Blockchain technology might be shaking up a supply chain close to you. It’s smarter, it’s faster, plus it gets more participants fully briefed.
Inside a recent piece at Harvard Business Review, Michael J. Casey and Pindar Wong observe that blockchain — an online globally distributed general ledger that monitors transactions via online “smart contracts” — will produce “dynamic demand chains as opposed to rigid supply chains, resulting in more effective resource use for many.” They observe that several startups are bobbing up around blockchain-enabled supply chains, and corporations such as Walmart, IBM and BHP Billiton are launching efforts to raised track the movement of merchandise and data.
Blockchain — enhanced by electronic tracking technology — can only speed up supply chains, while adding greater intelligence on the way, they argue. “It could possibly be especially powerful when along with smart contracts, where contractual rights and obligations, like the terms for payment and delivery of merchandise and services, might be automatically executed by an autonomous system that’s trusted by all signatories.”
A panel discussion held with the recent 2017 SAP Ariba LIVE conference in Vegas grew more animated when the subject of Supply Chain Books Online came up. The panelists, tech leaders at SAP Ariba, explored the opportunity of advanced cloud services in assisting to apply artificial intelligence and machine learning how to a range of business supply chain processes. Dana Gardner, principal analyst at Interarbor Solutions, moderated.
Blockchain “will have huge effect on just how people look at the business network,” predicted Dinesh Shahane, chief technology officer for SAP Ariba. “Blockchain reaches over to the boundary of your respective network, to faraway places where we are not even linked to, and brings that right into a governance model where your processes and all your transactions are captured in the central network.”
Blockchain works in enabling more intelligence business processes for the distributed trust and transparency, which experts claim will bring lots more people into connected supply-chain networks, said Sanjay Almeida, senior vice president and chief product officer of Network Solutions for SAP Ariba. “We have more than 2.5 million buyers and suppliers transacting around the SAP Ariba Network – but you can find vast sums of other people who are certainly not around the network. Obviously we wish to make them. If you use the blockchain technology to get that trust together, it’s a federated trust model. Then our supply chain could be lot more efficient, much more trustworthy. It is going to help the efficiency, and all sorts of risk that’s related to managing suppliers will probably be managed better by making use of that technology.”
The energy in blockchain is its capability to scale, Almeida continued. “You want the scale of your SAP Ariba, have the scale in the number of suppliers, the volume of business that happens around the network. So you have got to get a scale and technology together to generate which occur.”
You’ll find challenges that need to be addressed before blockchain can proliferate across supply chains, however. First, there’s the have to overcome embedded, calcified corporate thinking. Business leaders and organizations have to speak in confidence to the sharing of information with mainly unseen network partners. “Enterprises are certainly not accustomed to really exposing that sort of information in a shape or form – or they are very secretive over it,” said Sudhir Bhojwani, senior vice president from the product suite for SAP Ariba. “For the crooks to suddenly take part in this calls for a change on their own side. It requires seeing ‘what may be the benefit for me personally, what is the value that it offers me?'” This type of thinking is slowly coming around, he added. “You hear more companies – especially around the payment side – needs to take part in blockchain…. It’s still a technology only before companies want to say, ‘Hey, this is the value … on the other hand have to change myself as well.'”
Within their article, Casey and Wong also observe that overall governance and standards are challenges to implementing blockchain to manage supply chains over a global scale. There will be the open, public blockchains, but, “inevitably, private, closed ledgers run by a consortium of companies also arise, as his or her members seek to protect market share and profits.” In addition, “there has to be interoperability across public and private blockchains, that will require standards and agreements.”
Laws and regulations — which vary from nation to nation — also pose a challenge to global scaling of blockchain, Casey and Wong add. “Even before governments might be convinced to guide this effort, also to accomplish that in the globally coordinated way, industry must agree on guidelines and standards of technology and contract structure across international borders and jurisdictions.”
But modifications in thinking are inevitable, Bhojwani believes, noting that major shifts have occurred in the consumer world. The incoming generation of employees and business leaders might help drive this modification as well. “I personally trust next less than six years when you can find more-and-more Millennials in the workforce, you will notice people adopting blockchain and new ledgers with a faster pace,” he predicted.
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