Season 1, Episode 1
IoT Blockchain Applications
Mr. Erik Bergeman, Business Development Executive of Blockchain Solutions with IBM, joins host Vaughn Amann for a discussion surrounding IoT applications of blockchain technology.
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There are several emerging enabling or umbrella technologies related to the Internet of Things such as artificial intelligence, machine vision, and the topic of this episode’s discussion, distributed ledger technology, or as it’s more commonly known, blockchain.
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Vaughn: There are several emerging enabling or umbrella technologies related to the Internet of Things such as artificial intelligence, machine vision, and the topic of today’s discussion, distributed ledger technology, or as it’s more commonly known, blockchain. My guest today has been involved in varying degrees with several projects and applications of blockchain technology spanning multiple vertical markets.
He frequently gets to deal with both developer groups and with customers. So he’s in a great position to understand and discuss many of the intersections of the internet of things with blockchain. So let me introduce my guest, who’s a business development executive of blockchain solutions with IBM. Mr Eric Bergeman.
Erik: Thank you, Vaughn. I appreciate it.
Vaughn: Thanks for joining us. So how did you get started in the blockchain business?
Erik: Ooh. So, I’ll take a little step back and talk about much of my career at IBM has been focused on. What I’ll [00:01:00] call wave one technologies. I came into IBM in the late nineties kind of at the beginning of the dotcom boom as we were trying to figure out how to create this thing that we called eBusiness, which was not e-commerce per se, but.
But really, you know, more focused on how do enterprises do business together and how do they leverage the, this new thing, the internet to be able to do that. So I participated in that. And, and throughout my career, I’ve kind of focused, as I said, on these wave one technologies. So as we were doing eCommerce and B2B commerce and marketplaces, and, and then we went through a kind of a period where we acquired , several different things, and we called it smarter commerce as, we began to inject intelligence and back in the the mid thousands, if you will. Um, we began to take a real [00:02:00] hard look at a set of technologies, which subsequently now is called internet of things technologies. At the time, we were looking at RFID and, Oh, how could we use near field communication technologies to solve business problems?
Vaughn: Machine to machine
Erik: Yeah, exactly. So machine to machine, what we call in, in the, in the business and the old, the business world, we call it an instrumentation. So we needed to instrument the physical world and whatever, since we could do so, and be able to do that. Now it’s, it’s obviously called the internet of things technologies.
And then about a little over a year ago I had been. Involved in and primarily focused on the retail and the consumer industry. And I had an opportunity to become a part of a group inside IBM that was focused on what we called platforms and the creation of industry specific platforms. And so [00:03:00] I, once again remade myself and, and joined what is our blockchain in supply chain, solutions organization platform group.
And, and have been applying both my industry expertise and having covered the retail and consumer industry for many years in this new kind of startup business where we, IBM decided to make a significant investment and operationalizing this thing called blockchain. And creating these trusted networks of business partners that we could then collect the data, do it in such a way that we were not violating the principles of owning your own data and kind of be the, the trusted facilitator of these, of these network relationships and really kind of amp up the digitalization of certain technologies, certain functional capabilities like supply chain in particular,
Vaughn: Right, [00:04:00] so it’s not just blockchain by itself. There’s also augmenting that with the trust ed networking and, and things of that nature that IBM supplies.
Erik: Right, for us, it’s not a matter of doing blockchain for blockchain’s sake. Blockchain, it does nothing else except leverage a kind of technology that underpins the businesses working in operating more efficiently, so…
Vaughn: A piece of the puzzle.
Erik: Yeah, exactly. And, and so when I, when I look at these platforms that IBM has been investing in platforms like TradeLens, which is for the container shipping business, platforms like food trust, which is targeted and focused on creating trust in the, in the food supply chain, kind of end-to-end.
We have an opportunity to, to underpin that with blockchain technology so that everybody that’s participating knows. [00:05:00] Okay. If you put something up there, it can’t be changed. Right? This whole concept of immutability, and I know there are a lot of debates in the marketplace about it, well, blockchain is Bitcoin and or not, or is it really immutable?
You know, is it enforceable? You know, self-sovereign versus, I mean, there’s a whole lot of debates about all of that. And and for us, it’s more about how do we, how do we do something in a more trusted way than what exists today and in a way that people can comprehend without having to, you know, worry about different people not playing by the rules or not playing in the right way, and in an enterprise scalable. sustainable way.
Vaughn: I met you at a blockchain meetup here in Austin, and you were discussing the international shipping application that you’re working on currently, and it had a lot of, [00:06:00] a lot of tentacles, if you will, into other markets. So that was, that was really interesting to me.
Erik: Well, I mean, you think about it, and a lot of people don’t realize this, but. The biggest ships that are out there carry 24,000 containers. Most people are not. Most different companies that are moving containers across the ocean aren’t moving more than one or two or three on average. You know, three or four at the most.
So you’re talking about something like 20,000 different companies that are represented by those 24,000 containers on that one huge mega ship that just landed at a port, that by the way takes sometimes weeks to unload. So the ability to apply these new technologies to the market in a way that drives efficiency around.
Not just the movement of the goods, but all of the documentation in order to get those 24,000 [00:07:00] containers on that ship. It may have had to stop many, many places, and every time it stops, um, more would get loaded on or, or what we call transshipment points in, in some of the hub ports around the world.
So a lot of goods coming out of Asia may stop in Spain, for instance, before, you know, before coming to the East coast, or, you know, or vice versa. So there, there’s a lot of, you know, not just, not just understanding. And, and a lot of different participants that take place. But there are other technologies that we’re beginning to see applied, like for instance, internet of things, technologies.
So one of the things that IOT is being used at in the container business. And then I have another example that I’ll share, um, that I think is relevant as well, is making smart containers. If I have a ship that has some kind of cellular service on it. And I have [00:08:00] 24,000 containers on that ship that each have some kind of of sensor that says, Hey, here it is.
You know, I have a, a new ability to understand where my goods are at any moment in time. And I think what a part of what has happened is there is this expectation. In you and I, because we use it, Every time we go to a new city and we pick up a phone and we, and we bring up the Uber app, we know exactly where the vehicle is that’s going to come pick us up.
And so these businesses are, are kind of asking the question of everybody involved in moving their goods. Why can’t I do that? And so the, the application of. You know, IOT for kind of real time tracking and understanding where things are is one thing. But you know, moving goods is not just physically where the goods are because there are many steps along the way and there are many things that have to [00:09:00] happen on both sides of the ocean.
in order for that container to even be put on a ship or taken off a ship. So it’s, it’s not just physically where is that container and what goods are in that container, but it is, where is the documentation for the import process or the export process. In, in the overall process so that I can do a better job understanding why is that container sitting there doing nothing.
Vaughn: So you mentioned before that there was a lot of, <TAG> efficiency that could be gained
through that process.
Just understanding how the paperwork is flowing through the system, but there’s also trust and, you know, you’d need to know where certain things are at certain times, and then the provenance behind those things.
You need to know where they were. And incorporating the IOT into things. You mentioned that some of the smart sensors would be able to give you the provenance of were they frozen at one point or where they thought accidentally at one point?
[00:10:00] Erik: Exactly. So one of the solutions that we have in the marketplace is called IBM food trust and IBM food trust.
It was a solution that we brought to market with a consortium of retailers and consumer packaged goods companies. And it was all about the worldwide food supply chain. Because, it’s no longer, everything is no longer grown, you know, regionally, like it used to be many, many years ago.
You know, you look at olive oil for instance, or you look at lettuce, lettuce comes from all over the place. Strawberries are grown year-round in hot houses, and you and I as consumers, we don’t really care where it came from. We, we were more interested that it is there and it’s not only available in the
You know, spring or in the fall, which is what we used to expect when we were going to our local farmer’s market, [00:11:00] or even early on in grocery stores, grocery, you know, grocery stores now look at demand. And when that demand comes in and they, and they have to source that good wherever it is, if they can source it locally, they’ll source it locally.
If it’s not available locally, they’ll source it from some other part of the world where it’s maybe summer instead of, you know, the winter. And if they can get that produce in, in such a way and be able to do it when that demand is there, then they’re going to make more money. And everybody’s got, their customers are going to be more happy.
And so it’s just, the world has changed a lot. So
Vaughn: Definitely a worldwide market now.
Erik: Yeah, exactly. So one of the, one of the most exciting examples, I think that. I have of this convergence of different technologies that are out there of the blockchain of IOT, of sensors, and of artificial intelligence in particular is one that we did around fresh meat, hamburger meat.
Um, and I won’t tell you specifically the [00:12:00] names of the companies, um, although they have published it in the marketplace. So it’s not like it’s any super big secret. They’ve been on stage with us to do it. But the basic premise was instead of using frozen hamburger patties, they wanted to use fresh hamburger patties.
Well, when you freeze hamburger patties and meat. The, the temperature sensitivity because it’s frozen and the patties are stacked together in there altogether is not quite as, it’s not quite as sensitive to changes in temperature or lack of being at a particular temperature. It’s still important to keep the goods frozen kind of along, but.
Temperature, up and down really doesn’t matter all that much. So in order to maintain freshness, so we were working with the company that both produced the fresh hamburger patties and the company that was using those hamburger patties in a restaurant in order to feed those to the, to the consumers. And so.
we combined all the different technologies that you’ve [00:13:00] heard about. You know, one thing we did was as soon as those hamburger patties came into the plants and they were created and they were put into a package, into a box, we put an RFID tag on the box, and then we could track what happened to that box from every step in the process all along the way.
And then we used IOT sensors in that particular package had to go through a series of, of refrigerated locations, right? Went through, you know, trucks. It went through coolers in the distribution plant of the manufacturer. It went through coolers in the back of a restaurant. And so we kind of create, you know, with now with the temperature sensor capabilities that we have, we could, every time there was a place that it, that that product was in a place that needed to be cooled.
We could monitor the temperature of that [00:14:00] environment. So if it was in a truck, we had a sensor in the truck that said, okay, this truck is that, you know, 40 degrees, or whatever, and we could sample that as often and as frequently as we wanted to. And so we were able to know exactly where the good was because there was RFID tags on the products itself.
We were to note, we were able to know what the temperature was of that product at all times because we had sensors in all of the environments that that product sat in. And then finally we were able to work with the restaurant itself to say, okay. Based on the journey of this particular fresh hamburger Patty.
We knew how long a, that particular hamburger Patty could stay kind of in circulation before it was consumed. Um, and so that’s kind of where AI came in. So we could look at all of the data. We could look at the journey of that hamburger Patty. We, we knew how long it had lasted, and we knew [00:15:00] where it was in the back room, in the cooler of the store.
And we could create a set of alerts to the people operating the, the, the restaurant to say, Hey, you’ve got something that is going to go bad in four days. So you need to make sure you use this box of hamburgers today. And we could, we could give that information to the people operating the store because people want to do the best they can.
They want to save money, especially the people that are managing and operating the store, because that makes a huge difference to their bottom line
Vaughn: With such a complicated supply chain though, there’s so many things that could go wrong at each step. Exactly. And I guess each step is recorded in the blockchain, right?
Vaughn: So that at the end of the day you have the provenance
Erik: So the temperature. You know, because there are multiple enterprises involved. It’s not just one or two enterprises. In some cases, they had outsourced the logistics and the [00:16:00] transportation of this, these products to other third party companies, depending on what, you know, you’re talking, we’re talking about a nationwide restaurant.
And so they don’t always own all of the parts and the pieces and everything that they do. And so they wanted to make sure everybody. Was fair. Everybody did what they said they were going to do, and nobody cheated along the way. So we were able to use the immutability of blockchain to say, okay, we’re going to connect this temperature sensor directly to the blockchain, and it’s gonna.
Communicate without anybody participating. So machine to machine, as you talked about, and you know, all the sensor did was say what the temperature was, not what else was going on or anything else.
Vaughn: it’d be hard to manufacture the records.
Erik: Exactly. It’s impossible because the temperature is registered.
I mean, the sensor is registered, and so unless you’re going to spoof the sensor, which [00:17:00] theoretically could be done, but there are lots of mechanisms in place that we have. In these technologies like, like IOT technologies and IOT networks and device management for IOT that prevent that from happening.
So, you know, each sensor is signed, each sensor is secured, each sensor has its own kind of identity, and we’re keeping that identity somewhere else so that we know to validate that identity so that we’re not getting that coming from some other Chinese or or Russian IP address somewhere else, trying to spoof, you know, trying to spoof what’s going on.
Not that they care about the hamburger patties, I mean, I don’t want to create that, but the reality is every one of these technologies can stand alone. And I think what’s unique about what w what we have done in this sense of these companies working together, is it’s [00:18:00] multi enterprise.
It’s a business network. It’s secure. And it allows us to solve a real business problem, and it allows us to improve the operations of everybody concerned. So there’s business value to kind of everybody.
Vaughn: Yeah. For the end user, I mean, you reduce spoilage and you also are able to prove that your product is pure and when it gets to the end user, and there are a lot of benefits to that.
Erik: And there are certain certain industries where that critical. So, you know, one of the other things that we’re doing specifically with, with food trust is around there’s been a lot of problem. A lot of people have gotten sick. Because of lettuce in the last five, 10 years, and the ability to very rapidly in literally 2.2 seconds, pinpoint exactly where the lettuce came from, which particular farm that came from.
And you know, it’s [00:19:00] not to harm the farmer, but to say, okay, farmer, what practices are you doing that’s causing, you know, this lettuce to be contaminated with e-coli? Let’s figure that out so that you can continually do business and we can be safe in our food supply, which is a critical factor. So it, you know, it’s not always, Oh, well, big brother wants to monitor you, big brother wants to know what you’re doing so that you know we can harm you. It’s, it’s really more a situation of how do we up the safety of the whole thing.
Vaughn: Right. Everybody works better together.
Erik: Yeah, exactly.
Vaughn: That’s another point though. In order for all of this to work, you have to have sort of a consortium together of all of these different entities along the supply chain that are working in concert.
So I know that you’ve been involved with some of that in the past, but you do really have to put together a industry standard body to develop [00:20:00] all the interconnections between the interfaces between all these different companies for the entire supply chain to work.
Erik: Yeah, exactly. And you know, and we think about that along a couple of different dimensions, right.
So. What we’re doing with blockchain is what we call permission trusted blockchain, where we know the members that are participating, and this whole concept of distributed ledger means that different people will monitor and maintain nodes on the network where this virtual ledger, distributed ledger exists across these nodes.
and where we have consensus methods where we all agree that, okay, this is a valid transaction, so let’s put it on the ledger. But there’s a couple of things that we’re doing that are different than what may have been done in some other places. So one of the things that we’re doing is we’re [00:21:00] using concept of channels within the distributed ledger.
So while you may be validating that this is a valid transaction, you may not know what the actual transaction, the data of the transaction is. You may just be validating that the person that is submitting that transaction has the right to submit it and, and, and is appropriate to be able to do that.
And then, as you said, one of the things that we’re doing is, is these consortium members, they may operate a node on the blockchain. And they may operate a node on this kind of multi enterprise business network, but not everybody has to operate a node. Not everybody can afford to operate a node when you’re looking at, you know, something as broad as a supply chain. So I’ll give you a specific example. One of the things that, we ran early on in a food pilot, in our food trust, [00:22:00] network was a pilot where a very large retailer that’s a global retailer was acquiring pork from very small farms in China.
So rather than force a small farmer in rural China from operating a blockchain node, which is not something even within their comprehension at all. You know, we had a trusted, a trusted party that could work with the Chinese, and would have a, and would operate the node on behalf of all the Chinese farmers.
And all they needed was a, basically a cell phone, and they would take pictures of their pigs and they would say, here’s the pictures of the pigs. And they would put the, they would push a button and that would have been then be uploaded to the blockchain. So the beauty of the advancement of all of these technologies at the same time, like mobility and mobile apps and [00:23:00] Android and, and iOS, and all of these mechanisms, is that you can extend these business networks in a trusted way. So yes, the pig farmer has to register, but the pig farmer has to register with the retailer anyway if the, if the retailer is going to buy the product from them. And so we have added these mechanisms where they can go through the registration process and just instead of the pig farmer happened to be able to know how to do EDI, which they don’t, or having somebody else do it or have them go to a very kind of arcane process on a website.
It’s a very simple mobile app that we can create that the retailer can then give to the, to their suppliers for free. We credentialize the, you know, the people so that we know we’re getting it from somebody who’s legitimate, but in terms of [00:24:00] the UI and what the farmer needs to know, it’s not all that difficult.
They already know how to take their phone and take pictures and they already know how to use apps on their phone and push that. So there’s, there’s been a democratization of technology to such an extent that we can begin to leverage it for the benefits of these multi enterprise business networks.
Vaughn: Sure. So the parties that are benefiting the most from the financial benefits of using this technology are the ones that are responsible for the most amount of payment into it, but they’ll still come out with a net positive.
Erik: Right, exactly. So they are the ones, yeah. So the big retailers are the big.consumer packaged goods are the big food processors that are doing it on behalf of these larger retailers and other large retailers, right? So it’s not just one retailer, but you know, the way supply chains work is there are intermediaries that are adding value in the middle of the supply chain that are doing [00:25:00] things like processing food or taking the pigs and slaughtering them.
And then, you know. Making the cuts and then creating the cuts that are then packaged and given to the retailers and sold to multiple retailers. So kind of we’re taking a, who can afford to have a node and to participate in the blockchain and for instance, the transportation companies to look, here’s a, here’s a sensor technology that we can all use to, you know, do the IOT.
And then. You know what you’ve got. So for instance, in the containers business, a lot of the big ocean carriers that get the most benefit as you talk about, are investing in some startup technologies for smart containers. So there’s four or five of the big ocean carriers that have put their money and said, okay, I’m going to start.
It takes time, but I’m going to start over time having these smart containers, and [00:26:00] I’m going to begin to work those smart containers into my entire container population, and containers live five, six, eight years before, you know, so it’ll be another five, six, eight years before we get to the point where all of the containers are smart containers.
And even even at that, the old containers basically end up being sold on the open market to people who want to use containers. And sometimes they’re used in people’s backyards. And you know, sometimes they’re used to ship things around. You know, because I want to own my own containers. Cause at the end of the day, you know, a lot of containers are leased.
And if I’m a beneficial cargo owner or somebody that’s shipping some goods I have to pay rent on that container. So it may be a little more cost effective for me to buy a used container. Right. You know, just like buying a used car instead of, you know, instead of taking an Uber.
Vaughn: But you wouldn’t know all these things if you weren’t documenting it in the first place.
Erik: [00:27:00] Exactly.
Vaughn: And you mentioned some, in the particular vertical that you were talking about initially was the international shipping vertical. You mentioned some cost benefit numbers, and there was a percentage that you mentioned in the meeting in Austin, and what was it somewhere in the neighborhood of 10% or?
Erik: Well, so, you know, think about it and they’re there are
a couple of different key things that we’re seeing as we’re going through digitalization of the supply chain and benefits that our clients are achieving. And in one sense the efficiency of moving can be thought about in terms of both time and in terms of money. Right? So there was a study that was done a couple of years ago, and actually back in 2018, and it was done by an academic [00:28:00] institution. And basically what they found is that the average container has 27 participants in the movement of that container from a foreign country into the United States, or, you know, from point to point a across borders, 27 different entities that have to have to participate in that process, 36 different documents and 240 copies of those documents that have to get shared around. And a lot of that is done today with paper. It just is. That’s the way it works. And because of that, there is a rather significant amount of time where containers are just sitting around, not moving. In one pilot that we did from avocados of East Africa to Europe we were able to show that by digitizing all of the documents that were necessary between the two points that we were doing business, we were able to actually shave about 20% off of the total transit time [00:29:00] from the time that the goods were packed until the time they were unpacked.
So that’s, that’s truly how long it is
Vaughn: And reduce spoilage at least.
Erik: Exactly, exactly.
So, you know, if I can reduce 20% out of that time versus pre digitalization versus post digitalization. Then as you say, there are so many benefits that can come in, to doing that spoilage. You know, the ability to move goods more efficiently, more effectively, I can, I can do a better job anticipating what they’re going to do. I can sell more because I have less. Spoilage is a double edged sword. Part of it is, Hey, it’s costing me money, but part of it is I’m not selling it because it’s not as fresh when I get it there. Right. Um, so it’s, it’s kind of a double whammy in terms of the benefits that get created there.
So that’s one thing. You know, the, the [00:30:00] ability to reduce that total transit time is important. And then one of the other things that we did, we did a study with a client where, you know, they looked at this very inefficient global process where they’re moving stuff all around. So they, they both import and export, and they’re moving stuff from one country to another country.
They’re moving stuff into the United States. They’re moving stuff out of the United States, They are a United States based company. But at the end of the day. When they looked at their cost for logistics, for moving these goods around, what they found was that about 40% of the time, there was an inaccuracy in what they should have paid.
So in the invoice that they got from their transportation provider, and remember there’s 27 different entities involved in moving goods, so there’s a lot of those that are transportation providers and they’re only looking at their little piece. Lots of room for [00:31:00] error, lots of room for error.
And, and, you know, we kind of went through that process with them, kind of re-engineered that process, and basically found that somewhere between 5% and 8% of the logistics cost in moving a container through those 27 entities from point to point, on average we could reduce. So somewhere in between 5% and 8% reduction just in the invoice logistics costs.
So that has nothing to do with what’s inside the container. It has everything to do with what you’re getting charged to move that container. And, and that’s significant when you’re talking about tens of thousands or hundreds of thousands of content containers that get moved, or even, you know, some of the largest companies that move containers might move as many as a million containers, right?
You take five to 8% out of that cost and, or 6%, I think an average, whatever. It’s huge. [00:32:00] It’s, it’s a huge thing.