Solve Real-World Supply Chain Challenges with Blockchain

Earlier this month, Hailey Lynne McKeefry, Editor in Chief, wrote about the bets that are being placed on blockchain in the world of supply chain management.  As she explained there is tremendous hype and buzz that blockchain has virtually unlimited potential to disrupt the management of supply chains – as long as the typical challenges associated with emerging technologies can be overcome. 

Image courtesy: Pixabay

Image courtesy: Pixabay

Recently there has been a lot of press coverage about IBM, Maersk, Walmart and other organizations tackling large-scale challenges through the provenance, immutability and security of blockchain.  And without question these are important challenges.  However, for most of us solving the “less sexy” challenges our complex supply chains present are where we will find the most near-term value. 

Let’s tackle one common problem here:

Where’s my stuff

Despite two decades of deploying software applications such as materials resource planning (MRP) and enterprise resource planning (ERP) platforms, data exchange solutions such as EDI, and over fifty years of applying lean manufacturing principles, most manufacturers still struggle to get visibility into when the materials they need for production will arrive.  And often it’s too late to react without a negative impact on cost or customer service.       

A myriad of challenges have been blamed as the root cause but often the real culprit lies in the gaps between organizations, systems and processes.  Disparate legacy systems and processes simply don’t talk to each other – and needed information gets lost in the chasm. 

Blockchain provides hope to overcome the gaps created in the handoffs.  In a blockchain, each participant, whether a company, a manufacturing plant, a warehouse or even a single plant floor production center, can act as an independent node.  Because blockchain is independent of legacy and proprietary systems and is seamlessly scalable, any number of participating nodes (in this case vendors) can be quickly connected together, information can be broadcast in near real-time, and an entire supply chain can be appraised of the current state of replenishment.  

Overcoming the “where’s my stuff” challenge could be solved by a manufacturer establishing a private blockchain with each supplier (and supplier’s supplier) participating as a node.  Each node would broadcast their actual production, inventory, logistics information, etc. as it takes place onto the shared ledger for the entire network to see.  Information could also be compartmentalized and protected by the cryptographic capabilities of blockchain and, in a private blockchain, the manufacturer could establish the rules of the road for which information each participating node would be able to access.  Some information – contracting, pricing, terms, etc. – could be kept private while other information would be available for general consumption by the entire network. 

Taking this a step further, the manufacturer could also broadcast orders into the blockchain network.  Then, based on the information provided by the manufacturer directly on the blockchain, a blockchain smart contract could automatically make allocations to suppliers based on the data already on the blockchain and their ability to fulfill the demand signals. Suppliers can then accept the terms of each order directly on the blockchain and the entire current state updated for the entire network to see.  In many ways this is like Toyota’s famous demand broadcast used in its automotive plants but is applied allows for near real-time two-way exchange of information, contracting and demand planning directly on a secure and immutable chain of transactions. 

For the supply chain and operations professional, the advantages gained from the ability to know which supplier has what material(s) and the location of such material(s), coupled with the ability for the network to self-manage responses to demand signals is significant.  And while the technology is still in its early days, the energy and enthusiasm for the technology is accelerating its availability and maturity.  Now is the time to begin jumping into the waters. Hesitating today means that companies will wake up in the very near future and realize they are behind their competition.

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