Blockchain technology might be shaking up a supply chain close to you. It’s smarter, it’s faster, plus it gets more participants aboard.
In the recent piece at Harvard Business Review, Michael J. Casey and Pindar Wong observe that blockchain — a web-based globally distributed general ledger that keeps track of transactions via online “smart contracts” — will produce “dynamic demand chains instead of rigid supply chains, resulting in extremely effective resource use for all those.” They observe that many startups are springing up around blockchain-enabled supply chains, and companies for example Walmart, IBM and BHP Billiton are launching efforts to higher track the movement of items and knowledge.
Blockchain — enhanced by electronic tracking technology — is only able to speed up supply chains, while adding greater intelligence along the way, they argue. “It could be especially powerful when coupled with smart contracts, where contractual rights and obligations, like the terms for payment and delivery of items and services, could 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 Sin city grew more animated once the subject of Supply Chain Books Online emerged. The panelists, tech leaders at SAP Ariba, explored the potential of advanced cloud services in helping to apply artificial intelligence and machine understanding how to a variety of business supply chain processes. Dana Gardner, principal analyst at Interarbor Solutions, moderated.
Blockchain “will have huge influence on the way in which people go through the business network,” predicted Dinesh Shahane, chief technology officer for SAP Ariba. “Blockchain reaches in the market to the boundary of the network, to faraway places where we are really not even attached to, and brings that in a governance model where your processes and your transactions are captured from the central network.”
Blockchain will work in enabling more intelligence business processes for the distributed trust and transparency, which often provides more people into connected supply-chain networks, said Sanjay Almeida, senior v . p . and chief product officer of Network Solutions for SAP Ariba. “We convey more than 2.5 million buyers and suppliers transacting on the SAP Ariba Network – but there are vast sums of others who aren’t on the network. Obviously we wish to buy them. If you utilize the blockchain technology to bring that trust together, it’s a federated trust model. Then our supply chain will be lot more efficient, additional trustworthy. It will help the efficiency, and all sorts of risk that’s linked to managing suppliers will be managed better by using that technology.”
The energy in blockchain is its capacity to scale, Almeida continued. “You have to have the scale of the SAP Ariba, contain the scale through the variety of suppliers, the volume of business that happens on the network. So you have to possess a scale and technology together to make that occur.”
There are challenges that must be addressed before blockchain can proliferate across supply chains, however. First, you have 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 aren’t accustomed to really exposing that kind of information in almost any shape or form – or they may be very secretive about this,” said Sudhir Bhojwani, senior v . p . in the product suite for SAP Ariba. “For them to suddenly be involved in this implies a difference on his or her side. It will take seeing ‘what is the benefit for me personally, is there a value it offers me?'” This type of thinking is slowly coming around, he added. “You hear more companies – especially on the payment side – needs to be involved in blockchain…. It’s still a technology only until the companies mean, ‘Hey, this is actually the value … however i have to change myself also.'”
In their article, Casey and Wong also observe that overall governance and standards are challenges to implementing blockchain to manage supply chains with a global scale. There will be the open, public blockchains, but, “inevitably, private, closed ledgers run by a consortium of companies will also arise, as his or her members look to protect share of the market and profits.” Furthermore, “there should be interoperability across private and public blockchains, which will require standards and agreements.”
Legal guidelines — which differ from state to state — also pose a challenge to global scaling of blockchain, Casey and Wong add. “Even before governments could be convinced to guide this effort, and to achieve this inside a globally coordinated way, industry must agree on recommendations and standards of technology and contract structure across international borders and jurisdictions.”
But changes in thinking are inevitable, Bhojwani believes, noting that major shifts have taken place from the consumer world. The incoming generation of employees and business leaders can help drive this variation also. “I personally have confidence in next 3 to 5 years when there are more-and-more Millennials from the workforce, you will note people adopting blockchain and new ledgers at the much faster pace,” he predicted.
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