Blockchain technology might be shaking up a supply chain near you. It’s smarter, it’s faster, and it gets more participants aboard.
Within a recent piece at Harvard Business Review, Michael J. Casey and Pindar Wong remember that blockchain — a web-based globally distributed general ledger that monitors transactions via online “smart contracts” — will produce “dynamic demand chains instead of rigid supply chains, resulting in extremely effective resource use for those.” They remember that several startups are springing up around blockchain-enabled supply chains, and firms including Walmart, IBM and BHP Billiton are launching efforts to improve track the movement of merchandise and details.
Blockchain — enhanced by electronic tracking technology — are only able to speed up supply chains, while adding greater intelligence in the process, they argue. “It might be especially powerful when coupled with smart contracts, in which contractual rights and obligations, such as terms for payment and delivery of merchandise 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 Vegas grew more animated if the subject of Supply Chain Books came up. The panelists, tech leaders at SAP Ariba, explored the potential of advanced cloud services in helping to apply artificial intelligence and machine learning to a variety of business supply chain processes. Dana Gardner, principal analyst at Interarbor Solutions, moderated.
Blockchain “will have huge affect the best way people look at the business network,” predicted Dinesh Shahane, chief technology officer for SAP Ariba. “Blockchain reaches out to the boundary of your network, to faraway places that we are not even connected to, and brings that right into a governance model where all of your processes and all sorts of your transactions are captured from the central network.”
Blockchain will work in enabling more intelligence business processes for the distributed trust and transparency, which experts claim will take 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 than 2.5 million buyers and suppliers transacting on the SAP Ariba Network – but you can find billions of others who are not on the network. Obviously we’d like to have them. If you are using the blockchain technology to bring that trust together, it’s a federated trust model. Then our supply chain will be lot more efficient, a lot more trustworthy. It’s going to increase the efficiency, and all the risk that’s linked to managing suppliers will be managed better by utilizing that technology.”
The power in blockchain is its capacity to scale, Almeida continued. “You have to have the scale of an SAP Ariba, have the scale in the number of suppliers, the amount of business that takes place on the network. So you’ve got to get a scale and technology together to make that happen.”
You’ll find challenges that must be addressed before blockchain can proliferate across supply chains, however. First, there is the need to overcome embedded, calcified corporate thinking. Business leaders and organizations need to confide in the sharing of information with mainly unseen network partners. “Enterprises are not utilized to really exposing that kind of information in almost any shape or form – or they may be very secretive regarding it,” said Sudhir Bhojwani, senior vice president in the product suite for SAP Ariba. “For these to suddenly take part in this implies a difference on their side. It requires seeing ‘what could be the benefit to me, is there a value that it offers me?'” This sort of thinking is slowly coming around, he added. “You hear more companies – especially on the payment side – beginning take part in blockchain…. It’s still a technology only before companies want to say, ‘Hey, this is the value … on the other hand need to change myself at the same time.'”
Inside their article, Casey and Wong also remember 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 will also arise, as his or her members seek to protect business and profits.” Additionally, “there needs to be interoperability across public and private blockchains, which will require standards and agreements.”
Legal guidelines — which change from place to place — also pose a challenge to global scaling of blockchain, Casey and Wong add. “Even before governments can be convinced to support this effort, and also to achieve this in the globally coordinated way, industry must concur with guidelines and standards of technology and contract structure across international borders and jurisdictions.”
But alterations in thinking are inevitable, Bhojwani believes, noting that major shifts previously occurred from the consumer world. The incoming generation of employees and business leaders will help drive this change at the same time. “I personally have confidence in next less than six years when you can find more-and-more Millennials from the workforce, you will observe people adopting blockchain and new ledgers at a much faster pace,” he predicted.
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