Before founding my current company, a large part of my career was a long-term romance with supply chain. It all started in the mid- to late-1990s when a major client of the IT consulting firm I was working for was planning to start a multi-year supply chain program. I was sent to the client, which happened to be Australia’s largest building materials company, to take on the technical lead role to help design, build and automate their entire supply chain across quarry, cement, concrete, asphalt and transport.
That was my first major involvement in a large supply chain business, and because of it, my career evolved into enterprise architecture, particularly in ERP (enterprise resource planning). Although I have had several short stints in financial and other sectors, I always found my way back to heavy supply chain industries.
More than two years ago, I co-founded ShelterZoom and threw myself into the deep end of blockchain. That’s when I realized that many of my previous business challenges can be addressed by a very different approach: distributed ledger technology (DLT).
There are many impactful blockchain business use cases for industries like real estate, legal, government and financial services. While all of these are in various stages of maturity (with most still early stage), I am keeping a close eye on supply chain in particular — and I think anyone with more than a passing interest in blockchain should as well.
It All Starts With Procurement
Supply chain is driven in large part by the procurement process. Moving any product or service through a supply chain starts with a procurement contract, which initiates the tendering or bidding process via an RFI, RFP or other type of formal request. This process is often long, inefficient and frustrating. Talk about a great use case for blockchain!
Once the procurement contract is executed, the supply chain process kicks into gear, and your materials (or whatever you’ve ordered) begin their journey to your company’s — or third-party vendor’s — door. Everything moves through the process based on the procurement contract. It creates the master framework for everything to execute as intended. If you’re thinking that supply chain procurement is similar to how blockchain smart contracts work, then you are on the right path.
The Obvious And Not-So-Obvious Blockchain Benefits
I mention all of the above about procurement because I think it is the element of supply chain where blockchain can make the biggest impact, especially with bidding, contracts and process automation.
With bidding, there are typically multiple parties involved, and most processes are not transparent to the bidders or the customers. This gets especially tricky with large initiatives, like a coal seam gas JV project I worked on where third-party suppliers from other countries were often part of the mix. I often thought about how great it would be for everyone in the chain to have visibility into the entire process. The sums of money involved can get into the tens or even hundreds of millions, depending on the industry, so knowing where the breakdowns occur can have major financial implications.
Keep An Eye On Cannabis
When people ask me about the immense potential that blockchain has for supply chain, areas like energy, logistics and food supply are typical topics of conversation. But, no matter where we start, these days the conversation almost always ends up at cannabis.
What’s fascinating about the cannabis industry is that it’s just getting started. Unlike just about any other industry, cannabis is still building out its infrastructure and supply chain. So, while it is a bit chaotic from a supply chain standpoint, it’s a new and unique use case for blockchain to add benefits like cost savings and quality assurance via traceability. And, with a projected size of $57 billion by 2027, it’s a big deal for any vendor in the supply chain space (though it is important to note that cannabis is technically still not legal at the federal level).
A Few Stumbling Blocks On The Horizon
While I am solidly in the pro-blockchain camp for supply chain use cases, I realize that there are some potential stumbling blocks to overcome.
Unlike with ERP or other legacy technology platforms, there is not yet a stable of well-known, tried-and-true solutions. This is common for new technologies like blockchain, however. And there are some new platforms on the market now with immense potential.
Another hurdle is that blockchain will likely not replace the entire supply chain management (SCM) process. In my opinion, blockchain will always be part of a hybrid solution to SCM. This leads to integration requirements and a certain amount of complexity to ensure everything runs smoothly. The benefits of having certain SCM processes on blockchain, however, can potentially outweigh the complexity of any integration.
The Time Is Right For Disruption
This supply chain industry is top-heavy from a technology standpoint and, in my opinion, ripe for disruption. Supply chain is also inextricably tied to ERP systems, which are dominated by industry heavyweights like SAP and Oracle. Specific to SCM solutions, SAP is by far the leader. Oracle is a distant second, and then it’s fragmented among dozens of other companies. I was fortunate to be one of the few ERP experts in the field for both SAP and Oracle.
While a smaller competitor could build a blockchain solution for SCM and maybe even make a dent in the industry, nothing of substance is going to change until one of the big players integrates blockchain into their ERP and SCM systems to transform some of their old processes into modern, transparent and efficient processes.
Like supply chain, the blockchain industry is immature compared to most and is still building itself out to tackle the industries and problems most in need of blockchain’s unique benefits and architecture. Will the right company come out with the right product at the right time? Opportunity is knocking.