Blockchain technology could be shaking up a logistics in your area. It’s smarter, it’s faster, and yes it gets more participants aboard.
Inside a 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, leading to extremely effective resource use for all.” They observe that numerous startups are arising around blockchain-enabled supply chains, and firms including Walmart, IBM and BHP Billiton are launching efforts to improve track the movement of goods and information.
Blockchain — enhanced by electronic tracking technology — are only able to speed up supply chains, while adding greater intelligence along the way, they argue. “It may be especially powerful when combined with smart contracts, by which contractual rights and obligations, such as terms for payment and delivery of goods and services, might be automatically executed by an autonomous system that’s trusted by all signatories.”
A panel discussion held in the recent 2017 SAP Ariba LIVE conference in Las Vegas grew more animated when the subject of Supply Chain Books came out. The panelists, tech leaders at SAP Ariba, explored the opportunity of advanced cloud services in helping to use artificial intelligence and machine learning how to a variety of business logistics processes. Dana Gardner, principal analyst at Interarbor Solutions, moderated.
Blockchain “will have huge influence on the best way people look at 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 locations where we are not even associated with, and brings that in to a governance model where all of your processes and your transactions are captured inside the central network.”
Blockchain work in enabling more intelligence business processes for the distributed trust and transparency, which often will bring more and 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 an overabundance of than 2.5 million buyers and suppliers transacting on the SAP Ariba Network – but there are hundreds of millions of other people who usually are not on the network. Obviously we wish to have them. If you utilize the blockchain technology to bring that trust together, it’s a federated trust model. Then our logistics will be much bigger efficient, a lot more trustworthy. It’ll improve the efficiency, and all sorts of risk that’s connected with managing suppliers will likely be managed better by utilizing that technology.”
The electricity in blockchain is its capacity to scale, Almeida continued. “You have to have the scale of an SAP Ariba, hold the scale in the variety of suppliers, how much business that takes place on the network. So you have to have a scale and technology together to create that occur.”
You will find challenges that need to be addressed before blockchain can proliferate across supply chains, however. First, there is 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 usually are not accustomed to really exposing that sort of knowledge in almost any shape or form – or they are very secretive over it,” said Sudhir Bhojwani, senior vice president of the product suite for SAP Ariba. “For these to suddenly engage in this requires an alteration on the side. It requires seeing ‘what may be the benefit personally, exactly what is the value which it offers me?'” This sort of thinking is slowly coming around, he added. “You learn more companies – especially on the payment side – starting to engage in blockchain…. It’s still a technology only before companies mean, ‘Hey, this can be the value … but I must change myself as well.'”
Within their article, Casey and Wong also observe that overall governance and standards are challenges to implementing blockchain to deal with supply chains with a global scale. There is also the open, public blockchains, but, “inevitably, private, closed ledgers operated by a consortium of companies will also arise, as his or her members seek to protect market share and profits.” Furthermore, “there should be interoperability across private and public blockchains, that can require standards and agreements.”
Laws and regulations — which consist of country to country — also pose difficult to global scaling of blockchain, Casey and Wong add. “Even before governments might be convinced to guide this effort, and to do so within a globally coordinated way, industry must concur with recommendations 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 happened inside the consumer world. The incoming generation of employees and business leaders may help drive this transformation as well. “I personally trust next 3 to 5 years when there are more-and-more Millennials inside the workforce, you will observe people adopting blockchain and new ledgers at a faster pace,” he predicted.
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