Energy Savior Blockchain Set To Shake Up Utilities

James McClelland

Some commentators refer to them as an oncoming superstorm for the utilities industry. Others say they represent an impending revolution in the business.

The combination of microgrid energy production and blockchain distribution is powerful. The two technologies can work together to decrease prices for consumers. They also can improve energy generation during crises.

But their partnership poses global disruption for longtime utility providers. Understanding these tools will help in preparing for challenges and potential benefits.

Understanding microgrids

Utility grids are centralized power systems. The largest ones create, store, and distribute electrical energy to millions of customers. Some serve multiple nations on different continents.

A microgrid is a much smaller system for generating and storing electrical power. Islands, rural communities, urban neighborhoods, and individual homes may run on microgrid power. Some use renewable resources such as solar, wind, and water power to generate electricity.

A microgrid may be self-sufficient. Or it may connect to a large utility grid to purchase electricity or sell excess that the microgrid produces. One situation when a microgrid may choose to disconnect is during a storm that causes outages for the big grid. Another is when the microgrid wants to cut energy costs by avoiding periods of peak demand on the big grid.

Another key feature of microgrids is that they make it possible to purchase and sell tiny amounts of electricity, such as a single kilowatt hour.

Unchaining blockchain from Bitcoin

Blockchain is a type of database that distributes and gathers transaction information from all participants. It has no central point of control. Each participant can record a block of data connected to blocks of information from other contributors in a read-only chain.

The anonymous inventors of blockchain created it to trade electronic currency called Bitcoin. The encrypted, read-only function secures the entries against change. Blockchain information is also protected by its transparency. Each participant can view all the blocks.

Many types of businesses are experimenting with blockchain ledgers. Recording and sharing data about purchases, sales, and trades of energy are among the main uses of blockchains for utilities and microgrid participants.

To encourage the use of solar energy, the SolarCoin Foundation of Connecticut created a virtual currency called SolarCoins. Network members who produce solar power earn one “coin” worth about 24 cents for every megawatt hour of solar energy they produce. In time, they will be able to use the coins to purchase goods as well as energy from other prosumers (producers and consumers of microgrid energy).

The foundation estimates it will have about 1 million participants by late 2019.

Modernizing the power grid together

In March 2017, Navigant Research published a post about microgrids and blockchain, in which principal research analyst Stuart Ravens and coauthor Richard Shandross explained trading energy peer-to-peer (P2P) via blockchain. The P2P movement is based on the idea that power generation will eventually decentralize with utility companies taking a smaller role in production.

Here is the scenario the Navigant authors predict: Prosumers sell power to and purchase it from each other. If you own enough land or buildings fitted with solar panels or windmills, you may become a mini-utility. The old utilities morph into distribution network operators. Blockchain operators become supply companies. And consumers, the authors say, “pay their current retail tariff” or less due to local sourcing of power.

The article noted that blockchains may: (1) maintain data logs about production and transactions, (2) handle payment by cryptocurrency, (3) store unchangeable performance data, (4) and serve as a ledger for trades and purchases.

Ravens also discussed prosumerism in an August 2017 SAP Game-Changers talk show about the impact of blockchain and utilities. Another guest was Henry Bailey, global vice president of the SAP utilities industry business unit.

Bailey said that the Internet of Things (IoT) allows objects, such as power poles, to connect and share information rapidly. The IoT is a network of digital objects – actual and virtual – connected and sharing information with each other through the Internet. During the talk, Ravens added that blockchain secures the energy information it carries.

The importance of this role in securing information became clear during the talk when Bailey noted that an Australian experiment in which power poles contain IoT taps allowing the poles to “talk to one another” and to managers at remote locations. This is helpful when a problem arises, such as an outback fire requiring power pole repair.

Also, Ravens reported that adoption of solar power is occurring rapidly in Australia and soon will “account for about 90% of residential energy consumption and meet about 50% of the country’s needs.” So, lots of other microgrid equipment will be sharing information through the IoT.

Learning lessons from disasters

Speaking of utility power poles, in October 2017 numerous stories about Northern California’s massive wildfires indicated that winds felled poles, and this may have been the leading cause of the fires. Perhaps IoT connection of the poles would have more rapidly alerted authorities to locations of downed lines.

Before the wildfires, other disasters attracting world attention included destruction on Caribbean islands by hurricanes Irma and Maria. Following the storms, Dr. Jemma Green wrote in Forbes about the technology’s potential for speeding emergency access to energy during outages.

Green specializes in studying how blockchain disrupts enterprise. She noted that one of the few pieces of “good news” concerning the storms is that they have shifted interest toward renewable microgrid systems and new uses of blockchain to support them. She noted the survival of Sir Richard Branson’s microgrid on Necker Island “showing how things could be” with investment. She concluded that blockchain’s transparency makes it “easier to sell microgrid to investors.”

So, blockchain will cause disruption, but it will ride to the rescue of energy delivery as well.

Learn how to innovate at scale by incorporating individual innovations back to the core business to drive tangible business value by reading Accelerating Digital Transformation in Utilities.


Why Blockchain Is Crucial For FP&A: Part 2

Brian Kalish

Part 18 in the Dynamic Planning Series

In my last blog, I described blockchain in some detail. Now I want to dive a little deeper and expand on the potential value that blockchain could hold for the FP&A profession.

Blockchain has the potential to streamline financial processes, such as contract enforcement, by integrating delivery and payment into the contract itself. Blockchain can potentially increase IT security, because of the unprecedented protection it offers against fraud and hacking. Blockchain will also potentially improve transparency by accessing accurate transaction data from across your company’s value chain.

It would be fair to describe the current state of blockchain uptake as exploratory. Organizations are researching, assessing the potential use and value, and having discussions with the executive team.

A distributed database with cryptographic security

Blockchain has the power to challenge many of the accepted norms of global trade, finance, and supply chain management, because it reinvents the basic building block of commerce, the ledger, for a digital, connected age.

A blockchain is a digital ledger – a distributed database that can be shared across a network of computers based in different sites and geographies. An identical copy of the ledger is held by all people participating in a blockchain network. Any changes to the ledger are reflected in just minutes or seconds, thus providing all involved with real-time information and the capacity to track trends.

The security of the information in the ledger is protected cryptographically, with the participants in the network agreeing on who can perform the appropriate functions within the ledger. For blockchain, its attraction is more than the algorithmic technologies that underpin it.

This technology makes it possible to transform the ability of the ledger to record, enable, and secure a huge amount of transactions. It could be used in multiple sectors, from financial services to tax collection in the public sector. In the future, FP&A may be able to leverage blockchain to increase IT security, manage extended value chains, and streamline contract enforcement.

Blockchains are considered highly tamper-proof, providing unprecedented protection from fraud, hacking, and unauthorized use. Instead of having to reconcile the internal system of record with information from suppliers and partners, FP&A will be able to pull data from multiple blockchains to create their system of record.

A programmable ledger that contains logic

A smart-contract feature means that the delivery and payment relating to the transaction can be integrated into the contract itself. With blockchains, the ledger itself is programmable and contains logic, freeing up human resources and capital to work on higher-value objectives. For example, there can be a rule that automates a payment upon the completion of a service.

Smart contracts would automate this process, which today involves a lot of manual steps and paperwork. This will work most of the time, where there aren’t disputes. What has yet to be designed is a mechanism for handling disputes in smart contracts. This topic will emerge as an important area of blockchain research in the future.

Ultimately, there will be hybrid contracts that blend the automation of smart contracts with the provisions for dispute resolution that exist in traditional agreements.

While blockchain technology is quite new, it is likely to play an important role in FP&A in the coming years. FP&A professionals should be anticipating how they are going to build the relevant competencies and skill sets.

FP&A professionals also need to start discussing the future of their system of record, given that organizations could move from working with a single, monolithic system of record inside the enterprise to working with many different systems.

We will be addressing these issues and more at the upcoming 2018 FP&A roundtables and conferences we are hosting in St. Louis, Charlotte, Atlanta, San Diego, Las Vegas, London, Boston, Minneapolis, Dallas-Forth Worth, San Francisco, Hong Kong, Jeddah, and many other locations around the world.

For more on this topic, read the two-part “Blockchain and the CFO” series and “When Blockchain Fulfills CFOs’ Paperless Vision.”

Follow SAP Finance online: @SAPFinance (Twitter) | LinkedIn | Facebook | YouTube


Brian Kalish

About Brian Kalish

Brian Kalish is founder and principal at Kalish Consulting. As a public speaker and writer addressing many of the most topical issues facing treasury and FP&A professionals today, he is passionately committed to building and connecting the global FP&A community. He hosts FP&A Roundtable meetings in North America, Europe, Asia, and South America. Brian is former executive director of the global FP&A Practice at AFP. He has over 20 years experience in finance, FP&A, treasury, and investor relations. Before joining AFP, he held a number of treasury and finance positions with the FHLB, Washington Mutual/JP Morgan, NRUCFC, Fifth Third Bank, and Fannie Mae. Brian attended Georgia Tech in Atlanta, GA for his undergraduate studies and the Pamplin College of Business at Virginia Tech for his graduate work. In 2014, Brian was awarded the Global Certified Corporate FP&A Professional designation.

Digital Transformation Drives Convergence Of Platforms And Standards

Stefan Guertzgen

In mid-February, I attended the ARC Forum in Orlando, Fla. There was a strong emphasis on digital transformation as well as platforms and standards supporting it.

Within the digital transformation, a variety of platforms are emerging, such as Infrastructure-as-a-Service, IoT edge, cognitive computing, and cloud application platforms. This makes it even more important to integrate these platforms and establish a semantic layer across them to ensure they can be orchestrated towards company strategies and business goals.

To help companies in today’s world digitally transform their business, here are some trends and observations:

  • IT, operations, and engineering departments need to ensure interoperability between and across their domains. Historically, these three entities have all operated in their own silos under different standards set by different organizations with different goals.
  • More and more associations and companies are starting to collaborate and converge on open standards that support end-to-end processes, cycles, and value chains. For example, Namur Open Architecture, ZVEI Modul Type Package, and the Open Process Automation Group have a memorandum of understanding in the works to promote common standards and frameworks. Besides integration and simplification, avoidance of vendor lock-in is another key driver behind this.
  • Cloud platforms are starting to gravitate around functional needs with an underlying common IT technology (enterprise system of record platform, enterprise innovation platform, intelligent supply chain platform, operations and maintenance platform, asset network platform, product design platform, and so on).
  • Seamless, bidirectional data and information flow, supported by rules and workflow engines, are indispensable ingredients for turning data and analytics into action. This goal will be supported by an “intelligent and agile core” enhanced by a peripheral layer of microservices that can be easily consumed via APIs (IT landscape of the future).
  • The importance of the “intelligent edge” is increasing. Initially focusing primarily on reducing-data security risks, now operational issues such as analyzing and controlling devices, improving process speed, and reducing latency issues will prompt end users to get a much broader perspective on edge computing. Overall, this is driven by the ongoing need to maximize asset maintenance and production performance. Innovative models are now run on the edge, leveraging inexpensive cloud space for optimization.
  • People and processes are as important as technology for the adoption of digital transformation. In other words, machine learning, IoT, and blockchain don’t excel by themselves. They need to be embedded into industry and business contexts as well as processes. From a hiring perspective, the data engineer is an emerging species, as special skills are needed around data mining, data analysis, data orchestration, and data governance. Such data engineers need to be paired with business and process-domain experts to ensure innovative technologies unfold their true potential.
  • Change management is more important than ever before. Consistent and clear top-to-bottom communication and measuring transformation program progress by a common set of clearly defined KPIs are pivotal to successfully building relationships and trust across all enterprise entities.

What do you think? Please share your thoughts and observations with us.

For more insight on emerging tech, see Future Of Work 2018: 10 Predictions You Can’t Ignore.


About Stefan Guertzgen

Dr. Stefan Guertzgen is the Global Director of Industry Solution Marketing for Chemicals at SAP. He is responsible for driving Industry Thought Leadership, Positioning & Messaging and strategic Portfolio Decisions for Chemicals.

The Blockchain Solution

By Gil Perez, Tom Raftery, Hans Thalbauer, Dan Wellers, and Fawn Fitter

In 2013, several UK supermarket chains discovered that products they were selling as beef were actually made at least partly—and in some cases, entirely—from horsemeat. The resulting uproar led to a series of product recalls, prompted stricter food testing, and spurred the European food industry to take a closer look at how unlabeled or mislabeled ingredients were finding their way into the food chain.

By 2020, a scandal like this will be eminently preventable.

The separation between bovine and equine will become immutable with Internet of Things (IoT) sensors, which will track the provenance and identity of every animal from stall to store, adding the data to a blockchain that anyone can check but no one can alter.

Food processing companies will be able to use that blockchain to confirm and label the contents of their products accordingly—down to the specific farms and animals represented in every individual package. That level of detail may be too much information for shoppers, but they will at least be able to trust that their meatballs come from the appropriate species.

The Spine of Digitalization

Keeping food safer and more traceable is just the beginning, however. Improvements in the supply chain, which have been incremental for decades despite billions of dollars of technology investments, are about to go exponential. Emerging technologies are converging to transform the supply chain from tactical to strategic, from an easily replicable commodity to a new source of competitive differentiation.

You may already be thinking about how to take advantage of blockchain technology, which makes data and transactions immutable, transparent, and verifiable (see “What Is Blockchain and How Does It Work?”). That will be a powerful tool to boost supply chain speed and efficiency—always a worthy goal, but hardly a disruptive one.

However, if you think of blockchain as the spine of digitalization and technologies such as AI, the IoT, 3D printing, autonomous vehicles, and drones as the limbs, you have a powerful supply chain body that can leapfrog ahead of its competition.

What Is Blockchain and How Does It Work?

Here’s why blockchain technology is critical to transforming the supply chain.

Blockchain is essentially a sequential, distributed ledger of transactions that is constantly updated on a global network of computers. The ownership and history of a transaction is embedded in the blockchain at the transaction’s earliest stages and verified at every subsequent stage.

A blockchain network uses vast amounts of computing power to encrypt the ledger as it’s being written. This makes it possible for every computer in the network to verify the transactions safely and transparently. The more organizations that participate in the ledger, the more complex and secure the encryption becomes, making it increasingly tamperproof.

Why does blockchain matter for the supply chain?

  • It enables the safe exchange of value without a central verifying partner, which makes transactions faster and less expensive.
  • It dramatically simplifies recordkeeping by establishing a single, authoritative view of the truth across all parties.
  • It builds a secure, immutable history and chain of custody as different parties handle the items being shipped, and it updates the relevant documentation.
  • By doing these things, blockchain allows companies to create smart contracts based on programmable business logic, which can execute themselves autonomously and thereby save time and money by reducing friction and intermediaries.

Hints of the Future

In the mid-1990s, when the World Wide Web was in its infancy, we had no idea that the internet would become so large and pervasive, nor that we’d find a way to carry it all in our pockets on small slabs of glass.

But we could tell that it had vast potential.

Today, with the combination of emerging technologies that promise to turbocharge digital transformation, we’re just beginning to see how we might turn the supply chain into a source of competitive advantage (see “What’s the Magic Combination?”).

What’s the Magic Combination?

Those who focus on blockchain in isolation will miss out on a much bigger supply chain opportunity.

Many experts believe emerging technologies will work with blockchain to digitalize the supply chain and create new business models:

  • Blockchain will provide the foundation of automated trust for all parties in the supply chain.
  • The IoT will link objects—from tiny devices to large machines—and generate data about status, locations, and transactions that will be recorded on the blockchain.
  • 3D printing will extend the supply chain to the customer’s doorstep with hyperlocal manufacturing of parts and products with IoT sensors built into the items and/or their packaging. Every manufactured object will be smart, connected, and able to communicate so that it can be tracked and traced as needed.
  • Big Data management tools will process all the information streaming in around the clock from IoT sensors.
  • AI and machine learning will analyze this enormous amount of data to reveal patterns and enable true predictability in every area of the supply chain.

Combining these technologies with powerful analytics tools to predict trends will make lack of visibility into the supply chain a thing of the past. Organizations will be able to examine a single machine across its entire lifecycle and identify areas where they can improve performance and increase return on investment. They’ll be able to follow and monitor every component of a product, from design through delivery and service. They’ll be able to trigger and track automated actions between and among partners and customers to provide customized transactions in real time based on real data.

After decades of talk about markets of one, companies will finally have the power to create them—at scale and profitably.

Amazon, for example, is becoming as much a logistics company as a retailer. Its ordering and delivery systems are so streamlined that its customers can launch and complete a same-day transaction with a push of a single IP-enabled button or a word to its ever-attentive AI device, Alexa. And this level of experimentation and innovation is bubbling up across industries.

Consider manufacturing, where the IoT is transforming automation inside already highly automated factories. Machine-to-machine communication is enabling robots to set up, provision, and unload equipment quickly and accurately with minimal human intervention. Meanwhile, sensors across the factory floor are already capable of gathering such information as how often each machine needs maintenance or how much raw material to order given current production trends.

Once they harvest enough data, businesses will be able to feed it through machine learning algorithms to identify trends that forecast future outcomes. At that point, the supply chain will start to become both automated and predictive. We’ll begin to see business models that include proactively scheduling maintenance, replacing parts just before they’re likely to break, and automatically ordering materials and initiating customer shipments.

Italian train operator Trenitalia, for example, has put IoT sensors on its locomotives and passenger cars and is using analytics and in-memory computing to gauge the health of its trains in real time, according to an article in Computer Weekly. “It is now possible to affordably collect huge amounts of data from hundreds of sensors in a single train, analyse that data in real time and detect problems before they actually happen,” Trenitalia’s CIO Danilo Gismondi told Computer Weekly.

Blockchain allows all the critical steps of the supply chain to go electronic and become irrefutably verifiable by all the critical parties within minutes: the seller and buyer, banks, logistics carriers, and import and export officials.

The project, which is scheduled to be completed in 2018, will change Trenitalia’s business model, allowing it to schedule more trips and make each one more profitable. The railway company will be able to better plan parts inventories and determine which lines are consistently performing poorly and need upgrades. The new system will save €100 million a year, according to ARC Advisory Group.

New business models continue to evolve as 3D printers become more sophisticated and affordable, making it possible to move the end of the supply chain closer to the customer. Companies can design parts and products in materials ranging from carbon fiber to chocolate and then print those items in their warehouse, at a conveniently located third-party vendor, or even on the client’s premises.

In addition to minimizing their shipping expenses and reducing fulfillment time, companies will be able to offer more personalized or customized items affordably in small quantities. For example, clothing retailer Ministry of Supply recently installed a 3D printer at its Boston store that enables it to make an article of clothing to a customer’s specifications in under 90 minutes, according to an article in Forbes.

This kind of highly distributed manufacturing has potential across many industries. It could even create a market for secure manufacturing for highly regulated sectors, allowing a manufacturer to transmit encrypted templates to printers in tightly protected locations, for example.

Meanwhile, organizations are investigating ways of using blockchain technology to authenticate, track and trace, automate, and otherwise manage transactions and interactions, both internally and within their vendor and customer networks. The ability to collect data, record it on the blockchain for immediate verification, and make that trustworthy data available for any application delivers indisputable value in any business context. The supply chain will be no exception.

Blockchain Is the Change Driver

The supply chain is configured as we know it today because it’s impossible to create a contract that accounts for every possible contingency. Consider cross-border financial transfers, which are so complex and must meet so many regulations that they require a tremendous number of intermediaries to plug the gaps: lawyers, accountants, customer service reps, warehouse operators, bankers, and more. By reducing that complexity, blockchain technology makes intermediaries less necessary—a transformation that is revolutionary even when measured only in cost savings.

“If you’re selling 100 items a minute, 24 hours a day, reducing the cost of the supply chain by just $1 per item saves you more than $52.5 million a year,” notes Dirk Lonser, SAP go-to-market leader at DXC Technology, an IT services company. “By replacing manual processes and multiple peer-to-peer connections through fax or e-mail with a single medium where everyone can exchange verified information instantaneously, blockchain will boost profit margins exponentially without raising prices or even increasing individual productivity.”

But the potential for blockchain extends far beyond cost cutting and streamlining, says Irfan Khan, CEO of supply chain management consulting and systems integration firm Bristlecone, a Mahindra Group company. It will give companies ways to differentiate.

“Blockchain will let enterprises more accurately trace faulty parts or products from end users back to factories for recalls,” Khan says. “It will streamline supplier onboarding, contracting, and management by creating an integrated platform that the company’s entire network can access in real time. It will give vendors secure, transparent visibility into inventory 24×7. And at a time when counterfeiting is a real concern in multiple industries, it will make it easy for both retailers and customers to check product authenticity.”

Blockchain allows all the critical steps of the supply chain to go electronic and become irrefutably verifiable by all the critical parties within minutes: the seller and buyer, banks, logistics carriers, and import and export officials. Although the key parts of the process remain the same as in today’s analog supply chain, performing them electronically with blockchain technology shortens each stage from hours or days to seconds while eliminating reams of wasteful paperwork. With goods moving that quickly, companies have ample room for designing new business models around manufacturing, service, and delivery.

Challenges on the Path to Adoption

For all this to work, however, the data on the blockchain must be correct from the beginning. The pills, produce, or parts on the delivery truck need to be the same as the items listed on the manifest at the loading dock. Every use case assumes that the data is accurate—and that will only happen when everything that’s manufactured is smart, connected, and able to self-verify automatically with the help of machine learning tuned to detect errors and potential fraud.

Companies are already seeing the possibilities of applying this bundle of emerging technologies to the supply chain. IDC projects that by 2021, at least 25% of Forbes Global 2000 (G2000) companies will use blockchain services as a foundation for digital trust at scale; 30% of top global manufacturers and retailers will do so by 2020. IDC also predicts that by 2020, up to 10% of pilot and production blockchain-distributed ledgers will incorporate data from IoT sensors.

Despite IDC’s optimism, though, the biggest barrier to adoption is the early stage level of enterprise use cases, particularly around blockchain. Currently, the sole significant enterprise blockchain production system is the virtual currency Bitcoin, which has unfortunately been tainted by its associations with speculation, dubious financial transactions, and the so-called dark web.

The technology is still in a sufficiently early stage that there’s significant uncertainty about its ability to handle the massive amounts of data a global enterprise supply chain generates daily. Never mind that it’s completely unregulated, with no global standard. There’s also a critical global shortage of experts who can explain emerging technologies like blockchain, the IoT, and machine learning to nontechnology industries and educate organizations in how the technologies can improve their supply chain processes. Finally, there is concern about how blockchain’s complex algorithms gobble computing power—and electricity (see “Blockchain Blackouts”).

Blockchain Blackouts

Blockchain is a power glutton. Can technology mediate the issue?

A major concern today is the enormous carbon footprint of the networks creating and solving the algorithmic problems that keep blockchains secure. Although virtual currency enthusiasts claim the problem is overstated, Michael Reed, head of blockchain technology for Intel, has been widely quoted as saying that the energy demands of blockchains are a significant drain on the world’s electricity resources.

Indeed, Wired magazine has estimated that by July 2019, the Bitcoin network alone will require more energy than the entire United States currently uses and that by February 2020 it will use as much electricity as the entire world does today.

Still, computing power is becoming more energy efficient by the day and sticking with paperwork will become too slow, so experts—Intel’s Reed among them—consider this a solvable problem.

“We don’t know yet what the market will adopt. In a decade, it might be status quo or best practice, or it could be the next Betamax, a great technology for which there was no demand,” Lonser says. “Even highly regulated industries that need greater transparency in the entire supply chain are moving fairly slowly.”

Blockchain will require acceptance by a critical mass of companies, governments, and other organizations before it displaces paper documentation. It’s a chicken-and-egg issue: multiple companies need to adopt these technologies at the same time so they can build a blockchain to exchange information, yet getting multiple companies to do anything simultaneously is a challenge. Some early initiatives are already underway, though:

  • A London-based startup called Everledger is using blockchain and IoT technology to track the provenance, ownership, and lifecycles of valuable assets. The company began by tracking diamonds from mine to jewelry using roughly 200 different characteristics, with a goal of stopping both the demand for and the supply of “conflict diamonds”—diamonds mined in war zones and sold to finance insurgencies. It has since expanded to cover wine, artwork, and other high-value items to prevent fraud and verify authenticity.
  • In September 2017, SAP announced the creation of its SAP Leonardo Blockchain Co-Innovation program, a group of 27 enterprise customers interested in co-innovating around blockchain and creating business buy-in. The diverse group of participants includes management and technology services companies Capgemini and Deloitte, cosmetics company Natura Cosméticos S.A., and Moog Inc., a manufacturer of precision motion control systems.
  • Two of Europe’s largest shipping ports—Rotterdam and Antwerp—are working on blockchain projects to streamline interaction with port customers. The Antwerp terminal authority says eliminating paperwork could cut the costs of container transport by as much as 50%.
  • The Chinese online shopping behemoth Alibaba is experimenting with blockchain to verify the authenticity of food products and catch counterfeits before they endanger people’s health and lives.
  • Technology and transportation executives have teamed up to create the Blockchain in Transport Alliance (BiTA), a forum for developing blockchain standards and education for the freight industry.

It’s likely that the first blockchain-based enterprise supply chain use case will emerge in the next year among companies that see it as an opportunity to bolster their legal compliance and improve business processes. Once that happens, expect others to follow.

Customers Will Expect Change

It’s only a matter of time before the supply chain becomes a competitive driver. The question for today’s enterprises is how to prepare for the shift. Customers are going to expect constant, granular visibility into their transactions and faster, more customized service every step of the way. Organizations will need to be ready to meet those expectations.

If organizations have manual business processes that could never be automated before, now is the time to see if it’s possible. Organizations that have made initial investments in emerging technologies are looking at how their pilot projects are paying off and where they might extend to the supply chain. They are starting to think creatively about how to combine technologies to offer a product, service, or business model not possible before.

A manufacturer will load a self-driving truck with a 3D printer capable of creating a customer’s ordered item en route to delivering it. A vendor will capture the market for a socially responsible product by allowing its customers to track the product’s production and verify that none of its subcontractors use slave labor. And a supermarket chain will win over customers by persuading them that their choice of supermarket is also a choice between being certain of what’s in their food and simply hoping that what’s on the label matches what’s inside.

At that point, a smart supply chain won’t just be a competitive edge. It will become a competitive necessity. D!

About the Authors

Gil Perez is Senior Vice President, Internet of Things and Digital Supply Chain, at SAP.

Tom Raftery is Global Vice President, Futurist, and Internet of Things Evangelist, at SAP.

Hans Thalbauer is Senior Vice President, Internet of Things and Digital Supply Chain, at SAP.

Dan Wellers is Global Lead, Digital Futures, at SAP.

Fawn Fitter is a freelance writer specializing in business and technology.

Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.



The Differences Between Machine Learning And Predictive Analytics

Shaily Kumar

Many people are confused about the specifics of machine learning and predictive analytics. Although they are both centered on efficient data processing, there are many differences.

Machine learning

Machine learning is a method of computational learning underlying most artificial intelligence (AI) applications. In ML, systems or algorithms improve themselves through data experience without relying on explicit programming. ML algorithms are wide-ranging tools capable of carrying out predictions while simultaneously learning from over trillions of observations.

Machine learning is considered a modern-day extension of predictive analytics. Efficient pattern recognition and self-learning are the backbones of ML models, which automatically evolve based on changing patterns in order to enable appropriate actions.

Many companies today depend on machine learning algorithms to better understand their clients and potential revenue opportunities. Hundreds of existing and newly developed machine learning algorithms are applied to derive high-end predictions that guide real-time decisions with less reliance on human intervention.

Business application of machine learning: employee satisfaction

One common, uncomplicated, yet successful business application of machine learning is measuring real-time employee satisfaction.

Machine learning applications can be highly complex, but one that’s both simple and very useful for business is a machine learning algorithm that compares employee satisfaction ratings to salaries. Instead of plotting a predictive satisfaction curve against salary figures for various employees, as predictive analytics would suggest, the algorithm assimilates huge amounts of random training data upon entry, and the prediction results are affected by any added training data to produce real-time accuracy and more helpful predictions.

This machine learning algorithm employs self-learning and automated recalibration in response to pattern changes in the training data, making machine learning more reliable for real-time predictions than other AI concepts. Repeatedly increasing or updating the bulk of training data guarantees better predictions.

Machine learning can also be implemented in image classification and facial recognition with deep learning and neural network techniques.

Predictive analytics

Predictive analytics can be defined as the procedure of condensing huge volumes of data into information that humans can understand and use. Basic descriptive analytic techniques include averages and counts. Descriptive analytics based on obtaining information from past events has evolved into predictive analytics, which attempts to predict the future based on historical data.

This concept applies complex techniques of classical statistics, like regression and decision trees, to provide credible answers to queries such as: ‘’How exactly will my sales be influenced by a 10% increase in advertising expenditure?’’ This leads to simulations and “what-if” analyses for users to learn more.

All predictive analytics applications involve three fundamental components:

  • Data: The effectiveness of every predictive model strongly depends on the quality of the historical data it processes.
  • Statistical modeling: Includes the various statistical techniques ranging from basic to complex functions used for the derivation of meaning, insight, and inference. Regression is the most commonly used statistical technique.
  • Assumptions: The conclusions drawn from collected and analyzed data usually assume the future will follow a pattern related to the past.

Data analysis is crucial for any business en route to success, and predictive analytics can be applied in numerous ways to enhance business productivity. These include things like marketing campaign optimization, risk assessment, market analysis, and fraud detection.

Business application of predictive analytics: marketing campaign optimization

In the past, valuable marketing campaign resources were wasted by businesses using instincts alone to try to capture market niches. Today, many predictive analytic strategies help businesses identify, engage, and secure suitable markets for their services and products, driving greater efficiency into marketing campaigns.

A clear application is using visitors’ search history and usage patterns on e-commerce websites to make product recommendations. Sites like Amazon increase their chance of sales by recommending products based on specific consumer interests. Predictive analytics now plays a vital role in the marketing operations of real estate, insurance, retail, and almost every other sector.

How machine learning and predictive analytics are related

While businesses must understand the differences between machine learning and predictive analytics, it’s just as important to know how they are related. Basically, machine learning is a predictive analytics branch. Despite having similar aims and processes, there are two main differences between them:

  • Machine learning works out predictions and recalibrates models in real-time automatically after design. Meanwhile, predictive analytics works strictly on “cause” data and must be refreshed with “change” data.
  • Unlike machine learning, predictive analytics still relies on human experts to work out and test the associations between cause and outcome.

Explore machine learning applications and AI software with SAP Leonardo.


Shaily Kumar

About Shaily Kumar

Shailendra has been on a quest to help organisations make money out of data and has generated an incremental value of over one billion dollars through analytics and cognitive processes. With a global experience of more than two decades, Shailendra has worked with a myriad of Corporations, Consulting Services and Software Companies in various industries like Retail, Telecommunications, Financial Services and Travel - to help them realise incremental value hidden in zettabytes of data. He has published multiple articles in international journals about Analytics and Cognitive Solutions; and recently published “Making Money out of Data” which showcases five business stories from various industries on how successful companies make millions of dollars in incremental value using analytics. Prior to joining SAP, Shailendra was Partner / Analytics & Cognitive Leader, Asia at IBM where he drove the cognitive business across Asia. Before joining IBM, he was the Managing Director and Analytics Lead at Accenture delivering value to its clients across Australia and New Zealand. Coming from the industry, Shailendra held key Executive positions driving analytics at Woolworths and Coles in the past.