Operations for enterprises by necessity are a very elaborate and multifaceted exercise. Research and development may be in one country, strategy and marketing in another, and manufacturing in a third country. Further complexities are added by the sourcing of raw materials and components from various third-party organizations, once again in disparate locations throughout the world. Moreover, dependent on the company and its products, distribution and sales may be to a global marketplace.
The management of the supply chain to facilitate such a business is indeed a complex endeavour. Each aspect of the supply chain is mission critical, with other aspects interminably dependent on its proper execution. No doubt, redundancies are built-in, and enough reserve inventories are in place to mitigate against any anticipated bottlenecks. However, the issue is not about trifling delays and the resultant inefficiencies. There is the potential for significant operational and financial loss that can have a material impact on a company’s performance and bottom line.
We make the proposition that systematic issues exist with today’s antiquated supply chain processes that result in loss and inefficiency to which all businesses are subject. A recent study by Winnesota suggests that within the transportation industry alone, on a daily basis, over $140 billion is tied up in payment disputes; up to 20% of shipping costs for companies is due to a paper-based administrative system; and, this administrative system results in a delay in the processing of payments for up to an average of 42 days.
The study also points to significant spoilage issues in the supply chain. It is estimated that more than 8 percent of temperature sensitive pharmaceuticals are lost because of deviation in temperature while in transit. This figure goes up to 20% in the Middle East.
How can blockchain technology help in addressing these endemic issues?
Blockchain is the pivotal technology that can form the core of an overall “supply chain ecosystem” strategy, buttressed by the utilization of IoT sensors and artificial intelligence (AI). IoT sensors perform a critical role in collecting and propagating the vital data to a blockchain, all along the supply chain. In the case of temperature sensitive pharmaceuticals, for examples, temperature data can be collected and sent to the blockchain on a real time basis. The blockchain ensures the transparency, accuracy and security of the data. In this way any deviation in temperature outside acceptable limits can be addressed with immediate remedial action to mitigate against loss. In cases where spoilage occurs, the blockchain can, with pinpoint accuracy, identify the defaulting party.
Blockchain, with the compulsory participating of all contracting parties, can do away with a paper-based administrative process. The antiquated paper-based bill of lading can be replaced by an “electronic bill of lading” that is housed on the blockchain. The immutability, assurance and security provided by the blockchain can now do away with disputes and delays in the current processes. There can no longer be any fraudulent changes to the bill of lading, delay in the payment of invoices or money being tied up for reason of legal disputes.
The last and vital part of the supply chain ecosystem is the AI component. With the collection of supply chain data via IoT, and the assurance, transparency and security of the data by blockchain, the AI is an important tool for companies to achieve strategic goals. AI processes can make changes based on the analysis of data to optimize the supply chain, inline with a company’s efficiency and profitability goals.
Overlaying the supply chain ecosystem is the Supply Chain Dashboard. The Dashboard provides an overview of the operation of the whole supply chain, with capabilities to intervene, drill-down and investigate the minutiae of any issue that arises on any element of the supply chain. The issue can then be addressed on a real time basis.
Yes, the enterprise supply chain is complex. This complexity, however, we submit is only a function of the multiplicity of intermediaries and processes. The blockchain as a part of an overall supply chain ecosystem approach takes away the complexity.
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