The Power Of A Blockchain-Enabled Supply Chain

Paul Brody

Part 2 in the 3-part series “Blockchain and the Supply Chain.” 

Through blockchains, companies gain a real-time digital ledger of transactions and movements for all participants in their supply chain network. But don’t let the simplicity of the tool overshadow how transformational it is. The benefits to be gained will save you time, money, and effort on several fronts — and have the potential to redefine how you do business.

Procurement: more visibility and more savings

Companies negotiate procurement discounts based on the total number of purchases they drive. Your business may ask other people to do purchasing on your behalf, but the consequence is that it’s hard to keep track of the volume you drive across subsidiaries, business partners, and everyone else in your supply chain network.

Blockchains make that simple. With a constantly refreshed digital ledger that incorporates data from all your relevant partners, your company can see the total volume regardless of who directed the purchase activity—without each user having to share its operational data with the others.

Without a blockchain, companies hire many people to audit their orders to capture these volume-purchase benefits. Large businesses can have dozens of professionals spending days and nights to audit each one to add up all the gains they’re supposed to receive. (For example, EY assisted a large consumer goods company that had 60 people devoted to this task.) But blockchains do this work without the staff and without any added time, eliminating the extra price-verification process.

Data and analytics: better data, better outcomes

The oldest phrase in computing is “garbage in, garbage out”—and nowhere does that apply more strongly and more expensively than in supply chain management. To compensate for uncertainty in how much product or material is in different locations – how much actual demand there has been in a period of time—companies put in extra inventory.

And while that inventory is often cheaper than a lost sale, it’s far from free. In the technology industry, it is often estimated that keeping $1 of inventory costs 20 cents to 40 cents per year, when you account for both the cost of capital and the rapid depreciation of technology products.

With blockchains, through the ability to track and manage resources at the ecosystem level, the payoff should be much greater accuracy and, from there, better forecasts, and the need for less inventory to maintain the same service level.

Digital contracts and payments

The average U.S. Fortune 100 company has more than 60 days of sales outstanding. That’s how long it takes for companies to get paid after completing a task or delivering a product in the real world. What’s odd about this statistic is that nearly all these companies are interacting with each other in contracts that specify payment upon receipt or, at most, within 30 days.

The gap between contracts and reality comes because payments, though themselves digital, are separated from contact performance by an “analog gap.” That is, work is done and invoices are generated, which are emailed to customers, who, in turn, enter them manually and decide when and how to pay them.

Smart contracts to end costly procure-to-pay gaps

The result is a ridiculous and insanely expensive dance as suppliers politely call and nudge customers to pay, while customers aim to cash in on the float by entering and processing invoices at a snail’s pace and occasionally “losing” them. Blockchains can put an end to that by integrating delivery and payment in digital contracts that flow across enterprises and integrate with logistics partners and banks.

Using smart contracts, where the terms are payable upon receipt, a proof of delivery from a logistics carrier will immediately trigger automatic digital invoicing and payments through the banking system, with no analog gap between customer and supplier. The result has the potential to radically reduce working capital requirements and dramatically simplify finance operations, with a direct impact to the bottom line.

Putting a stop to the rogues

Blockchains give these supply chain networks the chance to create one shared truth without one all-powerful, centralized intermediary. Each participant has a copy of the ledger, and all transactions and movements are part of that ledger. If any participant tries to game the system or perpetrate fraud, that company is manipulating only its ledger and is immediately out of sync with the rest of the ecosystem, a powerful deterrent to bad behavior.

Sounds good, right? So what’s the catch? You may be thinking that the blockchain is yet another “solution” in a long line of others you’ve purchased, and that you’re not ready to rip everything up and start again. The good news: you don’t have to. I’ll discuss how you can seize upon the supply chain of the future in the last article in this series.

Read Part 1 of this series: How Blockchain Revolutionizes Supply Chain Management.

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Paul Brody

About Paul Brody

Paul Brody is global innovation blockchain leader at EY. Paul is responsible for driving EY’s initiatives and investments in blockchain, playing a dual role as global innovation blockchain leader as well the Americas strategy leader for the technology sector. He has extensive experience in the areas of IoT, supply chain, and operations and business strategy.

Blockchain As A Miracle Cure For The $78 Billion Opioid Crisis

Susan Galer

Blockchain technology is relentlessly hawked as the cure-all for everything that ails business and society. Pushing the hype aside for just one moment, the super-secure, distributed ledger could well deliver the global supply chain transparency that will help this country address the opioid crisis.

Every day, more than 90 Americans die after overdosing on opioids. The Centers for Disease Control and Prevention country puts a price tag of $78 billion on the opioid crisis, spanning healthcare, lost productivity, addiction treatment, and criminal justice. To be clear, it’s a difficult, multi-faceted problem. Yet some experts argue blockchain’s promise lies in its ability to take on precisely this kind of complex challenge.

Opening the black box

Of all the industry supply chains, pharmaceuticals is among the most strategic, and there’s no further proof of that than the Drug Supply Chain Security Act (DSCSA). Under this mandate, all drugs delivered to patients must have a traceable technology element—it could be a two-dimensional barcode or something electronic. Regulators would then be able to trace the drugs back to the manufacturer.

It’s easy to see blockchain’s potential fit. It’s ideally suited to open industrial-size black boxes like global supply chains. Pharmaceutical production starts with the raw materials and manufacturers, and extends through suppliers, brand manufacturers and contract manufacturers to distributors, wholesalers, physicians, hospitals and pharmacies, all the way to patients.

Here’s why #blockchain is ideally suited to tackle the #opioid crisis

When it comes to tackling over-prescribing, blockchain could leave today’s databases in the dust. Right now, companies and regulators can manage bits and pieces of the opioid crisis puzzle. But the truth is, if a physician is over-prescribing, others are likely aiding and abetting.

“Once you start tagging drugs with an immutable audit trail, you can do what was impossible before,” said Josh Greenbaum, principal of Enterprise Applications Consulting (EAC). “It’s fairly easy to game a national database of prescriptions, providers, and patients. But making the drugs traceable provides a much more comprehensive view of what each party is doing with the opioids. Blockchain adds the full distribution picture, and could be tremendously valuable in exposing leaks.”

Note to pharma: get a DNA transplant

Of course, there are numerous challenges, notably the dearth of experts who understand the technology, not to mention security.

“Blockchain is very nascent and pharma distribution is old school,” said Greenbaum. “There has to be almost a DNA transplant to make it work well. And, even though blockchain is meant to be secure, it doesn’t mean it’s infallible. You need to make sure it’s truly secure, including at the points of integration between systems. Openness is meant to be the gold standard for commerce in the global economy, but pharma has a tremendous amount of personal identifiable information.”

Blockchain’s immaturity—glaringly obvious in the profusion of disparate, disconnected, non-standardized fabrics and consortia—is another major hurdle. Green sees blockchain in pharma functioning in a more private network. “There won’t be a single blockchain across the industry. You’ll have to reconcile multiple chains so suppliers or contract manufacturers aren’t buried under the technical complexity of monitoring and participating in multiple blockchains.”

Collaborative transparency

Blockchain by itself won’t deter people from misusing drugs. As an auditable, traceable service underlying the pharmaceutical supply chain, blockchain might just provide a trail for investigators to thwart more counterfeiters, and help manufacturers make sure what’s coming out of the factory ends up at the right point of sale to the right patients. There is no single solution to the opioid crisis, but we do have to find some answers. People’s lives depend on it.

This blog was originally posted on SAP Business Trends.

Follow me on TwitterSAP Business Trends, or Facebook. Read all of my Forbes articles here.

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How Blockchain Can Restore Trust In The Wine Industry

Eric Annino

Blockchain is one of those things that everyone talks about but no one (myself included) really understands—like bitcoin or the stock market. I do understand, however, that blockchain is all about trust, and that’s the reason it’s going to revolutionize every industry. It’s also the reason it can revolutionize wine markets.

Fine wine has traditionally been bought and sold based on large measures of trust. A seller offers a bottle for sale, most likely something rare, old, or from an iconic maker; provides a reasonably good story of origin (or provenance) to establish that the wine is authentic and has been stored correctly; and buyers line up to shell out thousands, if not tens of thousands, of dollars.

That has changed in the last decade.

In 2008, Benjamin Wallace’s true crime hit The Billionaire’s Vinegar (soon to be a movie starring Matthew McConaughey) brought to light the story of a German music manager and wine collector who allegedly duped other wealthy collectors into buying counterfeit wine (i.e., wine that has been adulterated in some way, often passed off under a more expensive brand), including several bottles he claimed belonged to Thomas Jefferson.

Wallace’s book became a New York Times bestseller and planted a significant seed of doubt in the minds of collectors everywhere.

Half a decade later, the wine world was again shaken when wine-collector-turned-wine-forger Rudy Kurniawan was sentenced to ten years in prison for defrauding high-end collectors to the tune of at least $20 million. (For the whole story, check out Peter Hellman’s new book In Vino Duplicitas.) In the wake of the “Rudy affair,” auction houses began to withdraw lots of wine of suspicious provenance. Lawsuits followed, and one prominent collector—billionaire Bill Koch, who fell victim to both Rudy and the alleged forger of Wallace’s book, Hardy Rodenstock—even began a crusade against fake wine, hiring a team of experts and spending more than $20 million of his own money to ferret out counterfeiters.

Trust in fine wine markets has never been lower, but blockchain has brought hope.

Meet Everledger, a London-based blockchain technology firm and the first company to secure a wine’s provenance via blockchain. After making its mark fighting counterfeiting in the diamond industry, Everledger made the jump to wine, and has partnered with renowned wine fraud specialist Maureen Downey (who played an important role in the Rudy Kurniawan investigation) to create the Chai Wine Vault.

Using Maureen’s Chai Method, which identifies more than 90 data points on a bottle, along with high-resolution photographs and ownership and storage records, Everledger creates a permanent, digital representation of a bottle on the blockchain. This permanent record acts as a verification point as the bottle changes hands. The blockchain is updated along the way so anyone who buys or sells the bottle can rely on trustworthy provenance.

This level of supply chain security is increasingly vital to every industry. “If you can track and trace diamonds, you can track and trace anything,” says Joe Fox, SAP Ariba’s Senior VP of Business Development and Strategy.

“One of the things blockchain does is facilitate greater visibility and trust. In embedding it across our applications and network, we can enable supply chains that are smarter, faster and more transparent from sourcing all the way through settlement.”

Wine counterfeiting isn’t new—Pliny the Elder lamented the practice in first century Rome—but it’s certainly reaching new heights. Experts, Downey included, have suggested that as much as 20 percent of wine sold globally is fraudulent. An estimated 10,000 “Rudy bottles” are still in circulation, and just last week, police seized 6,000 bottles of counterfeit wine in China.

For wine markets everywhere, blockchain is a timely innovation that underscores the value of trust in any transaction.

For more on blockchain’s potential to impact business processes, see Improve User Experience With Internet Of Things, Blockchain, And Platforms.

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Eric Annino

About Eric Annino

Eric Annino works for Global Corporate Affairs at SAP.

Diving Deep Into Digital Experiences

Kai Goerlich

 

Google Cardboard VR goggles cost US$8
By 2019, immersive solutions
will be adopted in 20% of enterprise businesses
By 2025, the market for immersive hardware and software technology could be $182 billion
In 2017, Lowe’s launched
Holoroom How To VR DIY clinics

From Dipping a Toe to Fully Immersed

The first wave of virtual reality (VR) and augmented reality (AR) is here,

using smartphones, glasses, and goggles to place us in the middle of 360-degree digital environments or overlay digital artifacts on the physical world. Prototypes, pilot projects, and first movers have already emerged:

  • Guiding warehouse pickers, cargo loaders, and truck drivers with AR
  • Overlaying constantly updated blueprints, measurements, and other construction data on building sites in real time with AR
  • Building 3D machine prototypes in VR for virtual testing and maintenance planning
  • Exhibiting new appliances and fixtures in a VR mockup of the customer’s home
  • Teaching medicine with AR tools that overlay diagnostics and instructions on patients’ bodies

A Vast Sea of Possibilities

Immersive technologies leapt forward in spring 2017 with the introduction of three new products:

  • Nvidia’s Project Holodeck, which generates shared photorealistic VR environments
  • A cloud-based platform for industrial AR from Lenovo New Vision AR and Wikitude
  • A workspace and headset from Meta that lets users use their hands to interact with AR artifacts

The Truly Digital Workplace

New immersive experiences won’t simply be new tools for existing tasks. They promise to create entirely new ways of working.

VR avatars that look and sound like their owners will soon be able to meet in realistic virtual meeting spaces without requiring users to leave their desks or even their homes. With enough computing power and a smart-enough AI, we could soon let VR avatars act as our proxies while we’re doing other things—and (theoretically) do it well enough that no one can tell the difference.

We’ll need a way to signal when an avatar is being human driven in real time, when it’s on autopilot, and when it’s owned by a bot.


What Is Immersion?

A completely immersive experience that’s indistinguishable from real life is impossible given the current constraints on power, throughput, and battery life.

To make current digital experiences more convincing, we’ll need interactive sensors in objects and materials, more powerful infrastructure to create realistic images, and smarter interfaces to interpret and interact with data.

When everything around us is intelligent and interactive, every environment could have an AR overlay or VR presence, with use cases ranging from gaming to firefighting.

We could see a backlash touting the superiority of the unmediated physical world—but multisensory immersive experiences that we can navigate in 360-degree space will change what we consider “real.”


Download the executive brief Diving Deep Into Digital Experiences.


Read the full article Swimming in the Immersive Digital Experience.

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Kai Goerlich

About Kai Goerlich

Kai Goerlich is the Chief Futurist at SAP Innovation Center network His specialties include Competitive Intelligence, Market Intelligence, Corporate Foresight, Trends, Futuring and ideation. Share your thoughts with Kai on Twitter @KaiGoe.heif Futu

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Jenny Dearborn: Soft Skills Will Be Essential for Future Careers

Jenny Dearborn

The Japanese culture has always shown a special reverence for its elderly. That’s why, in 1963, the government began a tradition of giving a silver dish, called a sakazuki, to each citizen who reached the age of 100 by Keiro no Hi (Respect for the Elders Day), which is celebrated on the third Monday of each September.

That first year, there were 153 recipients, according to The Japan Times. By 2016, the number had swelled to more than 65,000, and the dishes cost the already cash-strapped government more than US$2 million, Business Insider reports. Despite the country’s continued devotion to its seniors, the article continues, the government felt obliged to downgrade the finish of the dishes to silver plating to save money.

What tends to get lost in discussions about automation taking over jobs and Millennials taking over the workplace is the impact of increased longevity. In the future, people will need to be in the workforce much longer than they are today. Half of the people born in Japan today, for example, are predicted to live to 107, making their ancestors seem fragile, according to Lynda Gratton and Andrew Scott, professors at the London Business School and authors of The 100-Year Life: Living and Working in an Age of Longevity.

The End of the Three-Stage Career

Assuming that advances in healthcare continue, future generations in wealthier societies could be looking at careers lasting 65 or more years, rather than at the roughly 40 years for today’s 70-year-olds, write Gratton and Scott. The three-stage model of employment that dominates the global economy today—education, work, and retirement—will be blown out of the water.

It will be replaced by a new model in which people continually learn new skills and shed old ones. Consider that today’s most in-demand occupations and specialties did not exist 10 years ago, according to The Future of Jobs, a report from the World Economic Forum.

And the pace of change is only going to accelerate. Sixty-five percent of children entering primary school today will ultimately end up working in jobs that don’t yet exist, the report notes.

Our current educational systems are not equipped to cope with this degree of change. For example, roughly half of the subject knowledge acquired during the first year of a four-year technical degree, such as computer science, is outdated by the time students graduate, the report continues.

Skills That Transcend the Job Market

Instead of treating post-secondary education as a jumping-off point for a specific career path, we may see a switch to a shorter school career that focuses more on skills that transcend a constantly shifting job market. Today, some of these skills, such as complex problem solving and critical thinking, are taught mostly in the context of broader disciplines, such as math or the humanities.

Other competencies that will become critically important in the future are currently treated as if they come naturally or over time with maturity or experience. We receive little, if any, formal training, for example, in creativity and innovation, empathy, emotional intelligence, cross-cultural awareness, persuasion, active listening, and acceptance of change. (No wonder the self-help marketplace continues to thrive!)

The three-stage model of employment that dominates the global economy today—education, work, and retirement—will be blown out of the water.

These skills, which today are heaped together under the dismissive “soft” rubric, are going to harden up to become indispensable. They will become more important, thanks to artificial intelligence and machine learning, which will usher in an era of infinite information, rendering the concept of an expert in most of today’s job disciplines a quaint relic. As our ability to know more than those around us decreases, our need to be able to collaborate well (with both humans and machines) will help define our success in the future.

Individuals and organizations alike will have to learn how to become more flexible and ready to give up set-in-stone ideas about how businesses and careers are supposed to operate. Given the rapid advances in knowledge and attendant skills that the future will bring, we must be willing to say, repeatedly, that whatever we’ve learned to that point doesn’t apply anymore.

Careers will become more like life itself: a series of unpredictable, fluid experiences rather than a tightly scripted narrative. We need to think about the way forward and be more willing to accept change at the individual and organizational levels.

Rethink Employee Training

One way that organizations can help employees manage this shift is by rethinking training. Today, overworked and overwhelmed employees devote just 1% of their workweek to learning, according to a study by consultancy Bersin by Deloitte. Meanwhile, top business leaders such as Bill Gates and Nike founder Phil Knight spend about five hours a week reading, thinking, and experimenting, according to an article in Inc. magazine.

If organizations are to avoid high turnover costs in a world where the need for new skills is shifting constantly, they must give employees more time for learning and make training courses more relevant to the future needs of organizations and individuals, not just to their current needs.

The amount of learning required will vary by role. That’s why at SAP we’re creating learning personas for specific roles in the company and determining how many hours will be required for each. We’re also dividing up training hours into distinct topics:

  • Law: 10%. This is training required by law, such as training to prevent sexual harassment in the workplace.

  • Company: 20%. Company training includes internal policies and systems.

  • Business: 30%. Employees learn skills required for their current roles in their business units.

  • Future: 40%. This is internal, external, and employee-driven training to close critical skill gaps for jobs of the future.

In the future, we will always need to learn, grow, read, seek out knowledge and truth, and better ourselves with new skills. With the support of employers and educators, we will transform our hardwired fear of change into excitement for change.

We must be able to say to ourselves, “I’m excited to learn something new that I never thought I could do or that never seemed possible before.” D!

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