Realising the challenges & opportunities in implementing and adopting blockchain to enable supply chain ecosystems
Supply chain industry use cases in the realm of blockchain technology are ones that are most relevant. of those perfect-fit ones. At Genesis DevCon, we couldn’t help but put together a panel of veterans who are a part of this technology cusp. Blockchain technology being a transparent, decentralised, immutable, traceable ledger, can really revolutionise the supply chain industry.
Here’s a glimpse at the conversations that saw at the panel discussion on blockchain and its applications in the supply chain industry.
Get to know the panel:
Sanjeev Narsipur — Managing Director, Accenture
Raghavendra Deshmukh — Director — Blockchain, SAP
Jayasankar Pillai — Associate Partner, IBM
Moderator: Mohan Ramaswamy — Co-Founder, Terrago Logistics Pvt Ltd
The relevance of supply chain as a blockchain use case
The supply chain sector is one that could easily adopt blockchain technology into its tech infrastructure.
Mr Raghavendra Deshmukh began by stating that the supply chain involves several parties within a network and there are several aspects that could go amiss. Therefore, blockchain technology provides the required visibility and transparency in a supply chain to address this issue of managing a network.
Mr Sanjeev Narsipur added that there are three broad use cases in the supply chain:
- The tracking and tracing of the movement of goods
- The provenance of the goods
- Trade finance and supply chain finance
However, there are horizontal use cases among these three broad use cases that will bring out the practicality of blockchain. This lies in managing the Identity of the goods and managing the flow of payments. Broadly speaking, the supply chain itself, identity, and financial services are all interconnected. These aspects make the supply chain application more realistic.
Building trust and transparency in a multi-party system
One of the biggest drawbacks in the adoption patterns of blockchain tech in the supply chain sector lies in how the ROI is not determined for applying blockchain in the technology mix. Mr Pillai pointed out that from an ROI perspective, you need to have revenue coming in based on subscription revenue from new players. This will drive the value for adding blockchain.
Following this, he added, there is a cost take-out and a complexity reduction part and these are the factors that are usually sought out to determine the value-add. The need for a transparent system and one that maintains data integrity is part of these two factors. Therefore, you need to have sustainable revenue coming out to make the use case successful. The lack of such deliberation contributes to the failure of several implementations.
Watch the entire panel discussion on supply chains and blockchains here,
Organisational challenges in implementing POCs or scaling-up of a model
While implementing blockchain-based models in the supply chain ecosystem, there are several organisational challenges that you will need to overcome. With reference to cross border transactions, there are government and semi-government bodies that are involved in the supply chain landscape. The challenges of bringing these organisations to adopt blockchain are many as they cannot wholly adopt into one single network as they are approached by several parties who request for customised usage of these networks.
Mr Narsipur brought the incentivisation aspect into the picture. In public and private blockchains, methods of Incentivisation are different and in some cases, cryptocurrencies are not an option. He also added that another challenge is that blockchain is still in its nascent stages. Interoperability is a factor that stands in the way of adoption. Given that supply chain is an expanse of activities, the entire system may not use a single kind of a blockchain, and to put that into perspective, if various functions in the supply chain are running on several blockchains, then there must be a point where all these systems can be interoperable.
In addition to the interoperability issue, Mr Pillai added that not all parts of the supply chain are susceptible for blockchain. He illustrated this fact with an example involving Nestlé. When Nestlé came out with food pressed products in the line of infant food, they added a blockchain layer to their supply chain because it was a high-profit margin item. Notably, tracing the provenance of the product and giving transparency to it was important to the nature of this product. However — he added, in the case of Milo, they wouldn’t need to implement blockchain because if it were traced back to its source, it would be to a certain trader in the market. In addition to this, incentivisation is also relative.
Emerging technologies enable the blockchain environment
Apart from blockchain, emerging technologies like the Internet of Things (IoT), artificial intelligence (AI), and 5G are being implemented into the supply chain ecosystem. The panel also discussed how the culmination of these technologies can enable a robust and efficient system for supply chains.
Mr Deshmukh added that IoT enables a blockchain environment. He shared his experience at SAP where they implemented a cold-chain track and trace. The transportation engineers where laden with the responsibility to ensure that the goods were levied in good condition. To materialise accountability, the transportation engineers were levied with certain penalties if the goods were below a certain temperature, indicating that the goods were spoilt.
However, he added that data recorded in the blockchain depends on the quality of the IoT devices. In order to tackle his situation, you need to make a certain set of assumptions about trusting the device and the availability of the information.
Given the importance of gathering data on a supply chain, Mr Narsipur brought an interesting concept into the picture. In order to track and trace the physical logistical environment of the supply chain, there needs to be a digital counterpart of the same. The concept of a digital twin is something significant at the conjecture of blockchain and other technologies. IoT enables the creation of these digital asset identities on the blockchain.
For AI to be implemented on the blockchain, you need to be certain that the data is trustable therefore the provenance of data needs to be verified before it is added to a blockchain. The architecture pattern which is emerging right now is such that if you can implement AI and run analytics on a certain data based in a blockchain, the outcome will be good. This is based on the fact that you can trace data provenance.
5G tech will provide the speed needed to expedite these processes given that there will be multiple networks that function in this space. Mr Narsipur concluded that these solutions, by themselves will not achieve much compared to what they can accomplish together.
Even though these technologies might seem very implementable, AI is not so prevalent in the supply chain industry because of two reasons:
- Data collected on a blockchain happened within a distributed network. This means that the data is not shared evenly.
- There are no set regulations and standards for data management and ownership in the blockchain.
Without some parameters, there will be several issues that arise from that the lack of regulations will not solve.
Regulation in the realms of blockchain and supply chain
Given how the movement of data and integration of several technologies comes into the picture, a set of standards and regulations is essential for the applications of emerging technologies in the supply chain sector. However, blockchain regulations are still a work-in-progress.
Mr Narsipur brought up an interesting point that circumvents the lack of clear-cut blockchain-based standards and regulations. He stated that as opposed to the regulations for blockchain technology, there are industry recognised regulations and standards set to deal with data. Example: Pharma Serialisation — that requires assets moved in a supply chain to have a digital identity — is a mandate in the EU. Blockchain could be a technology that could implement these regulations via identity management and hold parties to adhere to it.
He also shared the example of MOBI (mobility, open blockchain initiative) — is a consortium that is setting industry standards and regulations for the auto mobile industry. They are exploring parameters to define how acting partners in the automobile ecosystem can share data, manage and act on data in a blockchain ecosystem.
Enterprises contributing to government regulations
Enterprises play an important role in helping governments understand what needs to be considered while creating frameworks for technologies in blockchain.
Mr Deshmukh gave us some insight into how SAP participated in number of transport alliances. They worked with BiTA — Blockchain in Transport Alliance — and several trucking companies across Europe to explore the applications of blockchain technology to enable regulation in the space. SAP is also working to create better GS1 standards — standards set to improve the efficiency of supply chains across physical and digital channels — in the Pharma sector, to regulate the inflow of spurious drugs that are in the supply chain.
Note to developers who are BUIDLING for Supply Chain
Dr Pillai stated that developers need to keep in mind that the real ROI needs to be ascertained along with a method for incentivising the various parties in the network. Without an ROI, it becomes difficult to bring your use case into production.
Mr Narsipur stated that developers should try not to force-fit blockchain for the sake of novelty. It is important to explore the use case, the ROI blockchain will bring before adding it to your mix before trying to figure out what platform you will BUIDL on. He also added that developers need to take the time to find the best operating model which also determines the governance model for the network that includes all the partners.
Mr Deshmukh stated that blockchain is a network game. He advises developers to start with smaller networks within the supply chain to test the viability of the network, ensuring that you are adding value. He also added that developers or entrepreneurs need to understand the business model, figure out if a value-based pricing model is applicable. He added that smart contracts are still evolving, and that developers need to be aware of the platforms that you use to add them to your mix.
And that’s a wrap!
The panel discussion at Genesis DevCon brought out some important points on how the supply chain industry is implementing and adopting blockchain to enhance transparency and traceability. The stellar panel definitely gave us a first-hand account of how blockchains are going to revolutionise the supply chain sector.
To summarise the talk, here’s what we learned:
- If you’re stepping into the supply chain landscape with blockchain technology, ensure that it is not a use case that force-fits blockchain.
- Figure out the ROI for blockchain implementation.
- Industry standards and regulations are shaping the way blockchain can be implemented in supply chains well before blockchain regulations have been set.
- IoT, AI and 5G technologies working in Tandem with blockchains can revolutionise the supply chain industry as we know it
