Blockchain technology could possibly be shaking up a supply chain near you. It’s smarter, it’s faster, and yes it gets more participants up to speed.
Inside a recent piece at Harvard Business Review, Michael J. Casey and Pindar Wong notice 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 more effective resource use for many.” They notice that several startups are arising around blockchain-enabled supply chains, companies such as Walmart, IBM and BHP Billiton are launching efforts to improve track the movement of items and information.
Blockchain — enhanced by electronic tracking technology — are only able to help speed up supply chains, while adding greater intelligence on the way, they argue. “It could be especially powerful when along with smart contracts, by which contractual rights and obligations, such as terms for payment and delivery of items and services, may 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 emerged. The panelists, tech leaders at SAP Ariba, explored the opportunity of advanced cloud services in assisting to use artificial intelligence and machine finding out how to a range of business supply chain processes. Dana Gardner, principal analyst at Interarbor Solutions, moderated.
Blockchain “will have huge impact 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 your network, to faraway locations where we aren’t even connected to, and brings that in a governance model where all your processes and your transactions are captured from the central network.”
Blockchain will continue to work in enabling more intelligence business processes due to the distributed trust and transparency, which often provides more people into connected supply-chain networks, said Sanjay Almeida, senior vp 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 there are hundreds of millions of other individuals who usually are not on the network. Obviously we want to buy them. The use of the blockchain technology to take that trust together, it’s a federated trust model. Then our supply chain could be many more efficient, much more trustworthy. It is going to improve the efficiency, as well as the risk that’s linked to managing suppliers will probably be managed better by using that technology.”
The energy in blockchain is its ability to scale, Almeida continued. “You have to have the scale associated with an SAP Ariba, have the scale through the number of suppliers, the volume of business that happens on the network. So you’ve got to experience a scale and technology together to create that occur.”
You can find challenges that ought to be addressed before blockchain can proliferate across supply chains, however. First, you have the must overcome embedded, calcified corporate thinking. Business leaders and organizations must open up to the sharing of information with mainly unseen network partners. “Enterprises usually are not used to really exposing that sort of information in different shape or form – or they may be very secretive over it,” said Sudhir Bhojwani, senior vp of the product suite for SAP Ariba. “For these phones suddenly take part in this requires a difference on his or her side. It will take seeing ‘what will be the benefit to me, is there a value which it offers me?'” This type of thinking is slowly coming around, he added. “You hear more companies – especially on the payment side – starting to take part in blockchain…. It’s still a technology only prior to the companies want to say, ‘Hey, here is the value … on the other hand must change myself as well.'”
In their article, Casey and Wong also notice 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 operated by a consortium of companies will also arise, his or her members attempt to protect share of the market and profits.” Furthermore, “there has to be interoperability across public and private blockchains, that will require standards and agreements.”
Legal guidelines — which consist of nation to nation — also pose challenging to global scaling of blockchain, Casey and Wong add. “Even before governments may be convinced to support this effort, and achieve 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 previously taken place from the consumer world. The incoming generation of employees and business leaders can help drive this modification as well. “I personally have confidence in next less than six years when there are more-and-more Millennials from the workforce, you will observe people adopting blockchain and new ledgers with a considerably faster pace,” he predicted.
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