Wednesday, April 8, 2020

Non-Repudiation in Supply Chain Management - Use Case for Blockchain

Supply chains are under strain at the moment -- the fragility of current systems is laid bare during this pandemic crisis. Blockchain, simplified, is a data structure that maintains transactional records and while ensuring security. This decentralized approach ensures — a chain of records which are controlled by no single authority. This enables digital information to be distributed, but not copied, so each individual piece of data can only have one owner. Blockchain is the underlying technology of digital currencies. But it has a multiplicity of uses.

Many call blockchain a “digital ledger” stored in a distributed network. Here is one way to think about how Blockchain works:

“Picture a spreadsheet that is duplicated thousands of times across a network of computers. Then imagine that this network is designed to regularly update this spreadsheet…”

This information is constantly reconciled into a database, which is stored in multiple locations and updated instantly. That means the records are public and verifiable. Since there’s no central location, it harder to disrupt as the data exists simultaneously in millions of places.

In the service of supply chain management, manifests could be secured with this approach. Modern supply chains are complex. A business’ supply chain consists of all the links to creating and distributing it products. Depending on the goods, a supply chain can be extraordinarily complex, spanning numerous stages with multiple geographical (often global) locations. The documentation can consist of a multitude of invoices, statements, payments, bills of lading, etc., and have several individuals and entities involved. The timeframe, even with just-in-time production, can require months for the process to go from raw materials, component construction and assembly, through packaging and distribution.

The idea of using blockchain to streamline workflows for all parties, no matter the size of the business network, is not new. In government procurement, for example, shared infrastructure provides auditors with greater visibility into participants’ activities along the value chain.

The challenges in many supply chains include lack of transparency because data consolidation clouds repudiation. There's a lack of real-time issue resolution resulting in ineffective supply chain risk management. Shocks (as we have seen) result in sudden demand changes -- a "bullwhip" effect that reverberates throughout the vendor ecosystem.

A use case might look like this: instead of having a central intermediary, use blockchain in an Enterprise Resource Planning (ERP) solution to synchronize data and transactions across the network. Each participant verifies the work and calculations of others. This relives the enormous amount of redundancy and crosschecking found in many current systems.

With the right implementation strategy, blockchain has the potential to drive efficiencies, lower costs, and to enhance consumer experience through transparency and traceability.

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