Any information system is only as good as the quality of its data; the well-known garbage in, garbage out conundrum. Blockchains are distributed ledgers that are subject to this principle, but more so than conventional systems since the entries are supposed to be unalterable.
Is data integrity the Achilles Heel of blockchain technology, especially in global supply chain applications where countless different entities scattered across multiple geographies share information?
Blockchains deliver capabilities that are very attractive in the supply chain domain. They offer data reliability, accurate chain of custody tracking, improved traceability, and product visibility. However, as is the case with any information system, blockchains are reliant on user input. Supply chain actors are required to input huge volumes of data related to the products flowing through distribution channels.
In a blockchain environment these details become immutable once entered in the ledger – even if entries happen to be incorrect or fraudulent.
Clearly, the challenge is to ensure that all entries are correct and credible. It’s not an easy task. Take, for example, the major scandal that hit Europe in 2013, when it was discovered that consignments of beef contained horse meat. Once the beef products were fraudulently labeled as containing 100% beef, at no point did other supply chain actors verify or test that this statement was true.
Another limiting factor is the need to bring less technologically savvy trading partners on board. Imagine a small-scale, rural Indonesian farmer producing palm fruit to meet the ever-increasing global demand for palm oil. Their product is often handled by brokers, who use paper documents or word of mouth to pass along information about the batches of fruit they purchase. At no time does the farmer enter information digitally on key metrics such as farming practices, productivity, and product quality.
Blockchains have the potential to provide much higher levels of transparency in industries such as food, but product information at the producer level can be limited, and there are instances where multiple traders or brokers obscure supply chain information.
If blockchains are going to deliver benefits such as increased transparency across opaque end-to-end supply chains, downstream entities will probably have to train and equip upstream partners so they can participate.
Companies may well be willing to do this if the benefits are substantial. Also, measures for policing data quality are wired into blockchains.
In a shared ledger that is updated in real time, more eyes are privy to the information than is the case in traditional information systems. Incorrect or fraudulent information will eventually be flagged, especially for repeat offenders. Consensus mechanisms built into blockchains help to ensure the integrity of data inputs. And it is possible to add entries that correct previous, erroneous ones.
Innovations such as product identifiers that include DNA information could make it much more difficult to falsify product details. For example, an identifier being deployed in the meat business incorporates animal DNA information that can be used to track meat products from farm to fork on a blockchain.
The ability to alter the ledger is another possibility. Consulting firm Accenture has patented technology that enables users to edit the content of a blockchain in certain circumstances. The firm argues that this is necessary in industries such as financial services that are subject to drastic regulatory change. Critics counter that such a capability amounts to heresy, since it undermines the immutability of blockchains.
Stricter data protection regulations that are due to come into force in Europe next year will add another twist to the data integrity debate. The so-called “right to be forgotten” provisions allow citizens to demand that personal information available online be corrected or deleted. The implications for unalterable blockchains are uncertain.
Garbage in, garbage out questions will need to be addressed as blockchains evolve in the supply chain space. At the very least, this effort will shed light on data quality issues that undercut the efficiency and integrity of global supply chains.
This post was written by Dr. Alexis Bateman, Founder and Director of the MIT Responsible Supply Chain Lab (firstname.lastname@example.org), and Ken Cottrill, Global Communications Consultant, MIT Center for Transportation & Logistics (email@example.com).