standards first)
- Legal viability: corridors accept electronic transferable records where needed (title docs) (CNUDCI)
- Integration budget exists: ERP/TMS/WMS + partner systems will be integrated (no “shadow IT”)
- Privacy model is clear: role-based access + off-chain storage for sensitive docs
- Commercial incentives align: adoption benefits are shared across parties
Typical pitfalls (patterns you should actively prevent)
- Blockchain as a strategy instead of a solution to a quantified business pain.
- No standards: custom data models guarantee manual work forever.
- No incentives: tier-2/3 suppliers won’t adopt without clear value or contractual leverage.
- Legal blind spots: transferable documents require legal recognition and controlled possession. (Legislation.gov.uk)
- Over-promising on “truth”: DLT gives integrity of records, not truth of the physical world.
- Key management weakness: poor identity controls undermine the entire audit trail.
Practical MVP architecture (battle-tested)
- Permissioned network with known participants (supply chain reality).
- Off-chain document store (secure repository) + on-chain hashes for integrity and versioning.
- Canonical “shipment dataset” (aligned to standards) with strict validation gates.
- Event model: who/what/when/where + evidence reference + digital signature.
- Integration: API/EDI into TMS/WMS/ERP and partner systems (no double entry).
- Governance: onboarding, access rights, audit, dispute handling, and exit rules.
