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Blockchain & the Big Supply Chain Infrastructure Puzzle

An infrastructure defines the fundamental physical and organizational structures of any society or enterprise. For consumer goods and electronics manufacturers, their supply chain infrastructure consists of both physical and digital assets needed to get products made, transported from point A to B (and back) and sold to the end customer. It stretches across suppliers and production sites, enterprise resource planning (ERP) systems, warehouses and their intralogistics solutions, trucks and couriers, all the way down to the retail and e-commerce level – and everything in between.

Image courtesy: Pixabay

Image courtesy: Pixabay

Every link in the supply chain has a role in the movement and transaction of goods. However, in spite of everyone existing in a common network, few manufacturers can say their supply chain operates like a well-oiled machine. There are inevitably disconnects, which lead to inefficiencies as well as supply and demand imbalances. The problem is each party operates more like an island in the grand scheme of things, relying on individual systems, databases, metrics and rules. Instead, companies should rethink their supply chain infrastructure and reimagine it as a single, cohesive entity.

In this post, I will examine different components of a supply chain infrastructure – including their unique management systems – and how blockchain presents a radical, new way to tie everything together.

Suppliers, manufacturing sites, & technologies

Upstream in the supply chain, there are suppliers that are responsible for developing components and parts, and manufacturing plants where final products are assembled. They can be categorized in three tiers based on their technological capabilities.

  • Tier one suppliers and manufacturers are more advanced, equipped with software such as ERP systems, production planning tools, and quality management systems. These are familiar names such as Foxconn, Flex, and Foxlink. They predominantly have large, global footprints and have a digital presence that makes it possible to connect with other parties further downstream in the supply chain for more accurate planning.
  • Tier two are medium-size organizations. They may not have the latest and greatest technologies, but they do have tech-related processes in place. Most use spreadsheets or a homegrown solution for production planning. They have moderate levels of connectivity with the rest of the supply chain via email.
  • Tier three suppliers and manufacturers have advanced machinery and capabilities from an engineering perspective. However, most still use paper and pencil to capture manufacturing data and to coordinate production plans. They often don’t have ways to convert the written information into working documents, which hampers connectivity and integration with other systems in the supply chain.

Distribution & logistics

In the fulfillment and warehousing corner of the supply chain, there are logistics providers or 3PL providers that manage inventory storage, order fulfillment and the shipping of goods. They typically use a warehouse management system to capture inbound orders and direct either warehouse staff or automated systems to pick the required products.

On the freight side, the same logistics providers or 3PL providers may use a transportation management system (TMS) to manage inbound freight and trucks traveling across the country. A TMS helps with prioritizing and scheduling truck activity. It also provides visibility needed to track and trace orders, and anticipate possible delays in transportation.

Retail channel partners

Brick-and-mortar retailers and online shops often use internal enterprise resource planning (ERP) and point-of-sale (POS) systems to manage existing stock, capture sales and calculate sell-through velocity. They are looking at what’s selling, what’s not and what needs to be restocked. This provides a gauge of consumer demand, which has a direct correlation with the amount and types of product needed upstream at the supplier and manufacturing level. Unfortunately, these two ends of the spectrum use very different metrics and key performance indicators, making demand forecasting and production planning difficult. Not to mention, some smaller mom-and-pop retailers or independent stores may not even have an ERP, relying instead on basic POS and inventory management systems.

A large, complicated puzzle

This is just a basic breakdown of the major parts and systems involved in the big supply chain picture. There are multiple sites, locations, systems, and homegrown solutions at each tier, which make managing the supply chain – in a way that is profitable – even more complicated. Some organizations have tried to implement a company-wide ERP to connect their disparate parts. It works somewhat, bridging certain gaps, such as between retail and distribution. A retailer or customer can place an order and it gets directly linked to the warehouse level for fulfillment. However, very few are able to integrate their solutions further upstream for a holistic supply chain design.

How Blockchain connects everything

Through a permanent, centralized record of every transaction, Blockchain technology can help manufacturers connect their supply chain network and enable everyone to work together – regardless of what system they use. Since all records are transparent and visible to all parties within the Blockchain, it makes it easy to identify inefficiencies or problems within the connected network – whether it is a supplier, warehousing, or channel partner issue.

As I discussed in my previous blog, the data flows seamlessly and in real time, which supports smarter decision-making and proactive production planning. As demand spikes, supply can spike with it. Organizations can thereby achieve an equilibrium between supply and demand, making sure the right products and stock are available in stores and online. This reduces instances of stockouts and lost sales. More accurate demand forecasting minimizes overproduction and excess channel inventory – and its associated costs. This cohesive, demand-driven model leads to greater business growth and a far more efficient supply chain. Ultimately, everybody is speaking the same language and helping to move the supply chain forward.

3 comments on “Blockchain & the Big Supply Chain Infrastructure Puzzle

  1. rathorehitendra
    September 11, 2018

    I have read many articles about blockchain integration with erp software, and always the conclusion is that blockchain will simply the supply chain, Integration of blockchain with erp not only revolutionize supply chain but also it'll help in many areas like asset tracking, distribution operation. by the way, I really enjoyed reading the article.

  2. pratik soni
    September 12, 2018

    Hi BlockChain Will – thanks for the comment, we're happy you enjoyed reading the article and I agree that Blockchain integration into ERP systems will help drive transparency and trust across the value-chain.

  3. John Benito
    September 18, 2018

    Like the previous reader of your post, I have read many detailed and some not so comments, about blockchain! Recently I read an article in the Economist Magazine (Dated Sept. 1st, 2018) in which among many things stated in the article, is that many companies are staying away from Blockchain technology basically because it is just too cumbersome, difficult and expensive to implement. The article states “Because blockchains and cryptocurrencies are notoriously complicated, non experts from other industries can end up confused by techno-speak, whereas advocates of the technologies are so excited by the potential that they give insufficient attention to important details of the industries they are aiming to revolutionize!”  I am an older guy that went from Kardex cards to computers, to MRP / MPS, to ERP / DRP systems and the motto right through my working life was “Keep it simple stupid” Whenever, complicated / difficult systems were tried in the Supply Chain, they have not work as initially planned and the results have always been short of original expectations. Having said that, the best results we ever achieved were due to the fact that we streamlined the processes and made everyone from RM's suppliers to retailers accountable for their performance. For what is worth!!! JB  

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