Know the promise of new technologies for supply chains

Roger OakdenGlobal Logistics, Logistics Management, Procurement, Supply Chains & Supply Networks

Systems architecture

Perceptions and actual situations.

If you were asked whether investment in Information and Communications technologies (ICT) was good for your country’s economy, it is likely the answer would be yes; but would you be correct?

A recent evaluation of 59 econometric studies of developed and developing countries, by academics from Deakin University in Melbourne, identified that although ICT was in almost all aspects of our lives, economic growth is not demonstrably higher.

For developed countries, they found that computing had a moderate impact on growth. Mobile and landline telephone technologies had a small effect and the internet has had no effect. Where ICT innovations do lead to an increase in productivity, it was found to be often a one-off boost, rather than an ongoing annual increase.

For developing countries, benefits were identified from landline and mobile phone technologies but not at all from computing. Instead, investments in running water, electricity and primary education for girls, have bigger payoffs for the economies.

The academics considered that the time it takes for ICT investment to generate economic growth appears to be longer than expected. But the lure of new technologies is strong. An illustration was a recent survey of Australian executives, which identified they are more likely than their global counterparts to prioritise adopting new technology, rather than improving productivity. Logistics Services executives ranked high the use of autonomous technologies for future change.

An autonomous technology that is receiving much publicity is in vehicles; but, perceptions can get ahead of reality. A recent survey by the Euro NCAP (the vehicle safety authority) of 1500 respondents, showed that 70 percent believe “it is already possible to purchase a vehicle that can drive itself”.  But, the Authority commented, “no recently offered vehicle can avoid a crash without driver intervention”. For example, when another vehicle ‘cuts in’ to a driving lane or a leading vehicle in a lane quickly avoids a stationery obstacle. They also stated that “unfortunately, automotive companies are making or inferring exaggerated claims to sell vehicles”.

Defining supply chain applications

There is also media space given to the topic of using Blockchain technology to connect multiple parties in supply chains and so smooth the movement of items. But, this concept is not well defined. For example, the term ‘visibility’ is often used, but not defined, especially when considering interoperability and scaleability of applications using Blockchain.

Interoperability is the capability of applications supplied by different software suppliers to accept, reformat and use data supplied from other applications. Although no ‘solution’ provider can currently satisfy all requirements of a supply network, in a competitive market the standardisation of architecture for applications used in supply chains would devalue individual applications. It is therefore not in the commercial interests of software suppliers to engage in the development of standards for interoperability.

This situation applies in the current approaches to Blockchain, which operate differently. While powerful retailers and brand companies may dictate the use of a specific Blockchain implementation, their suppliers could be forced to operate with multiple implementations of Blockchain, to satisfy each customer.

Scaleability includes response times – as more users interact, an application can slow, making it difficult to scale-up. Using Blockchain for the ‘many to many’ situation of supply networks, is a challenge, where the data added to a blockchain must be validated. The current architecture has the process taking too long and so could limit scale in implementations.

Business relationships in supply chains

Many to Many business relationships

Lora Cecere at Supply Chain Insights states that “I know of no true many-to-many network in the supply chain space.  In contrast, many-to-many networks exist in banking”. If banks already have the ICT strength to operate within the structure of supply chains, then why should they adopt Blockchain? It is of interest that this month, seven international banks have joined a ‘Network for Digital Trade’, to link buyers, banks and suppliers for trade financing; to be operational by Q3 2019. More banks are negotiating to join and large corporations have been approached.

The system will be open architecture with standardised connectivity, based on the SWIFT inter-bank messaging system (encrypted, secure and fast). There is an existing operating model, based on authoritative identifiers of account and routing numbers, with governance between banks concerning the transfer of funds. Banks will have access to trusted trade information, to mitigates the risk of double financing and fraudulent trade information.

One to Many business relationships

In this scenario, an organisation tracks its operations and provides the data or information to many parties.

An example is the Government of Rwanda, which has contracted with the UK software developer Circulor to track the mining and supply of tantalum, used in the production of capacitors for laptops and mobile phones. The application will track the mineral from mines in Rwanda to customers, helping companies comply with the internationally mandated efforts to eradicate sources of funding for conflict minerals.

To record provenance of the mineral, the Circulor Protocol requires linked Smart Contracts to perform tests and proofs on the data for a batch as it is tracked along its supply chain. This includes the use of GPS tracking, facial recognition and reconciling batch weights of sealed bags in and out of each process step, to reduce the risk that batches of conflict zone minerals are mixed into ‘clean’ batches.

The focus for most blockchain deployments that Supply Chain Insights tracks are: lineage (provenance), transport (electronic Bill of Lading, including standards) and warranty/returns (reverse logistics). Each of these is based on a One to Many business relationship. In turn, the ‘Network for Digital Trade’, owned by the international banks, could access data and information from organisations that manage their One to Many business relationships. Will this be the future for blockchain?

A recent Deloitte survey of supply chain executives had less than four percent of respondents with little to no knowledge of Blockchain technology. With this knowledge, supply chain professionals can question the circumstances where Blockchain may be useful for their business.

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About the Author

Roger Oakden

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With my background as a practitioner, consultant and educator, I am uniquely qualified to provide practical learning in supply chains and logistics. I have co-authored a book on these subjects, published by McGraw-Hill. As the program Manager at RMIT University in Melbourne, Australia, I developed and presented the largest supply chain post-graduate program in the Asia Pacific region, with centres in Melbourne, Singapore and Hong Kong. Read More...