Blockchain for Chemicals – A Hammer looking for Nail?
SAP and IBM hosted an intimate blockchain for chemicals forum in Newtown Square on August 13th 2018. Companies in attendance included Dow, DuPont, Braskem, Air Products, Axalta Coatings, Infinium, Benjamin Moore, St. Gobain, and Covestro.
SAP’s objective for the event was to gauge the industry’s readiness for leveraging blockchain technology. Example use cases were presented by SAP, IBM and Cryptowerk. After the use cases were presented, an interactive session was moderated by SAP and IBM to gather input from the 9 companies. The input included identifying challenges, prioritizing use cases, and potential next steps.
A common theme quickly emerged: readiness is clearly predicated on opportunity. If there is substantial value in an opportunity, then any industry will become ready. But how does an ‘industry’ show that it is ready?
SAP opened the forum with a keynote by Conaill Gunn from SAP Digital Customer Initiatives.
Conaill provided an introduction of blockchain (the 101 basics of blockchain) to level-set the audience. He then summarized SAP’s initiatives around blockchain, including the formation of industry consortiums and active co-innovation projects at SAP. Key use cases included coldchain (verification that temperature does not exceed a certain limit throughout the extended supply chain), advanced track and trace for pharmaceuticals (verification and authentication in a returnables process), farm to consumer (reducing food waste and facilitating recalls), and international trade (a networked blockchain that includes manufacturers, shippers, carriers, border agents, customers, etc.). Lauren McCallum, SAP IBU Chemicals, then showed a product demonstration of the bill of lading process from the extended supply chain and how multiple parties could leverage a simple blockchain.
The value of blockchain appears to reside in key areas:
- Verification of a fraud-proof process, condition, or product (e.g. coldchain, product authentication)
- Collaboration and simplification of a processes involving multi-party networks (e.g. Bill of Lading handoffs, customs processing)
- Simplification of a complex transactional process (e.g. joint venture accounting)
IBM then presented their experience with blockchain with networked smart contracts. The value drivers were summarized as saving time, reducing costs, reducing risks, and increasing trust. Example use cases for chemical companies were very consistent with SAP’s examples – focus on networked processes and highly transactional processes, with an emphasis on risk reduction. The example of cold chain could be applied to any process condition during transit (too hot, too cold, pressure sensors, speed, etc.), leveraging the input of IoT into blockchains. SAP and IBM continue to collaborate and partner across multiple industries with targeted co-development efforts around joint venture accounting in the oil and gas industry.
The final presentation by Cryptowerk illustrated how blockchain can be used to protect your company against fraud, cyber attacks, or even terrorist attacks. Data manipulation by a hacker can occur due to a disgruntled worker, a competitive threat, or even an international threat. The objective of the hacker is simply to wreak havoc against a company. The focus from Cryptowerk was how to infuse trust into blockchains. An example use case was how to tamper proof the drug returnables process with Merck and AmerisourceBergen, which was a co-innovation effort with SAP to address the DSCSA (Drug Supply Chain Security Act). The blockchain will track that all drugs have a unique serial identifier at time of manufacturing, and that any subsequent transactions (ie returns) must be validated to that unique identifier. This will ensure compliance with DSCSA and also allow proper disposition of any drug that is returned to a distributor or manufacturer.
It is not apparent that the chemical industry has identified enough tangible value for blockchain technology at this time. This conclusion is drawn because companies are not yet deploying resources to explore blockchain technology. Any available resources are being devoted to other high profile technology projects (adoption of SAP S/4HANA, IoT, digital transformation, customer engagement…). There is clearly interest in the technology and chemical manufacturers are watching use cases develop, mostly in other industries. As use cases evolve to POC’s, the technology providers will be ready to adopt experiences from other companies and from other industries to extend blockchain to chemicals.