Part 3 in the 3-part series “Blockchain and the Supply Chain.”
Better visibility into procurement, more accurate and reliable data for analytics, and increased trust among all participants in your supply chain network are some of the benefits of adding blockchain to your infrastructure. But how much will it disrupt your current way of doing business? You may be understandably wary about the costs and potential turmoil behind yet another piece of technology.
It’s important to clarify that the blockchain isn’t merely a prerequisite piece of software to buy. As an integrative technology, its underlying logic and processes force data to become synchronized—and that allows companies to capture the broad benefits I described in Part 2 of this series. So don’t think of it as a hurdle or just another program to learn that needs to be integrated into your current system. It’s actually the opposite: a solution to your current fragmented infrastructure.
Plugging into your existing infrastructure
The blockchain essentially functions as a layer supplementing your existing enterprise resource planning (ERP) software. You can still see your existing user interface and business process. But now, when you look at inventory, you see everyone else’s alongside your own. And instead of a placeholder of a price, the actual price based on the consumption of your supply chain network is available.
Done properly, a blockchain installation slots into your workflow without disruption, so it can feel like you’re not really leaving your existing infrastructure. The installation will likely not be as simple as a “one-size-fits-all” approach; it’s more like three sizes, depending on your current infrastructure and the smaller partners you may need to set up.
To accommodate your other partners, the blockchain can be built into a Web interface to use, also relying on electronic data interchange (EDI) connectors. These connectors take the messages from disparate systems—such as when inventory departs one warehouse and ends up in another that operates under a different platform—and bring them together.
Professional services firms and software companies have made significant investments into developing blockchain capabilities and resources, with the goal of making the process as seamless as possible. For instance, EY recently introduced EY Ops Chain, our in-house suite of applications and services built on open-source blockchain components. The result is that, as an enterprise IT organization, you increasingly have more options to choose from, with your convenience paramount.
How blockchain works in real life: the ROI
What does adding blockchain capabilities look like in the real world instead of just the abstract? EY helped a global manufacturer leverage blockchain technology in its existing environment to solve compliance issues for its procurement/direct-buy processes. These issues stemmed from third-party, pass-through pricing from its suppliers to contract manufacturers, in which audits revealed that the correct pricing was not used, requiring time-consuming reconciliation efforts.
We conducted a proof of concept demonstrating the features required to manage a contract manufacturer supply chain under a blockchain. Then it was a matter of expanding it across their network, reducing value leakage and eliminating the costly price verification process that was eating into the savings under negotiated pricing agreements.
It’s possible that cost savings just from reduced auditing could cover your entire blockchain investment—but you’re also getting so much more. In an increasingly globalized world, with the speed of business accelerating and data swirling all around us, it’s worth exploring your blockchain options with a trusted advisor.
For more on how blockchain can benefit supply chain management, see The Power Of A Blockchain-Enabled Supply Chain.