Executive Summary

• Global trade is based on an estimated €16 trillion supply chain sector.

• Goods are produced and distributed through a vast network of

producers, retailers, distributors, transporters and suppliers in a complex

arrangement of processes for managing contracts, payments, labelling,

sealing, logistics, anti-counterfeit and anti-fraud.

Current Situation

• The scale and complexity of the systems involved leads to high transactional costs, frequent mismatches and errors in manual paperwork, as well as losses through degradation and theft along the way.

• Other issues include abusive or unsafe working conditions; environmental damage through inefficacies, illegal extraction and production processes; forgery and imitation and health risks through poor supply chain management.

• Actual processes remain costly and unreliable, especially in regions with high levels of corruption.

Call for a new SCM

There is a growing call for safer, more trustworthy and transparent

supply chains of goods and services.

The main question…

Blockchain technology can really improve today's supply chains and

logistics sector to respond to operational inefficiencies, fraud and perhaps

even some 'grand challenges' such as unethical labour practices and

environmental degradation?

Let us restate the definition

Blockchain technology is fundamentally about adding trust to an untrusted

environment and exploiting a distributed ledger mechanism, supported by the majority of nodes, in a peer-to-peer

network in order to create an authoritative record of significant events

From a business point of view a blockchain can be defined as a platform whereby peers

can exchange values using transactions without the need for a central trusted

arbitrator

19Gartner Document

Note: Value creation bucketed into Cost takeout, Risk management savings, Innovation. Value and TAM calculated by Keystone Strategy using bottoms up business process mapping and cost allocation. Not all industries are expected to adopt blockchain immediately;

some (Finance and Insurance) are expected to start adopting in 1-2 years, others (IoT, Healthcare, Supply Chain) to start adopting in 7-10 years). According to EY FinSec would see full adoption in 3-5 years with IoT, Health, Supply Chain to follow full adoption shortly

there after. Technology TAM estimated at 10-20% of value. US numbers only. More aggressive case than MSFT POV.

Source: Keystone Strategy Research

Early adopters Later adopters

Business Value created due to Blockchain

$B USD Early adopters Later adopters

Total Addressable Market for Technology

$B USD

High case

Low case$50

Blockchain can drive over $500B in Business Value and

$50-100B in Technology total addressable market by 2026

Challenges hindering mainstream adoption of Blockchain

Co-operation & Establishing Standards• In order to gain widespread adoption, standards need to be agreed between

participants that create a common set of protocols for individual firms to adopt.

This is challenging given the number of participants that need to come to

agreement

• For some markets “Critical mass” will be achieved by a smaller group that will then

work together and create de-facto standards

Regulatory Framework• Regulators will focus on how blockchain achieves outcomes

that align with regulatory concerns (e.g. AML/KYC,

Resilience, Recovery and Resolution)

• Specific local regulations such as specific Asian data Secrecy

requirements will need to be met

• Negative connotations associated with bitcoin impact on

regulator’s perceptions

Scalability & Resilience• Bitcoin’s transaction capacity (~3 transactions per

second) precludes mainstream capital markets

adoption

• Regulators concerns around operational resilience will

need to be satisfied

Legal Framework• To trade significant values of assets firms need to ensure that they

can perfect legal title to the underlying asset recorded by the

tokenised asset in the distributed ledger

• An identified challenges is achieving a uniform legal framework

across a distributed set of peer parties with no centralised authority

Settling value in “real money”• Any mainstream application will need settlement certainty in

real money

• Tokenized solutions pose an added layer of settlement and

counterparty risk that will not be acceptable

Legal and regulatory, rather than technology are primary barriers for blockchain adoption

Blockchain in Supply Chain

TraceabilityProve the Provenance of components (Diamonds). Helpful in product recalls, Eliminating Counterfeit products

Smart ContractsReduce time in handover from one entity to another

TransparencyCustomer understanding origin of products

Process Optimization Warranties/Returns

CurrencyLoyalty Programs

IOT IntegrationSensor (temp, pressure, moisture) data as transactions associated with products

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• Can enhance the security of transaction and can efficiently maintain

book-keeping eliminating the chances of fraud.

• The middleman can be completely avoided and can connect all the

concerned stakeholders smoothly.

• More transparent and the auditing will be simplified.

• Smart contracts can be incorporated to control the smooth

processing and transportation of goods and will be highly useful in

handling volatile and perishable goods.

• This can significantly reduce transaction costs, human errors and

delivery delays.

Blockchain in Supply Chain

• Mechanism for attaching information to

the product in a way that is visible to the

customer

• Discerning consumers and retailers would

like to know when and where the fish was

caught, and whether environmentally

friendly fishing methods were used.

• They would also be interested to learn what

ingredients were introduced during

processing, whether there was a risk of

tampering, whether the product was

handled and stored properly, and where any

"value-added" changes occurred.

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How…

• Blockchain-based applications have the potential to improve supply

chains by providing infrastructure for registering, certifying and

tracking at a low cost goods being transferred between often distant

parties, who are connected via a supply chain but do not necessarily

trust each other.

• All goods are uniquely identified via 'tokens' and can then be

transferred via the blockchain, with each transaction verified and time-

stamped in an encrypted but transparent process.

• Smart contracts could also be deployed to automatically execute

payments and other procedures.

How…

Potential impacts and development

Several companies are already testing blockchain for record-keeping in

their supply chains… let’s see …

Mojix

• Mojix lets retailers automate their supply chains to enable smart contracts, making the delivery of goods more reliable with less overhead.

• The solution developed by Mojix allows for Blockchain-based smart contracts between retailers, suppliers and logistics providers.

Everledger• Everledger enables companies and buyers to track the

provenance of diamonds from mines to jewellery stores and to combat insurance or documentation fraud.

• For each diamond, Everledger measures 40 attributes such as cut and clarity, the number of degrees in pavilion angles and place of origin.

• They generate a serial number for each diamond, inscribed microscopically, and then they add this digital ID to Everledger's blockchain (currently numbering 280 000 diamonds).

• This makes it possible to establish and maintain complete ownership histories, which can help counteract fraud and support police and insurance investigators tracking stolen gems.

Provenance

• Provenance has developed a real-time data platform that gathers and verifies the origin of an asset by assigning it a token or 'digital passport' that can be tracked.

• Provenance gives you the tools you need to create living histories for any product.

SkuChain (formally ThingChain)

• Skuchain applies the cryptographic principles developed in the Bitcoin network to security and visibility for the global supply chain.

• Skuchain is building a system of next generation identifiers in the form of both barcodes and RFID tags to digitally secure the transfer of goods across the entire global economy.

• While most anti counterfeiting systems rely on copy restistant labels, holograms etc., skuchain relies on the uncopyable nature of a blockchain ledger to solve the problem of supply chain integrity Skuchain's system will provide cryptographic proof of each SKU's origin, supply chain than can be verified all the way to the point of consumption.

CargoChain

• CargoChain digitizes international trade by creating a secure, eternal record of important trade documents on the Blockchain and establishes ‘smarter’ contractual relationships between trade parties. International

GateChain

• Gatechain redefines the trade finance industry with blockchain technology. Gatechain offers electronic documents/ smart contract and payment obligations in a faster, easier, leaner and more secure way.

Hijro (formally Fluent)

• Hijro is the financial operating network for global trade powered by distributed ledger technology.

Modum

• Modum.io creates sensor devices leveraging blockchain technology to assert data immutability and public accessibility while saving costs in the pharma supply chain.

• Our product monitors the temperature of each parcel during the shipment to fully ensure GDP regulations.

• All data is transferred to the blockchain where a smart contract assesses against the product attributes.

• A solution on the Swiss market in June 2016 with 95% success rate and great feedback.