The Blockchain Supply Chain; the quest for the holy grail of supply chain integration.
published on 2nd July 2018
For those of us involved at the interface between technology and organizational transformation it is hard to ignore the revolutionary potential of blockchain.
Q: What is a Blockchain?
A: Put simply, it is a safe way of hanging together substantial amounts of information to create one secure source of truth.
Q: Is there a difference between a Bitcoin Blockchain and a Blockchain Supply Chain?
A: Yes, in the Cryptocurrency world of Bitcoin and Ethereum, the block chain enables traders to buy and sell an asset anonymously, safely and securely (kind of, google $500m Japan cryptocurrency theft). Businesses on the other hand, are required, to name but a few, to prove that supply chains are not corrupted by money laundering, environmental risks and child labour laws. Real-time transparency and control are key bywords in a well-managed globalised supply chain.
Q: Could a Blockchain Supply Chain be the holy grail? one secure source of truth?
A: The holy grail is a legendary cup that Jesus supposedly drank from at the last supper. Anyone who finds the Holy grail will in theory obtain eternal life. Indian Jones and even Monty Python, have sought to obtain the holy grail, but to no avail.
The holy grail within supply chain management is knowing exactly in real time what is happening across the entire chain. Inventory holdings from downstream to upstream, response times, payment terms and disruptions. The nemesis for any supply chain professional has been the dreaded bullwhip effect (Also known as the Forrester effect). A situation whereby incorrect information is amplified across a supply chain due to disintegrated information flows.
Q: So, are you saying that the Blockchain could eliminate the bullwhip effect within supply chains?
A: In theory, yes. By delivering a Realtime connected single ledger across multiple organisations, with all accurate and relevant information to that supply chain. The holy grail of a lean customer responsive globalised supply chain.
Q: Where do I sign-up?
A: Not so fast, some major challenges remain. Gartner, a leading IT research company, produces a chart called ‘the hype cycle’. The hype cycle charts emerging technologies as defined by there stage of maturity. On Gartner’s hype cycle, Blockchain is on the downward curve of its peak of inflated expectations. I.e. the initial hysteria is starting to wear off as organisations realise that it is not a quick win.
Q: Ok then, what are the challenges?
As anyone involved in either seeking to improve organisational performance or implement technology transformation will attest, the initial battle to improve is almost always internal, not external. Experience of another emerging technology, RPA (Robotic Process Automation), highlights the problems organisations have in trying to understand the information that exists across internal departments. The need to unwind multiple different processes for the same thing makes the implementation of one standard technology difficult. Never mind, throwing into the mix internal politics and the need to break down internal empires.
Q: I am still interested, what should I do next?
Wait and prepare.
Wait for the technology platform to mature and as you wait, align your internal information flows to eliminate the internal bullwhip effect. Then move out to understand the internal workings of your supply chain, do they have their internal house in order? Would they be willing to collaborate in a transparent way (this is far from a given)?
The Blockchain supply chain is a key trend to keep an eye on, but as of yet (July 2018) it is not the holy grail of supply chain integration.
Dr Michael K Needham
MKN Advisory Services Ltd