Guest Blog Post: Adam Gittler, Adjunct Professor, Global Supply Chain Graduate Program at Portland State University
At T Exponents, we support diversity of thought and disruptive technologies and opinions. We often collaborate with other experts in Supply Chain and related fields.
Adam Gittler has over 25 years of experience in Global Supply Chains, Operational Excellence, and Regulatory Affairs. Adam is also an adjunct professor at Portland State University’s School of Business in their Graduate Supply Chain Management program. Adam has a BS in Industrial Engineering, MS in Production Management, and MBA from Cal-Berkeley..
Putting the Brakes on the Blockchain Hype
Is Blockchain a Technology in Search of a Problem? Is it Applicable to Your Business Problems and Industry?
September 2020
Blockchain has increasingly been in the news and a quick Google search will yield more than 233 million results. In this post, I’ll be helping you to make sense of where Blockchain is in its maturity and in application.
It’s helpful to think of Blockchain as EDI 2.0 (Electronic Data Interchange); whereas EDI is based on bilateral signals between two companies, Blockchain is akin to a social network for a complete supply chain, with a commonly accessible database based on permissions and enhanced security features. Think of EDI versus Blockchain technology as the difference of an email between you and one supplier versus the potential of using Facebook or Twitter for data communication amongst you and all your supply chain partners.
Additionally, unlike EDI which is a flat file of information, a Blockchain application can also execute contracts and other events (e.g. payments) based on embedded logic like if-then statements, and thus has the potential for some AI (artificial intelligence) aspect. Therefore, Blockchain has the ability to take on transactional work that is today completed by people in Purchasing and Accounts Receivables functions.
Blockchain’s underlying architecture allows for greater data security and traceability, via its ability to link an encrypted time-stamp and verification for every entry. Therefore, supply chains that highly value these aspects of their data and performance will benefit most from Blockchain, such as medical device manufacturing, food processing, and aerospace; these are industries that intrinsically have higher-than-average liabilities and are highly regulated.
In less regulated industries, the opportunity of Blockchain within supply chains is mainly one of productivity improvements. In ALL cases, the transmission formats and executable signals need to be set up amongst entities within the Supply Chain, as with any complex data transmission, even EDI.
Among the current providers, AWS (Amazon Web Services) offers Blockchain services, as does Oracle, with the release of a suite of Blockchain applications. These companies offer the backend operational storage for Blockchain solutions BUT they don’t offer an out-of-box approach for Supply Chains to integrate their transactions. That kind of integration would require the rollout of all new signals across the entities in a supply chain, i.e. a large-scale IT project for the benefit of increased security and transaction traceability.
EDI standards and the ‘network effect’ of deploying those standards took more than 13 years to get rolling (1968-1981), and Blockchain is no different. An ISO Technical Committee 307 is currently working on global standards for Supply Chain approaches. With the rise of globalization and international trade since 1981 (and the potential profits to be made from it by software companies), we can expect Blockchain to take less time than EDI.
Despite what you may read, IoT and Blockchain can be considered separate, but complementary, technology trends. One helps you understand your system and one helps you store the data that helps you understand your system. Without an IoT sensor or input mechanism set up to a Blockchain database backend, all the same process data input issues exist that exist in supply chains today.
As with any new technology, a company should ask themselves ‘what problem are we trying to solve?’. Are there major gaps today regarding a lack of data, or the integrity of data, or the way data is used within the company? Do not assume Blockchain is a panacea for resolving your supply chain communication and data issues.
In many global supply chains, the supply chain’s problem is a lack of data sufficient to make routine or critical decisions and/or data entry issues that derive from the use of unsophisticated suppliers in areas like Vietnam or China. In these cases, Blockchain won’t solve their problems.
There are no benefits for a single company in a supply chain network to change unless the other trading partners follow. Therefore, any scale-based benefits of Blockchain require a network-effect deployment. Like other supply chain IT projects, these can be large, complex, difficult, or costly. However, it is also possible to look at pilots that could benefit certain business risks, e.g. Toxic Substance tracking for a limited number of BOM items, compliance data for one country’s imports, or for food traceability.
Standards are coming though, to support a smoother network deployment. They’ll arrive either through governmental entity orgs like ISO, or through the deployment of major supply chain influencers like Walmart, Nestle, and Unilever.
Therefore, you and your company have a choice with any near term deployment of Blockchain within their supply chains: You can 1) develop and deploy you own Blockchain templates (and then likely have them replaced by standards in a few years) 2) take a seat at the table and work to create global standards or 3) wait for standards and wait to deploy any Blockchain approach with a network effect already taking hold.
In summary, I encourage companies to look closely at their current usage of EDI and transaction processes within their supply chains, to identify the scope and breadth of its use. A focus on that incremental gain could yield greater benefits with less risk and effort than chasing the shiny newness of Blockchain.
In summary, Blockchain is still in its infancy and the investments needed to make it scale are prohibitive to all but the largest companies and the global work on standards will make it more feasible to implement in the future, rather than risking a first-mover advantage. I encourage companies to look closely at their current usage of EDI and transaction processes within their supply chains, to identify the scope and breadth of its use. A focus on that incremental gain could yield greater benefits with less risk and effort than chasing the shiny newness of Blockchain.
About the Author
Adam Gittler: Adam has over 25 years of experience in Global Supply Chains, Operational Excellence and Regulatory Affairs. Adam is also an adjunct professor at Portland State University’s School of Business in their Graduate Supply Chain Management program. Adam has a BS in Industrial Engineering, MS in Production Management and MBA from Cal-Berkeley.
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