Blockchain for Defense: A New Tactical Supply Chain
Hello! My name is Rudy Subramanian, a Cloud Platform Solution Engineer at SAP, and also a public sector blockchain SME and emerging technology enthusiast. Prior to joining SAP, I worked in investment banking and held finance roles in the healthcare and utilities industries.
In this document, we will understand how blockchain can help create a more nimble supply chain when engaging in a new (joint) initiative, resulting in potentially faster deployment, increased collaboration, reduced inventory levels, and improved transparency and auditability.
Traditional tactical supply chain for spare parts is foremost vertically aligned, starting at the unit level, escalating to the Supply Support Activity (SSA, warehouse) and up to the national depot (US Army). Requests for spare parts are managed through two ERPs, one at the tactical level and another at the national level. Refer to the diagram below:
Some disadvantages with the current system are:
- Involved entities (tactical units, SSAs, depots etc.) are part of two “closed” networks (the ERPs).
- A single vertically-aligned source of supply can’t fully support all requests for spare parts immediately, resulting in decreased mission readiness.
- To maintain a high level of readiness, tactical units sometimes circumvent the established supply chain in acquiring spares, resulting in reduced transparency, security, and auditability.
- When pursuing a joint initiative between services, agencies or other countries, contracts need to be established and new ERP interfaces need to be created upfront between every trading partner.
- Stocks in the SSA are maintained redundantly in two ERP systems.
How can we improve mission readiness without incurring huge costs? Utilizing blockchain technology, we can expand the traditional vertically aligned supply chain through:
- A private economy between trusted peers on a blockchain network, where spare parts can be sourced from other peers.
- Additive manufacturing (at the SSA level), where necessary parts can be 3D printed.
The following process takes place:
- A field unit needs a spare part and creates a request through the ERP 1.
- This request is routed through the SSA, which is responsible for sourcing the part.
- SSA (ERP) checks the traditional supply chain for the requested part.
- If the part is unavailable or delayed through the traditional ERP-centric supply chain, SSA (ERP) can reach out to the peer-to-peer network for fulfillment or 3D print the part closer to the source of need.
- Transactions are reflected in ERP.
We are creating a private economy (or peer-to-peer network) between different trusted entities operating in the same area, involving multiple services, agencies, allied and coalition forces, as well as 3rd parties (e.g. OEM). The DoD Services share certain equipment and parts and so do allied and coalition forces (ie. Humvees, etc.), and spare parts for this equipment are essentially commodities that can be traded.
- After determining that the peer-to-peer network is the best option to deliver a spare part to the tactical unit (by turn-around time, cost, etc.), the SSA’s ERP triggers a request on the blockchain network.
- Any peer on the network can respond to the request.
- The contract is then reviewed and signed by authorization parties in the hierarchy.
- When fully validated, the contract is added to the blockchain.
- Trades are made and confirmed, and code can be executed to add the transaction to the ERP system.
If the required spare part isn’t available within an acceptable timeframe or cost through the established supply chain and is identified as “can be 3D printed”, it can be 3D printed at the SSA warehouse level. However, certain conditions must be met:
- Provenance must be established for the CAD files to ensure authenticity and accuracy of design.
- SLAs/warranties must be transferred to the part owner.
- Royalties must be paid to the OEM.
Blockchain technology can be used in conjunction with SAP technology (Dist. Mfg. and PLM) to provide this solution (Steve Stubbs to expand).
- The addition of both options increases the availability of spare parts, reduces equipment downtime and increases readiness.
- While it is very certain that 3D printing will lead to reduced inventories and cost savings, it is very likely that the peer-to-peer network will do the same.
- Every peer in the theater becomes a potential source of supply to the field unit for commodities, improving the chances of procuring a spare part quickly and maintaining mission readiness.
- Tactical units do not need to change established request protocols.
- Improved visibility into a process (part exchange) that currently occurs, but isn’t fully monitored, thereby increasing auditability and security dramatically.
- The peer-to-peer network could also be leveraged to unload surplus in spare parts or supplies.
- Overall, the peer-to-peer network allows coalition forces / allies to share resources in a more efficient way.
- Transactions between units and/or supply depots of different entities can be done in a trusted fashion, without sharing classified supply chain and spare part inventory data. Contracts and ERP interfaces between trading partners no longer need to be established upfront allowing greater flexibility in sourcing and in securing readiness.
This document is simply one example how blockchain technology can be implemented to achieve process improvements in a cost effective manner. While the agencies may not yet be ready to fund large scale BC projects, we need to start discussions between federal agencies and SAP, to understand the issues they are currently trying to resolve, as well as to establish SAP as a leader within the BC domain.
I will continue to stay up-to-date on the state of blockchain, both in general and specifically in public sector, and you can expect future blog posts from me regarding new developments within this space, both from a technical and business perspective. Please reach out to me with any questions or new ideas!