Blockchain technology may be shaking up a logistics towards you. It’s smarter, it’s faster, plus it gets more participants fully briefed.
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 rather than rigid supply chains, causing extremely effective resource use for all.” They observe that numerous startups are arising around blockchain-enabled supply chains, and corporations for example Walmart, IBM and BHP Billiton are launching efforts to improve track the movement of goods and knowledge.
Blockchain — enhanced by electronic tracking technology — are only able to speed up supply chains, while adding greater intelligence along the way, they argue. “It could be especially powerful when joined with smart contracts, through which contractual rights and obligations, including the terms for payment and delivery of goods and services, can be automatically executed by an autonomous system that’s trusted by all signatories.”
A panel discussion held on the recent 2017 SAP Ariba LIVE conference in Sin city grew more animated when the subject of Supply Chain Books Online came out. The panelists, tech leaders at SAP Ariba, explored the potential for advanced cloud services in aiding to make use of artificial intelligence and machine learning to an array of business logistics processes. Dana Gardner, principal analyst at Interarbor Solutions, moderated.
Blockchain “will have huge effect on the best way people go through the business network,” predicted Dinesh Shahane, chief technology officer for SAP Ariba. “Blockchain reaches in the market to the boundary of your respective network, to faraway locations where we’re not even attached to, and brings that into a governance model where your entire processes and many types of your transactions are captured in the central network.”
Blockchain works in enabling more intelligence business processes due to its distributed trust and transparency, which provides more and more people into connected supply-chain networks, said Sanjay Almeida, senior second in command and chief product officer of Network Solutions for SAP Ariba. “We convey more than 2.5 million buyers and suppliers transacting for the SAP Ariba Network – but you can find poisonous of others who aren’t for the network. Obviously we’d like to have them. If you are using the blockchain technology to take that trust together, it’s a federated trust model. Then our logistics will be much bigger efficient, additional trustworthy. It’ll increase the efficiency, and all sorts of risk that’s associated with managing suppliers is going to be managed better through the use of that technology.”
The energy in blockchain is its ability to scale, Almeida continued. “You want the scale of your SAP Ariba, possess the scale from the variety of suppliers, the amount of business you do for the network. So you have got to have a scale and technology together to create that happen.”
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 knowledge with mainly unseen network partners. “Enterprises aren’t employed to really exposing that kind of knowledge in different shape or form – or they may be very secretive about it,” said Sudhir Bhojwani, senior second in command in the product suite for SAP Ariba. “For them to suddenly participate in this calls for a change on their own side. It needs seeing ‘what is the benefit to me, what is the value which it offers me?'” This type of thinking is slowly coming around, he added. “You learn more companies – especially for the payment side – starting to participate in blockchain…. It’s still a technology only before the companies mean, ‘Hey, here is the value … but I ought to change myself also.'”
Within their article, Casey and Wong also observe that overall governance and standards are challenges to implementing blockchain to manage supply chains on the global scale. There is the open, public blockchains, but, “inevitably, private, closed ledgers run by a consortium of companies also arise, his or her members seek to protect business and profits.” Furthermore, “there must be interoperability across public and private blockchains, that can require standards and agreements.”
Regulations — which consist of country to country — also pose an issue to global scaling of blockchain, Casey and Wong add. “Even before governments can be convinced to compliment this effort, and to do this within a globally coordinated way, industry must agree on guidelines and standards of technology and contract structure across international borders and jurisdictions.”
But adjustments to thinking are inevitable, Bhojwani believes, noting that major shifts have previously occurred in the consumer world. The incoming generation of employees and business leaders might help drive this change also. “I personally believe in next 3 to 5 years when you can find more-and-more Millennials in the workforce, you will see people adopting blockchain and new ledgers at a much faster pace,” he predicted.
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