Perspective

Integrating Supply Chain Control Towers and Blockchain

September 6, 2018

Intergrating Supply Chain Picture this: you have a dispersed supply chain network with multiple transportation, manufacturing, and warehousing providers. All of them must work in concert to keep the supply chain running smoothly. Miscommunication can result in excess inventory, misdirected orders, or unfulfilled orders. How can you manage these players in an environment where speed and visibility are essential? 

The solution to this problem has been supply chain control towers, a combination of systems and processes that collect and share data from providers and automate changes in the shipping and manufacturing of orders. Building and maintaining a control tower requires managing multiple interfaces with provider systems and relies on accurate, timely data. Until now, managing interfaces and data validation has been the biggest hurdle to building an effective control tower supply chain management system. 

Emerging blockchain technology can greatly improve control tower operations. Blockchain is a distributed ledger system that enables every member of a business network to possess a mirrored copy of a ledger. As new transactions are added to the ledger, they are simultaneously mirrored to the entire network. 

For a control tower system, this means that the underlying transaction data are consistent and widely visible. The networked blockchain affords the control tower system total visibility of transactions as they happen. In addition, any changes—new orders, demand data, new production schedules, etc.—are recorded once and instantly transparent to supply chain partners according to their authorizations. No longer does the control tower manager need to worry about maintaining multiple system interfaces or data formats, or receiving data improperly. With a blockchain foundation, the control tower can run with confidence that all players in the network see and operate on the same information.  

But it’s not that easy; the blockchain needs standards to ensure that all data are readable, in the right format, and useable by everyone on the network. Obtaining agreement on the details can be challenging. For example, when trying to work through simple details and requirements regarding weight measurements, you can easily gather people in a room to standardize that weight shipping is measured is in tons. But is that metric tons? Imperial tons? Gross weight? Net weight? Estimated weight? Do we include two decimal places or four, and do we use a comma or a period to mark the decimal place?  

Some commercial Blockchain databases have implemented a capability called “smart contracts” or “on-chain computer code.” These pieces of code watch blockchain transactions and react to the overall changing state of the ledger, such as when an item is unpackaged at its destination. Recording that transaction triggers an automatic action, like a payment or another transaction, and could increase the velocity of financial flows in the supply chain and build trust in partnerships. This unique blockchain functionality could also enable a control tower system to execute timely financial and logistics transactions through more reliable contracting and validation data.  

As with many emerging and evolving technologies, multiple providers offer blockchain solutions, but they are not necessarily compatible with each other. Selecting the right platform is essential to ensuring your system will be supported in the future. Control tower managers need to evaluate the pros and cons of using an open blockchain platform, such as Ethereum, or a ”permissioned” Hyperledger platform, implemented for the IBM and Maersk TradeLens joint collaboration. In addition, all partners in the supply chain must agree to the same blockchain platform, and the proliferation of providers makes this difficult. As the technology matures, we expect clear leaders to emerge, allowing for more standardization in blockchain application. 

As a distributed data ledger, blockchain tends to be inefficient for storing large data sets. For this reason, a control tower implementation would likely rely on a partner’s core systems for maintaining most of the supply chain data and using the blockchain to share major transaction data. The information to be shared via the blockchain will depend on the needs of the control tower as well as the capabilities of the underlying system. 

Supply chain control towers have proven their value in delivering efficient and transparent operations. Including a blockchain foundation in a control tower can provide faster and more reliable data as well as assurance that everyone in the supply chain is operating off the same information. The combination of these technologies can create a highly visible, highly reliable, and highly agile supply chain network. 

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