Blockchain Adoption in Supply Chains | Nikhil Vadgama

The pandemic disrupted supply chains. Constraints will affect delivery of goods around the globe this upcoming holiday.  How do we fix this?

Nikhil Vadgama, Deputy Director of UCL's Centre for Blockchain Technology, reviews ten sectors and hundreds of projects over the last decade that incorporate blockchain to provide better supply chain systems. 

Learn how challenges with traditional supply chains are solved using blockchain and what we can expect to see in the next ten years.

Transcript

Lauren Weymouth (00:00):

I'm Lauren Weymouth and I lead the University Blockchain Research Initiative at Ripple. Our dedicated listeners hear us talk about how DLT creates information systems. Electronic ledgers that are transparent and a single source of truth and we spend time analyzing how this is being rolled out around the world. Who is catching on to the benefits and where it will disrupt all sorts of business process.

Today we're talking about blockchain adoption in supply chains. It's timely. 

The pandemic disrupted supply chains and as we near the holidays, we hear about constraints that will affect delivery of goods around the globe. How do we fix this?To start, we better understand how blockchain technology can provide a better system. And we can look deeply at different sectors who have figured this out over the past decade.

Nikhil Vadgama recently published a paper reviewing hundreds of projects to give us the bottom line. Now, I've had the pleasure of knowing Nikhil for several years now, as he managed industry engagement among other operations for University College London Center for Blockchain Technology. I've seen him rise from a research associate to the Acting Deputy Director of the Center.

He's highly regarded in the industry, from consulting central banks on strategy implementation of digital currencies, to designing and creating blockchain courses to entire master's programs. All while publishing papers and books and in the past six months, is concurrently the chief data officer at Twig, a rising circular economy fintech startup. Thanks for sharing your expert lens with us today, Nikhil.

Nikhil Vadgama (01:28):

Hi Lauren.

Lauren Weymouth (01:29):

We love to ask this question of all our guests. What is the how and when and why that you first got interested in blockchain DLT crypto? Can you share your journey with us?

Nikhil Vadgama (01:39):

I just looked at an old wallet I had and that was all the way back in 2014. So that that was the first time I actually came onto the scene of bitcoin and my memory of it back then was this kind of esoteric thing that people talk about but didn't really understand at all.

I didn't do anything in the blockchain space after that first interaction with it until about 2017 when things you know in the space started really getting hot and you saw that the first time that bitcoin really went up and hit, created new highs.

At that time, I was working initially with UCL on a project to commercialize some scientific research. extend that particular use case. And that there was around tokenizing real estate. That was when I got back into looking at blockchain.

And then having the opportunity to create the top academic blockchain center in the world that we have at UCL.

Lauren Weymouth (02:40):

Okay. So getting in early yourself and having had the experience that it's somewhat difficult to understand, how do you go about creating curriculum for students to make it really clear and concise? You created the masters of financial technology that just launched at UCL. Tell us about that undertaking.

Nikhil Vadgama (02:57):

We saw in the market that there's definitely a huge skills gap. There's a huge knowledge gap as well, not only in blockchain, but in all emerging digital technologies and in technology in general and we thought about how can we go about and try and help address that.

That's really where the impetus came for creating this master's in financial technology. Also, another one that we created a master's in emerging digital technologies. In terms of how we've designed the curriculum for blockchain and how to make it more accessible and understandable, We break the subject up into three areas. One is looking at the technology. One is at the business and economics aspect of it. And the last area is legal and regulatory.

When we're introducing students to the subject, depending on the level they're at, I think we start off where people are most comfortable which is getting them to understand what is the use case? What is the business needs that come about that? Then getting them into the understanding a bit about the technology and moving on also into the regulatory and legal aspect.

Blockchain unlike other technologies is one which requires  a huge kind of understanding of a spectrum of different disciplines in order to understand it. Because it just has utility that is so great amongst all the different aspects of industry in our society. Unlike other technologies like that. that’s what makes it also quite difficult because you need to bring in so many different aspects in order to gain a proper understanding of it.

That's why us as industry researchers There's still so much to research and understand about the technology and we're at such an early stage with this evolution that who knows how it's going to pan out in the future.

Lauren Weymouth (05:11):

Well, I couldn't agree with you more. It's why we launched this podcast specifically talking about use cases. We found that when you're trying to explain the technology to people, sometimes they get that glassy look in their eye.

But when you actually talk about how they're going to use it in their lifetime, how it's going to benefit different sectors, then they start to crystallize understanding. Now you have this master's program rolled out. You've enrolled students. They're in the middle of a semester. How are they finding it?

Nikhil Vadgama (05:36):

We decided to take a smaller cohort for the first year of running so we've got around 20 students on the program. They're all really excited. 

Lauren Weymouth (06:06):

How else is the vibe of the students when it comes to blockchain and digital assets on campus?

Nikhil Vadgama (06:16):

Some of these courses I've been teaching for a couple of years now. But we've really seen student interest take off more and more and more as time has gone on. Blockchain is firmly going to have a place in the future and it's something that they're going to need to be able to understand as they go into the world of work and they take managerial responsibilities and so on and that they are going to have to make decisions about. So it's important that they understand what's going on.

Lauren Weymouth (07:28):

Yeah. I'd say from an industry perspective, we're seeing the same thing. When we launched this program a little over three years ago, we were introducing the concept to students. To now when we're recruiting, entire cohorts are excited about getting into the field. 

You are affiliated with blockchain research associates, over 300 from all over the world and in touch with cutting edge material. Zooming into your recent paper, what had you choose to investigate supply chains?

Nikhil Vadgama (07:58):

There are a couple of reasons why we picked supply chain. One was, as a center most of the people who are working at the center have a background or industry expertise and have done quite a lot of research actually in the financial services domain. For instance, I used to be an investment banker many years ago.

We wanted to actually think about the broader use case of blockchain technology outside of the financial services. I think the one area we saw that was the second, probably the second hottest area was that of supply chain. At the time as well, we kicked off a series of workshops with retailers in the UK and we'd had some technology companies. For instance, we had Oracle there. Then we had leading UK retailers like Sainsbury's, which is a grocery company. We had Marks & Spencer's clothes and groceries as well come along and we were having these round tables and talking about the future of blockchain.

Again, the only thing that they were really talking about was how could we use this to improve our supply chain practices? One thing that came across was that there was just so little data actually, that was kind of answering the questions around you know ... Not use cases because people could see what use cases were, but more around really understanding which particular technologies could be applied. What was the success and failure of particular technologies? What was the experience companies had with these technologies?

That's what led to the synthesis of this particular research which was, could we try and answer some of these questions about what's actually been going on in the supply chain world with respect to blockchain and can we try  and find out have there been any trends? Have we seen certain technologies come to dominate? Which particular sectors are using what and why?

That was the synthesis of why we picked a supply chain. And it happened at the time we started doing this particular research, that was also time when COVID hit. And globally, we started seeing such a pressure taking off in global supply chains as well. Which was another reason that prompted us to really push on trying to also investigate that question within the research and see what we could find out.

Lauren Weymouth (10:23):

Okay. We're going to dive into all your data. But maybe spell out what is the challenge with traditional supply chains that these projects could solve using blockchain?

Nikhil Vadgama (10:31):

The biggest issue that supply chains have is one of transparency and they are incredibly opaque. It's very difficult to get visibility over the entire supply chain as it stands. Then typically in a traditional supply chain, what you'll see is that the knowledge of the person at any single point is always limited by whatever stakeholder has come in before and the stakeholders that was going to be afterwards. After that, there's very little understanding about what's going on.

When you've got a very complicated supply chain with lots of different stakeholders that are involved, you have very little idea what's going on. As a result of that, what you see happening is you get huge errors with.time and delays. With knowing when things are actually coming through a particular supply chain. You get issues with fraud, for instance. You get issues with cost. You get issues with time. You get all these different issues simply because planning and understanding where things are at a particular point and how that is going to affect a product that goes through a particular supply chain. 

Lauren Weymouth (11:46):

Most people I know right now are running out to get their holiday shopping done very early because they're afraid that if they wait till Christmas Eve, if they wait till the last minute, they won't be able to get anything on the shelf. If one of these companies, if a sector was using supply chain, how would that make this better?

Nikhil Vadgama (12:01):

It increases the information overview you have, and therefore enables you to basically plan better and to react to delays and errors and so forth ahead of time. That's the main thing. The ability to coordinate all this information and do it with a technology which is enabling you to have better properties of security. Better transparency and make use of things like smart contracts, which are going to enable the flow, for instance, of funds to go through a particular supply chain in a better way.

Typical examples that you see with what goes wrong in  supply chains or let's say you've got some goods that were damaged. How do you trace at what particular point damage occurred within this particular supply chain? Whose fault was it? That's one particular thing because you don't have visibility., the end party may not have visibility over the entire supply chain, it's difficult to pinpoint exactly where this particular incident occurred.

Another one, for instance, is payments. Stakeholders within the supply chain may have to wait an incredibly long time in order to get their payments because of issues around proof of delivery and things like that from one particular point to another.

Again, blockchain with properties of tokenization when added on top of it can enable a really seamless, more efficient way of driving payment flow throughout a blockchain because you have that transparent tracking, for instance, of when a particular event happened and you're able just to effectively use a smart contractor to pay someone through tokens as soon as that happens. It's really increasing the efficiency, and of course the transparency of the entire sector leading to better planning and better outcomes for all the stakeholders that are involved.

Lauren Weymouth (13:52):

Yeah. I could definitely see how pinpointing damage and facilitating faster smoother payments makes a big difference to the corporations and providing me the consumer with more accurate information so that when I'm told I'm going to receive a couch in two weeks, if it's really going to be put off for six weeks, I have that information. I can do something in the meantime and plan better. That's great.

so in addition to accurate information, how else would this benefit the consumer?

Nikhil Vadgama (14:16):

Sure. One thing we find particularly is that consumers are getting more and more aware of the products that they're buying right and they want to know more about exactly how they were produced, where they've come from, what conditions they've gone through. utilizing blockchain technology here within the supply chain helps to give that reassurance, that security of exactly the stages and the journey that a particular product has gone through.

Whether that's taking oranges that have ended up in orange juice. Or even something like a vaccine that's been manufactured and you've ensured that it's actually been through a supply chain and in cold storage. All the way to ending up at the doctor's surgery or wherever it's ended up in. Having that certainty and having that particular trust within the information that's presented is a huge benefit that consumers can get themselves when they're interacting with supply chains that have utilized blockchain technology.

Lauren Weymouth (15:22):

I see. It's not just accurate information, it's the depth and breadth of the information that will be communicated to me. For example, Making sure it's really organic or there wasn't child labor used. Or all the other things we're starting to care about and look at when we're frightened about climate change and we want to make the world a better place. How many blockchain projects did you analyze?

Nikhil Vadgama (15:43):

We chose to try and find as much information as we could from public data that was out there rather than trying to go for an interview-based approach. We in the end narrowed it down to 271 projects that we thought were worthy of some analysis and that's what we came up with in our paper.

Lauren Weymouth (16:03):

That seems like a lot to me. I don't think I realized there were that many enterprise blockchain projects going on in this sector. Speaking about sectors, you mentioned a couple of brand names that we know of like retail Marks & Spencer. How many sectors did you look at?

Nikhil Vadgama (16:17):

We came up with 10 unique sectors. Then we classed one as multiple because it was too difficult to exactly pinpoint it down to one particular sector. Then we had a minority that we just classified as others because there wasn't enough significance to the number of projects.

It was quite interesting to see that it was being utilized in many, many different sectors. All the way from aerospace and defense. All the way to oil and gas, luxury goods, finance, fashion, and all these different particular sectors.

Lauren Weymouth (16:51):

Then you concluded that agriculture, grocery and freight logistics, those sectors had the most observed activity. Can you tell us why that is?

Nikhil Vadgama (17:00):

Sure. we felt that these areas would come out as those that were the most popular. But I think there’s a good reason why. If we look at agriculture and grocery as a particular sector, and we think about the safety and the paramount importance of food security and safety, this is why this particular sector has really embraced it.

Because you look at some of the food scandals that have happened in the past in terms of looking at any food poisoning activities that have happened, we had issues in Europe and the UK with certain types of meat being contaminated, for instance. Or not knowing exactly where your produce has come from. It's really important that all of these things actually come from the right place and that are secure in their entire journey throughout the supply chain. That's where we saw that companies and governments are looking at agriculture and groceries and application because simply of how important that is to us and society.

Then the other one freight and logistics, that came about because this is a really complicated sector. Freight and logistics is the entire thing that needs to coordinate how all the different goods come through that particular supply chain. So in itself, it is trying to look for ways to increase efficiency and to try and reduce the complexity that is there within the sector. And Another interesting thing we saw is these particular sectors also embracing the use of IoT as well. You've got here a combination of not only blockchain, but blockchain combined with IoT, the Internet of things devices that were coming together as well in order to give that jewel mechanism of having more in depth information about all the different processes that were going on. And having that on a system which was enabling better transparency, coordination, security, efficiency and so on, which was in the blockchain itself.

Lauren Weymouth (19:03):

Yeah. We've heard about the IoT sensors being added into the equation on this show. We heard about how they're being used to measure energy consumption in dorm rooms at UPenn and how SFSU was using them in a food safety project, Making sure that food when it's being transported from place to place stays cold. All right. Now these different projects that you observed were at different phases in their market readiness. Why do you think some projects achieve market readiness while other stays stagnant?

Nikhil Vadgama (19:32):

We were looking to try and define success. We picked these terms like we wanted to see what was failure? What was development and what was success itself in the market?

We realized we had to actually tweak these terms a little bit because it wasn't fair to actually label things as completely failed or to say things were completely successful because we didn't have that fine level of detail in order to make that conclusion. What we could instead state was that, yes, things have become stagnant. Or indeed had become inactive. As in we've not seen any activity from them in over a certain period of time.

We could certainly say things were in development because there was news coming out. But it wasn't, this news was still that things were occurring. That the project hadn't come to the market yet. And the last time, we couldn't say successful for certain, but we could certainly say that they were market ready in that they were available to be purchased.

It's important to differentiate market readiness here from the term success because a project could say it's market ready and be available to be purchased without actually having any customers, This is something that we found from the research that we had this spectrum of projects that were inactive. Many that were in development. Indeed, certain projects were in development for a number of years. And that we had projects that were market ready and that were available to be bought.

Projects that were stagnant were dominated by startups that had come around during the ICO boom period. That they had been getting into the market. When things were really hot, they were raising funds.

Then for whatever reasons, whether that be poor treasury management, whether that be just too much hype being associated with their particular fundraising, seeing them fall by the wayside because actually They didn't have the runway and they didn't in fact have the actual utility of the project going further. And on the other side, those projects that were market ready, certainly some of them were startup projects that just have come up with a solution or advertising it so fall into that bucket.

But other ones have come through which are particular projects that have spent a considerable amount of time actually developing their use cases out and have finally come about and chosen a particular technology, which we saw actually an interesting result in terms of technology choice. And indeed in terms of the player. what we saw was that Hyperledger or Hyperledger Fabric in particular, and indeed enterprises themselves were coming out to dominate as the most market ready structure in the market overall most recently.

Lauren Weymouth (22:22):

Well, that's interesting how you tie that all together. I was actually going to go there asking you that. You looked at the span of the last decade and when it came to choosing a blockchain, in your analysis there was a change in adoption from Ethereum to Hyperledger-based projects and I was going to ask what you thought the reason was for this.

Nikhil Vadgama (22:38):

we saw that shift.one of the big reasons. With Ethereum you've got a public blockchain there. You've got something that is easily accessible for anyone that supports a token that enables fundraising practices.

That was a reason why the majority of startups pick that. But when you're talking about supply chains, when you're talking about these enormously complicated processes that are going on with multiple different stakeholders that you need to come together, a startup sometimes isn't in the position to make all the different pieces come together to solve a particular problem which involves so many different disparate stakeholders.

Here was a perfect space where we  saw a shift from startup interest, actually into enterprise interest dominating because large enterprises are the ones that can make this happen for supply chains. Because supply chains given how complicated they are, given all the different players that are in there, the enterprise or large scale enterprise is the one that could, in a sense, apply a bit of pressure on their supply chain to enable them to adopt one particular blockchain technology.

Indeed, if you want blockchain to be successful within a particular supply chain, you need to get all the stakeholders to be on the same one. Certainly when we were looking at the research interoperability, and still interoperability is an issue. So you need people to be on the same technology using the same systems to interface with it.

When you have a particular partner that is within a supply chain process that is able to exert pressure, that you live to see more successful outcomes of an adoption of a particular type of technology there. That's why we see large scale enterprises succeeding a bit more than startups having and actually being able to implement supply chain projects.

And we see actually the dominance of Hyperledger over Ethereum IBM is a name that many enterprises trust. Therefore, when they saw what technologies they wanted to work with, from an enterprise decision point of view, where they may already have working relationships, technology usage with IBM as well. To then switch to, even though the technology had become open source with Hyperledger Fabric, something that was pioneered by them, well, certainly where IBM took a uh a leading role in its development was a reason that made them more comfortable with using it.

That's why we've seen this shift from the market from early stage activity from startups utilizing Ethereum, to them falling by the wayside realizing that this is a really difficult problem to solve and that one that actually is where size actually makes a difference to whether or not a technology can be implemented to seeing enterprises, consortia, and even government coming into the play. Then choosing to use, depending on the use case, but from our research, the majority were using Hyperledger-based or Hyperledger Fabric-based technology in order to satisfy the use case.

But I should say that's not something that was ubiquitous in all  particular sectors. For instance, certainly that's the case in agriculture. Certainly that's the case in many different sectors. But in something like freight and freight and logistics, actually we saw more Ethereum usage than Hyperledger. I think one of the reasons for that may be that we thought was simply because this sector may rely on having more public provenance of particular information and therefore there was a slight bias towards still using Ethereum. 

Lauren Weymouth (26:15):

Well, I think we all can certainly understand enterprise using an old school trusted name like IBM. But I want to go back to something you said about interoperability. I think we both know tons of researchers who are working on interoperability of blockchains. But it sounded like you were saying, you think there might be a clear winner in blockchains that are adopted and used in industry. Can you expand on that?

Nikhil Vadgama (26:39):

I would say certainly from our research perspective that we see Hyperledger Fabric dominating.But again, I would say that still we're at a very early stage of these particular technologies being deployed wider in industry and society. Particularly in supply chains, it's still very early stage.

I won't say there's a clear winner, but certainly when companies that we've talked to about particular supply chain usage, one of their concerns is of course interoperability because they're concerned about actually today, if they choose and pick a particular technology, if they choose to go with it, what is kind of the obsolescence risk of it? What is going to be an issue? If there are better technologies that come along. How are they making sure that interoperability is going to be there?

If these things aren't clearly presented to them, and if there isn't a particularly good answer for that, then they're choosing actually to not go forward into full on production. That's actually one of the things we see also in the research, which is why we see so many projects which are in this stay in this development zone. They've gone from starting off to being just developing, and they've been in the development stage for a number of years. They've not gone into market readiness or production.

That's because companies are still experimenting with and still trying to fully understand They want to remain open to technologies. But they don't want to go and put their flag in the sand and say, "We firmly picked. It's Hyperledger Fabric for us and that's how we're going to go in the future." They're open to using a number of different technologies indeed. I think when interoperability is more developed amongst blockchain technologies, I think there'll be a greater appetite for them to go through and start pushing things into the production regime.

Lauren Weymouth (28:24):

It sounds like the Interledger project, the ILP needs to be more widely made known because that is something that has proven to work for interoperability

 Okay. The billion dollar question, which supply chain project using blockchain would you invest in?

Nikhil Vadgama (28:40):

Well, that's an interesting one. Well, majority of successful ones were all done by large corporations and indeed, they were all using Hyperledger. And particular there, there was no token use case so you weren't able to invest in the supply chain project itself. You'd have to go away and invest in the stock of the company.

If I think about particular projects that I thought were more interesting, I would say these were the ones that really synthesized cross usage of not only blockchain technology, but also Internet of things, as well artificial intelligence to really put the entire aspect of planning and management. The entire transparency and coordination level that the blockchain brings in, and the more in depth and richer data that is provided.

Now actually, one stands out for me in terms of its unique new customer experiences that you could provide. It was a company, actually, in the United States that was tracking all the way from farm to fork salad. It was a high street restaurant that was serving different kinds of salad and based on the data they had about, for example, the tomatoes that they were growing, they would be able to tell you what taste you'd be able to get from your tomato based on that.

Because of the conditions that the tomato was grown in, you could pick if you wanted a sweeter tomato. If you wanted a richer tomato flavor and so on and so forth. They were actually putting flavor into the ability for consumers to choose what they wanted because of the richness of the data they were capturing and how that was going across through the supply chain.

That's one of the projects that really stood for me when I was doing this research. It highlighted again, one of the benefits we talked about earlier, consumer choice and what you can do with business models once you have these kind of technologies put in place.

Lauren Weymouth (30:37):

Now, will you follow up this paper. Will you go forward and interview some of the companies you reviewed and go further?

Nikhil Vadgama (30:45):

Sure. I think one of the pieces that when we kicked off looking at supply chains a couple of years ago, one of the things was that still understanding what are the best practices. Now with this research, we were able to observe trends. We were able to observe what was going on with technologies over time. But we weren't able to see actually in terms of implementation practices, what was working well? What were issues, actually, with companies on the ground trying to put these technologies in place and so forth?

I think if we're following it up, we're going to be doing some research that actually spends time interviewing these particular, some of the particular projects we found most interesting sampling across sectors. Sampling across technologies and trying to do some case studies there.

That's not only going to be great for research publication purposes, but also makes a fascinating education case studies as well that you can see about how companies have coped with particular problems and why they made the choices that they made. And in fact  in hindsight, what can we learn from that? What feedback can we get?

Lauren Weymouth (31:51):

We can hear that there's further research to be done. But based on your current learnings, what can we expect to see in the next 10 years from this topic?

Nikhil Vadgama (31:58):

I think one of the key things and one of the big areas where we're going to see supply chain growth is this idea of tokenization of assets along a supply chain. And indeed, the flow of funds through a supply chain being made much, much more efficient.

We've already seen previously use of blockchain as an information coordination system simply to give more transparency. But now we're going to see the other parts of blockchain. We're going to see smart contracts being utilized more. We're going to see flow of funds happening. Tokens being utilized.

Even who knows where that can go with business models. Who knows where that can go where actually this kind of thing that people were saying before like assets and freight that's going all around the world, value is just locked into that as it goes around the globe. But that could become so dynamic if we're able to tokenize those particular assets. Then to actually trade them as and see how they flow across a supply chain dynamically. When you can free up that kind of capital that's deployed and say get capital that's just sitting there, who knows what could happen. I think there's going to be a lot of growth [uh] that happens as a result of that.

Lauren Weymouth (33:06):

Growth being the predominant word. Is there anything I've not asked you that you wish I had?

Nikhil Vadgama (33:11):

No. I think you've covered everything. I think this has been a great conversation on supply chains.

Lauren Weymouth (33:17):

All right, Nikhil. Well, by you compiling this data, you give us a better understanding of how this technology is rolling out and what it takes to adopt and what lessons we can learn for future implementations. Thank you for taking your time today to share your knowledge. I know how incredibly busy you are with all the things you manage in academia and industry in addition to being a new father. 

Nikhil Vadgama (33:36):

Yeah. It's been it's been a great journey. My daughter is 10 months old now and she's crawling everywhere and she's so difficult to catch. So it's keeping us really, really busy.

Lauren Weymouth (33:45):

Have you set up a crypto account for her yet?

Nikhil Vadgama (33:49):

I did. And did someone did give me a wallet with some crypto on it as a birthday gift for her so yeah. She's got some already. Yeah.

Lauren Weymouth (33:58):

Very advanced. Okay. Well, we loved hosting you on UBRI's podcast all about blockchain. Listeners, thank you for your listening. If you have any questions about this episode or feedback for new episodes, please reach out to ubri@ripple.com. END HERE