Blockchain technology could possibly be shaking up a supply chain near you. It’s smarter, it’s faster, and yes it gets more participants on board.
In the recent piece at Harvard Business Review, Michael J. Casey and Pindar Wong notice that blockchain — a web-based globally distributed general ledger that monitors transactions via online “smart contracts” — will produce “dynamic demand chains as opposed to rigid supply chains, leading to extremely effective resource use for those.” They notice that a number of startups are developing around blockchain-enabled supply chains, companies for example Walmart, IBM and BHP Billiton are launching efforts to raised track the movement of merchandise and information.
Blockchain — enhanced by electronic tracking technology — is only able to help you speed up supply chains, while adding greater intelligence along the way, they argue. “It may be especially powerful when joined with smart contracts, in which contractual rights and obligations, including the 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 with the recent 2017 SAP Ariba LIVE conference in Sin city grew more animated once the subject of Supply Chain Books Online came out. The panelists, tech leaders at SAP Ariba, explored the opportunity of advanced cloud services to help to make use of 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 impact on the way in which people consider the business network,” predicted Dinesh Shahane, chief technology officer for SAP Ariba. “Blockchain reaches to the boundary of your network, to faraway places that we’re not even connected to, and brings that into a governance model where your processes and many types of your transactions are captured in the central network.”
Blockchain work in enabling more intelligence business processes due to its distributed trust and transparency, which in turn brings lots 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 have more than 2.5 million buyers and suppliers transacting around the SAP Ariba Network – but you will find billions of other people who usually are not around the network. Obviously we would like to make them. The use of the blockchain technology to get that trust together, it’s a federated trust model. Then our supply chain would be lot more efficient, additional trustworthy. It’ll increase the efficiency, and all the risk that’s associated with managing suppliers will likely be managed better by using that technology.”
The energy in blockchain is its capacity to scale, Almeida continued. “You want the scale of the SAP Ariba, have the scale from the quantity of suppliers, the amount of business you do around the network. So you’ve to possess a scale and technology together to produce that occur.”
There are challenges that must 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 confide in the sharing of knowledge with mainly unseen network partners. “Enterprises usually are not used to really exposing that type of knowledge in any shape or form – or they are very secretive about it,” said Sudhir Bhojwani, senior second in command with the product suite for SAP Ariba. “For them to suddenly engage in this implies a change on the side. It will take seeing ‘what may be the benefit for me, what is the value that it offers me?'” This kind of thinking is slowly coming around, he added. “You hear more companies – especially around the payment side – starting to engage in blockchain…. It’s still a technology only before the companies am getting at, ‘Hey, this can be the value … however i have to change myself also.'”
Within their article, Casey and Wong also notice that overall governance and standards are challenges to implementing blockchain to manage supply chains on the global scale. There will be the open, public blockchains, but, “inevitably, private, closed ledgers operated by a consortium of companies also arise, for their members aim to protect business and profits.” Moreover, “there must be interoperability across private and public blockchains, that can 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 can be convinced to aid this effort, and to do so in the globally coordinated way, industry must agree on recommendations and standards of technology and contract structure across international borders and jurisdictions.”
But alterations in thinking are inevitable, Bhojwani believes, noting that major shifts have already happened in the consumer world. The incoming generation of employees and business leaders can help drive this modification also. “I personally rely on next 3-5 years when you will find more-and-more Millennials in the workforce, you will see people adopting blockchain and new ledgers in a considerably quicker pace,” he predicted.
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