As Solution Manager for Retail Supply Chain and SAP Leonardo, I frequently participate in discussions on how to optimize logistics processes, reduce supply chain costs and on how SAP Leonardo applications enrich supply chain efficiency. And I just learned how beneficial, not only from a health perspective, a dog walk can be.
But let’s go back to the very beginning. Recently, I talked to a customer about blockchain technology at SAP. I spoke about a project where SAP is participating as technology provider, being responsible for the solution architecture and the technical implementation of the future blockchain application. The goal of this project with GS1 Germany (a not for profit organization that develops and maintains global standards for identification, communication and process optimization) and further renowned project participants is to gain insights into the potential of the blockchain technology for logistics. The focus is on the pallet note. Most of the time, companies ship their goods on pallets. As pallets cannot always be immediately returned in the same number, type and quality, the involved parties receive pallet notes, which document the number of pallets delivered and collected. Later, these paper pallet notes can be used directly in exchange with physical pallets. Currently, this paper case is cumbersome and not transparent within the complete supply chain.
I loved the spontaneous feedback I received, even though it was not a very enjoyable one from the customer’s perspective, but showing real business pain: “We just paid thousands of dollars to one of our logistics service providers for un-returned pallets.” This demonstrates that the project definitely strikes a chord at SAP’s customers.
Distributing goods – the possibilities are endless
Today, many Retailers operate both in brick and mortar stores and in e-commerce. The assortment they offer to customers is a very wide one covering hundreds of products and product categories. These goods are shipped from various manufacturers along the supply chain, to distribution centers and finally to the stores, sometimes even around the world. Whether the assortment is a deep one, like in many fashion stores or a wide one, like in most mass markets, it’s huge and always needs to be packed and shipped safely. Just some ideas: do-it-yourself retailers have big and heavy items, supermarkets lots of smaller items, or even fresh or frozen goods – most of them are packed on pallets for a secure transport.
How are the goods distributed? The possibilities I see at our customers are multifaceted: Retailers having an own fleet or retailers doing subcontracting with logistics service providers, retailers deciding on a day-by-day or shipment-per-shipment basis, retailers involving carriers only for peeks or only for non-value shipments. Possibilities are endless. But all the different products must be shipped thoroughly and secure through the supply chain, ensuring that they all arrive at their destination. The cargo container, e.g. pallets, are handled by many involved parties, who might all pay different levels of attention to these assets.
How does it work today?
Core of today’s pallet management processes is the pallet note. It’s a paper form that is used if a direct exchange of pallets is not possible. It documents the number, type and quality of the charge carriers. These vouchers can be redeemed for “real” pallets, today or some time later. As the retail supply chain is very complex and involves a lot of players, such as producers, shippers, Logistic Service Providers, carriers, distribution centers, cross docking centers, stores, keeping overview of pallets is a challenge for all parties. There is no central authority that manages and monitors the pallet exchange process. This current situation is the perfect case for using blockchain technology to come up with a solution that establishes trust and transparency while streamlining business processes across company boundaries.
So, pallets do easily vanish – in the customer warehouse, along the supply chain, behind stores, by theft, in the black market and in time. Digital documentation with full transparency is key for full visibility and profitability.
How can trust and efficiency be realized?
Together with leading companies from retail, FMCG, logistics, IT and science GS1 Germany initiated a blockchain pilot project with the common objective to gain insights in the possibilities of this technology for a digital and transparent pallet management across the entire supply chain.
At the heart of the initiative is still the pallet note. Currently, it can be exchanged bilaterally and point to point, paper for pallet and pallet for paper – this leads to maximum complexity and many uncertainties. Blockchain can act as the single truth that enables the decentralized, secure, direct and digital transfer of cargo carriers.
They are here!
Great news! When walking with the dog this afternoon, I found some of the pallets. Somewhere on the fields around Walldorf, Germany.
This simple picture clearly shows what challenges our trade customers and their business partners are facing. Pallets are frequently not considered as a valuable asset that impacts profitability and efficiency, but as something insignificant.
So, stay tuned and I’ll share future updates on this project and how retailers can successfully manage pallets using blockchain across the complete supply chain.