Blockchain for Supply Chain- The solution for Transparency
Bringing Transparency to Supplychain
We live in the world we buy into
As consumers of the evolved world most of us take interest in what we buy. The extent of this interest of course varies from person to person.
The creation, exchange, and use of material things that is integral to human lives, however, has many potential negative consequences. Environmental damage, exploitative extraction, quality of products, unsafe work conditions, forgery, and the huge amounts of valuable material wasted at the end of product life are few of these consequences.
At a time, when corporations can be more influential than entire states, questions keep arising if we can trust them enough about not compromising on the well-being of workers, communities and environment in their pursuits for profits. Consider this – “the retail manufacturing industry is the second most polluting industry on earth, second only to oil. According to Annie Leonard, an expert in overconsumption, only 1% of the materials used to produce our consumer goods are still in use six months after sale.” Worker suicides at Apple Unit of Foxcows and Fam to table movement has already become a case point
Today we see a rise in what is known as conscious consumption, a movement of people who seek out ways to make positive decisions about what to buy and look for a solution to the negative impact consumerism is having on our world. People are demanding transparency as they take an increasing interest in the of those they buy from and what they buy.
- Provenance– the origin of their products (The growth of the farm-to-table movement is a case in point) and food safety practices
- People dimension (Profiteering at expense of people, animals and communities)- Pay/ Compensation parity, Work hours, work conditions (remember the recent debate about Foxconn Worker suicides and Apple), safety conditions, Ethnicity- engaging suppliers from ethnic, racial and gender minorities without bias, Child labour/ Slave labour
- Sustainability– Forest and land exploitation, unsustainable farming practices, water scarcity, pesticides, GM food and pollution
- Logistics and sourcing– Can we get it cheaper, are logistics a significant portion of costs, is logistics adding to pollution, is it killing my local communities, dumping issues
Not just consumers
Even governments, investors, analysts, risk managers, business customers, and other stakeholders worry about quality, safety, ethics, and environmental impact. They are demanding details about the systems and sources that deliver the goods to protect their investments, prestige and brand. With entire ecosystem looking for looking for greater transparency, only products with clear and comprehensive details are acceptable.
And businesses – Supply chain transparency is their tool for gaining and retaining the trust of consumers.
Creating hyper-efficient supply chains that can rebuild the relationship with the material world has always been a top priority of businesses
Though not everything, but “supply chain transparency” is crucial to establishment of product integrity, authenticity and identification at all the stages to build consumer confidence. If you have transparency, you also have good traceability.
- Traceability ensures safety and information on trade practice with intent of prevention of unfair trade practices
- Traceability necessitates record maintenance
- Traceability necessitates certification to prevent frauds
Transparency in the supply chain creates a business value that goes beyond traceability. Traceability and Transparency provide an opportunity to take action on insights gained through visibility and manage risks more effectively. Toxic waste and workers’ suicide are only two of the well-known conditions that happened behind closed curtains. To manage these rising levels of risk in the work setting, corporate supply chains need to practice transparency. It provides business to not just have productivity advantage alone but also on value advantage likeU “De-speeding” the supply chain as just-in-time models are challenged by the increased costs of fuel and warehousing
Supply chains are now transforming and re-inventive themselves with blockchains to fulfill on the promise of transparency
Businesses have already invested in novel tools to enable transparency and certification. Product labelling has already been transformed by micro-sized electronic devices, genetic markers for agricultural products, and a new generation of bar codes that can be read with standard mobile phones. Unfortunately, though, centralized and self-controlled systems can’t power transparency and deliver on public trust. There are still significant opportunities to use disruptive technology, break down process silos and build next-generation supply chain capabilities that create competitive advantage, unlock trapped value and drive customer loyalty.
Block chain technologies are among most suited for Supply chain Solutions.
- It is an effective and reliable solution that allows an incremental, piecemeal adoption model, gracefully upscaling as adoption increases.
- It can deliver on promise of transparency as it can be
- Applied consistently and equitably
- Result oriented
- Cost effective
Block chain is not just a mere technology substitution
It is an opportunity to enable better integration of processes within a company as a connecting technology. Combining blockchain with mobility, virtually unlimited data storage, machine learning / AI, data science at scale, predictive analytics, IOT, and firms can now contemplate more-sophisticated ways to track—and to reveal—the manufacturing trajectory of their products.
Most key technologies are not fundamentally new but they are evolving and blending to unleash new opportunities and threats.
Block chain technologies can manage the complexity of the global supply chains
Supply chain is an intricate system of interlinked networks, channels and businesses, leveraging worldwide logistics and synchronizing supply with demand works behind the scenes in the provision of products and services required by end customers with the objective of creating net value and building a competitive infrastructure.
- Entire supply chain is inter-dependent and multiple stakeholders are involved.
- One product can involve several companies from that supply the raw materials, and packaging.
- The chain begins with the provenance and continues with processing history, definition of the batch, links between manufacturing batches, methods of production, methods of analysis, storage, personnel involved, the entire supply and distribution chain system, etc.
- Various sizes and types of materials
- Involvement of sub-contractors
- Varying processes, sustainability and business practices of HR and investments
- Usually there would be no common language and multiple standards
Drivers for adoption of block chain
Farsighted organizations are aiming for a view of the wider supply chain network, which will require a comprehensive view of the entire supply chain, something most businesses struggle with in today’s global economy.
Gaining and retaining the trust of consumers- Transparency and sustainability
Consumers today hold the power. A movement of people who seek out ways to make positive decisions about what to buy and look for a solution to the negative impact consumerism is having on our world. They are demanding details about the systems and sources that deliver the goods. Consumers are hyper aware of how retailers and brands operate regarding their water consumption, waste disposal, acceptable labor practices, health and safety standards, treatment of workers, etc. If a brand’s name is related to any of these topics in a negative way, it will be effected. Today’s big brands need to be seen implementing some form of sustainability strategy. With customers looking for greater transparency, only products with clear and comprehensive provenance are acceptable. If the supply chain fails to deliver these , it’s the brand’s name that is impacted.
Supply chain Intelligence as risks are real and so are the gains
- Real time decisions-—when strategically guided by analytics blockchains can power the supply chain, enable decisions in real time, and unleash newfound productivity and efficiency.
- Visibility for staying aligned to goals – End-to-end visibility of supply chain to reduce costs and gain the ability to sense and resolve problems quickly to achieve specific business goals with quicker response times
- Inventory Intelligence- “De-speeding” the supply chain as just-in-time models are challenged by the increased costs of fuel and warehousing
- Protecting brand – Aligned cross-functional priorities and metrics that support overall business objectives
Blockchain means investing for future. It is an inevitable investment. With some caution and right approach, CXO can mitigate the risks. Blockchain technology offers immense transformation potential. Enterprise solution providers like SAP, are the best partners to enable the adoption of this technology – providing the right strategic and technical support for your blockchain voyage.
Bharti is Director, Digital Transformation and CXO advisory at SAP.
She provides the thought Leadership for the strategic client initiatives in disruptive technologies of analytics, blockchain and IOT including. She has been leading several large and complex IT consulting, process re-engineering, system integration, and business transformation programs across marquee clients globally.
This is highly enlightening, well thought out and inspiring !!
A must read !!
I would have liked to learn more about the blockchain technology itself and how it is capable of being used in supply chain environments. Not enough details on that. Why is the term "Blockchain" written as "block chain". Almost seems like you intent different meanings.
Good observations Michael. I agree to you. I will share more details that you are looking for in successive blogs.
Great blog. Thanks Bharti. As an end consumer myself I cannot agree more. It is important that we, as consumers, look beyond the product and understand what the impact of it's production was, where is comes from and also where it might go (think of all the toxic electronics waste).
One interesting point you are making is the 'de-speeding' of the supply chain. This is interesting since I am currently reading the book "The living supply chain" , related to Elementum and the Flex (former Flextronics) Pulse Center. Here it is about flexibility and transparency. They also want transparency for risk mitigation. One of their main goals is to increase velocity. This seems to be in contrast to de-speeding. Although they might also agree to inventory intelligence to lower work in capital costs.
Thanks. I too just ordered a copy of the book to understand the view point on velocity. Great input.