Blockchain technology might be shaking up a logistics towards you. It’s smarter, it’s faster, and it gets more participants up to speed.
Within a recent piece at Harvard Business Review, Michael J. Casey and Pindar Wong observe that blockchain — an internet globally distributed general ledger that monitors transactions via online “smart contracts” — will produce “dynamic demand chains as opposed to rigid supply chains, producing more efficient resource use for all.” They observe that a number of startups are arising around blockchain-enabled supply chains, and firms such as Walmart, IBM and BHP Billiton are launching efforts to improve track the movement of items and knowledge.
Blockchain — enhanced by electronic tracking technology — could only hasten supply chains, while adding greater intelligence in the process, they argue. “It could possibly be especially powerful when joined with smart contracts, where contractual rights and obligations, such as terms for payment and delivery of items 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 if the subject of Cheap Supply Chain Books emerged. The panelists, tech leaders at SAP Ariba, explored the opportunity of advanced cloud services to help to utilize artificial intelligence and machine finding out how to a selection of business logistics processes. Dana Gardner, principal analyst at Interarbor Solutions, moderated.
Blockchain “will have huge impact on the way people consider the business network,” predicted Dinesh Shahane, chief technology officer for SAP Ariba. “Blockchain reaches over to the boundary of the network, to faraway places where we’re not even attached to, and brings that in a governance model where all of your processes and many types of your transactions are captured from the central network.”
Blockchain will work in enabling more intelligence business processes because of its distributed trust and transparency, which in turn brings 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 will find hundreds of millions of individuals that are certainly not for the network. Obviously we would like to have them. The use of the blockchain technology to get that trust together, it’s a federated trust model. Then our logistics will be much bigger efficient, far more trustworthy. It’s going to help the efficiency, and all the risk that’s associated with managing suppliers will be managed better through the use of that technology.”
The electricity in blockchain is being able to scale, Almeida continued. “You want the scale of the SAP Ariba, contain the scale from the amount of suppliers, the volume of business you do for the network. So you’ve got to have a scale and technology together to make that happen.”
You can find challenges that must be addressed before blockchain can proliferate across supply chains, however. First, there’s the need to overcome embedded, calcified corporate thinking. Business leaders and organizations need to speak in confidence to the sharing of information with mainly unseen network partners. “Enterprises are certainly not utilized to really exposing that sort of information in a 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 participate in this involves a change on their side. It needs seeing ‘what is the benefit to me, exactly what is the value it offers me?'” This sort of thinking is slowly coming around, he added. “You learn more companies – especially for the payment side – beginning to participate in blockchain…. It’s still a technology only before the companies want to say, ‘Hey, here is the value … on the other hand have to change myself at the same time.'”
Inside their article, Casey and Wong also observe that overall governance and standards are challenges to implementing blockchain to control 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, as his or her members look to protect market share and profits.” Furthermore, “there needs to be interoperability across private and public blockchains, that will require standards and agreements.”
Legal guidelines — which consist of state to state — also pose a challenge to global scaling of blockchain, Casey and Wong add. “Even before governments can be convinced to guide this effort, and accomplish that in the globally coordinated way, industry must agree on best practices and standards of technology and contract structure across international borders and jurisdictions.”
But changes in thinking are inevitable, Bhojwani believes, noting that major shifts have previously taken place from the consumer world. The incoming generation of employees and business leaders may help drive this variation at the same time. “I personally trust next three to five years when you will find more-and-more Millennials from the workforce, you will note people adopting blockchain and new ledgers with a faster pace,” he predicted.
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