Supply Chain

Blockchain as the Engine for Collaborative Business Process Acceleration in the Supply Chain

We haven’t blogged for over a month here a – we have been busy! We’ve written about Blockchain technology in Networking and Blockchain’s differences vs Relational Databases (which rule and will continue to rule privately held ledgers).

by Tugrul Firatli - Sep 26, 2020

We haven’t blogged for over a month here a – we have been busy! We've written about Blockchain technology in Networking and Blockchain’s differences vs Relational Databases (which rule and will continue to rule privately held ledgers). And now, let’s talk about the elephant in the room: there is a back and forth debate about whether Blockchain is needed at all in some quarters, because a contrarian view is always entertaining – and because Blockchain technology over-relied on crypto-currencies as a success story – and we all know that’s not been going that great lately. (My personal option is that you should have never called something a currency that by nature is a speculative stock, but that’s a discussion for another day and has nothing to do with the underlying technology.)

This post is about talking why the success of Blockchain is inevitable: it’s a technology that helps overcome many of the bottlenecks that fuel collaborative business processes – and in our digital knowledge worker economy, which revenue-generating business process does *not* rely on a collaborative approach? Between intra-company departments, between partner ecosystems, between customers and sellers? Let’s face it, the digital economy is about vanishing boundaries in the business process, and anything we can do to accelerate and secure such business processes has a direct impact on an enterprise’s bottom line.

And a painfully common pattern in collaborative business processes is the fact that they fall out of synch, come to a screeching halt, and require resolution via mutual, slow approval to move forward. This is common in sales processes, where product teams and sales teams need to approve special offers, and (as a subset) especially in any supply chain ecosystem.

Supply Chain

Why supply chain?

It’s a classic collaborative business process use case: it involves several participants, several companies in the ecosystem, several private ledgers representing the local viewpoint of the data pertaining to the joint business process. Enormous efficiencies can be set free, and billions of dollars in locked-up inventory can be freed if the supply chain system business process could be accelerated. And what is most needed in a supply chain ecosystem? Ideally, it is rapid convergence to mutual consensus across the entire supply chain, from keeping inventory to fulfilling an order among all the participants that have invested resources.

Optimizing the supply chain is a complex exercise. Think about a successful smartphone manufacturer launching a model. The enormity of this multi-billion $ cycle that is repeated year after year, and on which $B++ success relies upon, it amazes me every time I think about it. And I know that, if you were the head of said smartphone manufacturer’s supply chain, you wouldn’t just say: “Hey, last time we sold 300M phones, so I’ll just do a hard pre-order for $10B for all the stuff my suppliers sent me last time”. It’s a big gamble, and you better have a very understanding boss if your one-dimensional scenario planning goes wrong. So no – no one does it in a supply chain these days. The collaborative supply chain business process has been optimized to an amazing degree.

That said, huge surprises still happen because of the nature of the supply chain business process, and because the private ledger reconciliation still happens based on pretty raw macro data. And because of that, the supply chain doesn’t feed the market demand optimally. Shortages or oversupply happens. The supply chain is a closed loop system, right? What causes oversupply or shortage? Simple: a sub-optimal feedback cycle, which is either too slow or inaccurate or not granular enough.

The situation in the supply chain is simple: you have participants with private ledgers, whose business results rely on keeping their private ledger as accurate as possible, as quickly as possible. And yet, the synchronization between these ledgers is nowhere near automated, is not open. It relies on typically weekly forecast meetings (daily internal meetings and a war room if you’re a smartphone supplier) between those involved in the supply chain. Which results in a data-driven, yet slow converging of the many ledgers involved in the supply chain. Let’s say our smartphone manufacturer’s new phone model is super-successful and they ask their supply chain to up supply by a factor of four right away… their traditional suppliers would go “What? That sounds like a gamble given our traditional ramp up? Can you provide data and really commit and prove it to me? I’d have to make potentially revenue impacting changes, and this looks risky to me. Let’s have a meeting next week, I need all our and your stakeholders to come together and commit”.

There it is: a classic business process that comes to a screeching halt just as huge mutual success is there to grab. But no: agendas of CEOs need to be aligned, new agreements signed, very nervous top executives in the supply chain need to make decisions on a current short-lived demand trend they are already failing to satisfy.

What could make this easier?

A distributed shared ledger, of course. Blockchain technology. Imagine it: it provides every participating company with an open yet secure platform to constantly share and update the collaborative business process with real time data, and get near-immediate visibility into collaborating partners’ view of it! The power of a securely shared, mutually approved shared ledger in a supply chain ecosystem can not be overestimated. That is why Blockchain tech is quickly revolutionizing the supply chain.

So, yet again, you may ask: “This makes total sense, so why isn’t everybody doing this right here, right now?”. And as often in IT these days, the answer is: we’re too busy dealing with the stuff we have. Maintaining it. Upgrading it. Fixing it. Who has time to write code for an intra- and inter-enterprise Blockchain message bus that reconciles privately held ledgers? Can I afford my top architects to take 3 months off to become Blockchain experts?

We all know the answer: no. The alternative question for an architect is “Can I plug into the benefits of this shared ledger technology via RESTful, reusable APIs I can intuitively integrate into my current private ledger, can I augment it with Machine Learning and define policies on when and how to share to the distributed supply chain ledger?”.

The answer to the latter is a resounding yes, provided you pick as a partner. Let’s work together on augmenting your supply chain with DLT technology.

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