Four ways blockchain will transform supply chain
Blockchain and its future derivatives will introduce a...
Blockchain and its future derivatives will introduce a new standard and infrastructure to manage the new strategic resource: data. Today big, powerful companies like Amazon, Facebook and Google benefit disproportionately from data because there has been no practical way to share data’s value without compromising privacy and security. Blockchain fundamentally changes this game. Its ability to provide regulated transparency while protecting data’s intrinsic security, veracity and above all, value, democratises data and allows its future regulation as a strategic resource. In supply chain, blockchain significantly increases the utility and value of data, especially in complex, highly regulated industries that need to share data throughout complex stakeholder networks without compromising security. The ability for more planning stakeholders in the extended supply chain to view and access more complete high quality data makes optimised supply chain planning easier and faster.
Here’s a closer look at some of my predictions for “sweet spots” where blockchain will be applied for the greatest benefit to businesses and consumers:
1. Tracking provenance to meet regulatory compliance – By serving as a public ledger system that certifies the data in a supply chain’s production log, blockchain provides the required visibility needed to track raw material provenance. This is essential in complex, global industries like food, medicine and consumer goods, where the provenance of raw materials and ingredients are highly regulated and notoriously difficult and expensive to manage.
2. Improving public health, safety and services – Blockchain provides a way to democratise data in order to improve public health, safety and happiness. Today data’s value disproportionately benefits large organizations like Amazon, Facebook and Google. With Blockchain, powerful organizations like these will no longer be able to successfully argue with regulators that they can’t share data with health organisations, public service providers and even citizens for fear of compromising privacy and security.
3. Leveling the e-commerce playing field – Amazon has become such a powerful force in retailing, that many smaller players are either disadvantaged or put out of business entirely. This isn’t healthy for consumers, smaller retailers or even Amazon, which continually exists under the specter of being broken up. Through the adequate regulations, blockchain will provide a mechanism to help level the playing field by sharing more of its valuable data to smaller online and bricks and mortar retailers without compromising security and privacy.
4. Facilitating digital twins for planning and optimization – Our small networks are rapidly expanding to global end-to-end value chains, which is why it’s so important that the ledger is public and available to different participants in the extended supply chain–and even beyond. For companies like those we work with at ToolsGroup, more industries and business sharing transaction data makes it far easier to get the end-to-end supply chain visibility they seek in a digital twin model. The data blockchain provides helps fill in the most difficult part of the digital twin that is required for planning and optimization. Better supply chain planning also significantly reduces waste and makes supply chains more sustainable.
Along the same lines, blockchain technology could also allow AI networks to access big data for sensing demand and demand forecasting without needing to wait for a downstream trading partner or other entity in control.
Can regulators keep pace with the speed of technology development?
Potential use cases for blockchain in supply chain are developing, but adoption is in early stages. A recent digital transformation study we conducted with Spinnaker showed that 12% of respondents had a supply chain-related blockchain project underway (see image below). According to Gartner, 80% of supply chain block chain initiatives will remain at a proof of concept (POC) or pilot stage through 2022. Not surprisingly, Gartner also maintains that “through 2023, 40% of all blockchain pilots across the supply chain will be developed as a complementary feature, or a mesh of, IoT and other advanced technology solutions.” Similarly to broader digital transformation initiatives, many businesses lack solid use cases and the internal buy-in and expertise to pilot blockchain projects.
Boston Consulting Group’s Stefan Gstettner stated blockchain’s challenges in this way: “It’s not enough to set up a technology platform [for blockchain]. It’s more about involving the stakeholders. The more stakeholders that need to be involved…the more difficult it becomes.
For instance, gain share mechanisms or who pays what, who has which advantage, how do we share data, maybe even across competitive environments. So the biggest obstacle in establishing blockchain has less to do with the technology. What makes it difficult to scale is that the number of parties that you need to involve is very high.
Another notable challenge of blockchain adoption is ecological: the immense computing power required to encrypt data will consume huge amounts of electrical power.
How to sum it all up? Blockchain is an incredibly powerful technology which has the potential for great benefit if we’re able to configure procedures and regulations that are compatible with the speed of technology development. Historically our governments have been slow to understand technology, particularly the importance of data. Consequently the speed of innovation has been hampered. I look forward to seeing blockchain’s potential unfold.
For more information on all topics for Procurement, Supply Chain & Logistics - please take a look at the latest edition of Supply Chain Digital magazine.
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”