A new startup company, Citizens Reserve, announced earlier this month that it will launch an industry-agnostic supply chain solution using a blockchain-based platform, aimed at tackling the issues of transparency, efficiency, and product visibility that existing legacy supply chain systems struggle to address.
According to the company’s press release, its “SUKU” platform will be a decentralized supply chain as a service platform which will span across industries, enabling trading partners to interact in a way that has been all but impossible up to now.
We spoke with CEO Eric Piscini of Citizens Reserve this week to find out more about it, and while there is much potential for blockchain solutions to revolutionize industry in general, we wanted to discuss what the true value-add of their platform could mean to business partners in this application.
First, a brief primer on blockchain. It was originally developed as the underlying technology to allow online transaction of cryptocurrencies such as Bitcoin. The imperative for transacting cryptocurrencies in the virtual world is to be able to do so without the oversight of a trusted central authority, such as a bank.
To facilitate this process, the concept of the “immutable distributed ledger” was conceived to create what is known as a “trustless” system. In extremely simplistic terms, each time there is a transaction, a ledger is updated with the new transaction, while also bringing forward an encrypted history of all prior transactions in the chain. Since this ledger is distributed across the entire network, instead of needing to trust a central authority - you have a system of full transparency.
If you replace a cryptocurrency with any digital asset, you still have the essence of a blockchain; a decentralized system with no central point of control, which offers all parties on the network full and immediate transparency.
This operating principle is what underpins Citizens Reserve’s SUKU platform. Using underlying blockchain technology ensuring that immutable records of supply chain transactions are decentralized, the platform is then augmented with several layers of functionality.
The “SUKU core” layer offers supply chain as a service features such as visibility of products, access to capital and engagement between stakeholders. And on top of this is what the company calls an ecosystem layer, whereby technology and trading partners can build “apps” and get paid when entities use them - for example, there might be apps for inventory or warehouse management systems.
Similar to “miners” in cryptocurrency blockchain networks - who are entities incentivized by a system of reward to participate in verifying blockchain transactions - SUKU provides an incentive for participation in the supply chain system, too, though on a different basis.
To help generate engagement, the company has created the “SUKU token,” which operates like a virtual currency within the ecosystem. Technology and trading partners will be awarded tokens for building apps and for using SUKU. The tokens themselves can then be used, for example, to pay for transaction fees. In addition, the more tokens an entity gains, the greater access they would have to premium services, as well as having greater voting rights in guiding new iterations for platform improvements, for example.
Piscini says “the token is a demonstration that you have a decentralized business organization” adding that this is a goal of their SUKU system. But as he indicated, many large companies that might claim to be setting up blockchain systems for managing supply chains are in fact more likely just sharing their own centralized database. Piscini stresses in contrast, “Citizens Reserve does not want control of it.”
Still, they have a business to run, and so the company plans to generate revenue by selling tokens as well as by gathering transaction fees from users of the system. And as it is a business-to-business platform, revenue will also be generated from consulting fees. For example, the company expects to provide consulting services to help businesses integrate their general ledgers into the SUKU platform.
Once on the SUKU platform, what advantage might the blockchain powered supply chain solution bring to bear?
In general, there is the potential for increased access to a network of business partners, enabling new opportunities for businesses, while opening up new decentralized marketplaces.
Piscini offered the hypothetical example of a container of soybeans shipped from a certain point of origin. Effectively, at the time of shipping, the end customer of the commodity might not yet be known because the container of soybeans might be traded multiple times in transit before it reaches an eventual final customer.
The SUKU platform would help facilitate these multiple trades, providing both transparency to the availability of the commodity to trade, and keeping accurate and immutable records of each transaction. In this way, while facilitating supply chain visibility, it also potentially opens up an efficient marketplace.
Another opportunity is providing certification for proof of origin for responsibly sourced commodities. Buyers want to ensure that what they have bought is what they will have delivered. SUKU will be able to track responsibly sourced commodities from origin throughout the supply chain; again, especially important if the commodity is traded multiple times in transit.
Still, Piscini recognizes that blockchain cannot be “all things to everything” and concedes “the challenge is how to connect the physical world and the digital world in the right way,” which is where the services of trusted trading partners can be integrated into the system too. For example, if you have bought a consignment of organic produce, you might still need an entity to verify and certify that organic produce is what is loaded into a container, otherwise the blockchain could simply transfer incorrect information. SUKU can integrate such value added real-world services partnerships to augment the digital technology.
But still, even with the challenges, or opportunities, of integrating the physical and virtual worlds, Piscini says blockchain will no doubt help facilitate improvements over current supply chain systems that exist in a fragmented form today. He also believes that creating a decentralized platform is easier to do as a startup than as an established company.
Piscini sees SUKU as one of a progression of decentralized business models powered by blockchain that we’ll increasingly see in the future and expects their supply chain solution to begin operation towards the end of this year or early next year.
Phil Covington holds an MBA in Sustainable Management from Presidio Graduate School. In the past, he spent 16 years in the freight transportation and logistics industry. Today, Phil's writing focuses on transportation, forestry, technology and matters of sustainability in business.