How Finance Is Thriving In A Digital World: 17 Experts Share Their 2018 Predictions

Judy Cubiss

Change is the new normal. The rate of change due to digitalization and technology continues at a breakneck pace. Technologies that were nascent last year are becoming mainstream. Businesses and organizations need to be agile to keep ahead of the competition. An Oxford Economics survey showed clearly that finance organizations that are taking advantage of digitalization are reaping the benefits. Automation allows finance organizations to focus on strategic and value-added topics. What does all this change mean for the finance professional in 2018?

We asked finance thought leaders to share their 2018 predictions for finance in this new digital world. Their insights include a sharp focus on automation, providing immediate insights, agility to support change and new regulations, reskilling the workforce for all these new technologies, and more.

Review the predictions from 2017 and see how they have evolved for 2018.

  1. Sebastian Behrendt, SAP, Regional CFO, Middle and Eastern Europe
    Artificial intelligence (AI) as an academic discipline has been around for 60 years. In recent years, computer power has increased massively, and machine learning became available for everyone. At the same time, algorithms for the business community left the labs and become mainstream. In 2018 and beyond, we will see the benefits on a broader scale for the finance department, which supports self-driving end-to-end processes with a very high degree of automation like automated intercompany reconciliation and processing. The same applies for distributed ledgers (blockchain). We will see more productive scenarios and introduce reality checks against the hype. Besides all the new technologies, we should not forget to do our homework – to invest in training and upskill our finance colleagues. They need to gain knowledge about new technologies and not only about accounting rules. In addition, we need investments in data governance to ensure data consistency and reliability.
  1. Alex Bennell, Capgemini, SAP Finance Transformation Practice Lead @Capgemini
    Cloud burst! Public cloud is now a genuinely disruptive option for finance organizations in large enterprises, offering agile solutions for rapidly growing business units or new group acquisitions, deployed in a two-tier landscape. The public sector will consider cloud to replace overly complex and expensive on-premise ERP, the overwhelming majority of which they don’t use, with something standardized yet powerful, robust yet frequently updated. Simpler; more agile; CapEx to OpEx.
  1. Joel Bernstein, SAP, CFO Global Operations
    2018 requires maintained focus on the redesign and automation of processes, continued focused on customer service, gained experience with embedded business outcomes, and ongoing compliance adherence. We need to shed the burden of legacy data, processes, and systems, which will allow us to spend our time on innovation and the future.
  1. Thack Brown, SAP, GM Finance Audience @thackbrown / @SAPFinance
    The digital revolution in corporate finance has been underway for a solid 3 years now. With a solid foundation of first-movers now achieving material improvements, 2018 will be the year that established best practices using digital tools will go mainstream. At the same time, artificial intelligence and predictive analytics for automating processes and delivering insight from data will become standard operating procedure. Just to show that digital is a journey, and not a destination, blockchain will emerge with its first enterprise-scale applications, offering fuel for more improvement in the future.
  1. Tammy Coley, BlackLine, Chief Strategy Officer @BlackLine
    Under pressure to increase efficiencies and productivity and ever fearful of competitors gaining an advantage, businesses in all sectors are taking a serious look at new technologies, such as AI and robotics. Many businesses are already dipping their toes in the water. And it’s happening throughout organizations — including finance and accounting. A recent survey commissioned by BlackLine revealed that the role automation is playing in F&A is gaining prevalence. Nearly half (46%) of those surveyed said that AI plays a role in their organization today, and 30% currently are investigating its use. This certainly won’t make accountants irrelevant, nor does it mean they’ll lose jobs. It does mean, however, that they need to evolve along with the technology. Every challenge is an opportunity: in this case, upping their game to add an even higher level of value.
  1. Peter David, SAP, Regional CFO Europe Middle East and Africa (EMEA)
    With enhanced capabilities in machine learning and artificial intelligence, we will see further automatization on standard finance processes and improved predictive analytics, increasing the relevance of the finance function for future business success. It’s important for finance professionals to realize that they own the data, not only to analyze the past, but much more importantly, to deliver insights to improve business in the future, dig for new opportunities, and propose new business models. Finance departments need to be prepared for much faster and shorter innovation cycles using state-of-the-art finance systems and setting up the finance organization for success.
  1. Nilly Essaides, The Hackett Group, Senior Research Director of Finance/EPM Advisory
    The Hackett Group research reveals that finance’s main objective in 2018 is to support the enterprise with better analytics. Faster and better insight gives management the intelligence it needs to make decisions about capital allocation, investment and assess strategic objectives. Digital technologies are a core part of finance’s ability to deliver insight and drive business value. Increasingly, finance will leverage predictive analytics tools and AI to create more robust forecasting and business analysis capabilities. By automating and augmenting finance’s decision-support abilities, new digital technologies will enable finance to build better business partnerships and support senior management in the assessment and development of business strategy.
  1. Joe Harpaz, Thomson Reuters, Managing Director @joeharpaz
    In 2018, U.S. tax reform (Tax Cuts & Jobs act), new sales and value-added tax regulations abroad, (notably in Middle East and India), and new OECD reporting requirements will introduce the biggest disruption that U.S. corporate tax departments have faced in over 30 years. To meet increasingly stringent compliance requirements and deadlines, tax departments will have to streamline and automate quickly, and effectively utilize its enterprise resource planning (ERP) technology and tax compliance solutions. Those who are heavily dependent on spreadsheets and manual processes will struggle, given the rapid and compressed timeframes to adjust their processes.
  1. Drew Hofler, SAP Ariba, Senior Director, Financial Solutions Marketing @dhofler
    2018 is a year when finance will build upon the foundation of networked finance and peer-to-peer (P2P) data, combining visibility into data at all points in the P2P process with robust, collaborative tools to yield new insights and respond nimbly to changing market dynamics and business goals. Through a connected business network, finance will have the visibility and the tools to collaborate with suppliers to increase free cash flow, improve working capital, and increase yield on cash to improve their bottom lines while concurrently reducing supply chain risk. With the application of AI to sort through the massive amounts of transactional data, finance will be able to make smarter decisions faster, and execute on available opportunities in a more timely manner.
  1. Brian Kalish, Kalish Consulting, Principal @FpandaBTK
    The trend of using increasingly sophisticated tools and technologies that we have witnessed over the past several years will only accelerate in 2018. That will enable today’s FP&A professionals to break free of mundane and low-value data-focused activities, and focus on providing business partners and organizations with the insights and foresights to make those better, smarter decisions faster, which is needed to support the strategies designed to make the organization thrive in the years ahead. There will also be a higher premium placed on the ability to communicate findings and insights to greater and more diversified audiences, both inside and outside the organization.
  1. Tony Klimas, EY LLP, Partner, Global Finance Practice Leader @tonyklimas / @EY_Alliances
    As traditional finance and accounting objectives around controls and reporting are fully met, the ability to see value where no one else does will continue to become an important capability that sets apart world-class finance organizations from others. The cloud will play a big role in making unstructured data something everyone is focused on, with the best finance organizations figuring out how to leverage this data to create value. A focus on the human capital agenda, from career paths to competency models, will become even more critical, and the best finance organizations will inspire their teams to innovate and lead despite all the uncertainty that exists today. Disrupted career paths and automation technologies will make simulation- and scenario-based training more important than ever. The concepts around blockchain and distributed encrypted ledgers will start to move from theory to practice at an accelerating pace.
  1. Richard McLean, SAP, Regional CFO, Asia-Pacific and Japan @McLean_Richard2
    2018 will see finance leaders accelerate the adoption of digital and innovative technologies to drive continued finance transformation in three main areas. The first is core process automation, with technologies such as machine learning and robotic process automation (RPA) becoming more mainstream to drive even higher levels of efficiency. Second will be Big Data management and powerful analytics to bring increased transparency to key business metrics and enable better data-driven decision making at all levels. Third, we will see finance leaders increase their investment in training and upskilling their people with the essential “soft” skills to play a more influential and collaborative role and to drive improved business performance.
  1. Phuong Nguyen, Principal and Central Finance Lead, SAP Center of Excellence, Capgemini @phuongnguyen_1
    2018 will position finance as an important piece in the digital transformation strategy. The triangulation of unified reporting-cum-distributed ledger technology, machine learning, and cloud will tackle complexities of back-end reporting processes and infrastructure scalability and security. Finance will sit snugly with supply chain and procurement initiatives like Integrated business planning (IBP) and robotics, creating a need of a redefined ERP play within the organization.
  1. Rob Ried, Deloitte Consulting LLP, Senior Manager @Rob_Ried / @DeloitteSAP
    Automation everywhere. Automation will blossom from niche solutions to a pervasive solution juggernaut. Maybe you have heard about it? That little automation proof of concept that showed some promise has now proven its mettle. 2018 will be the year of the bot. Digital transformation will emphasize automation as a prime enabler for change. We will see a surge in white-collar automation; organizations big and small will deploy bots and quickly redeploy their human resources. Organizations that embrace automation will take the lead within their industry.
  1. Henner Schliebs, SAP Global Marketing, Head of CFO Marketing @hschliebs
    CFOs will start managing big-ticket items as part of their finance transformation initiatives. They will start to optimize their working capital to fund sustainable growth initiatives and gain better insights into their corporate spend via connecting their financials to the value chain. This will enable the capture of employee-related costs like salaries, contingent workforce, employee-initiated cost, direct and indirect spend in the supply chain, as well as sales, marketing, and all other costs that affect profitability. The connected finance department will focus on the use of modern automation capabilities such as machine learning, advanced predictions, and connected platforms to continue to feed the need for insights and decision-making support. As the CFOs are leading the strategic aspects of their companies, they will be the natural drivers to tie the strategy to operational guidance to optimize the company’s performance.
  1. Joan Warner, Oxford Economics Group, Thought Leadership Managing Editor and Senior Analyst for Finance @OxfordEconomics
    This year, CFOs will work more closely than ever with their tech colleagues in the C-suite—as signaled in the Oxford Economics/SAP 2017 research study, How Finance Leadership Pays Off: Six Ways CFOs Stay Ahead of the Pack. The finance mandate and the technology mandate will intersect in three ways: firstly, as CFOs evaluate tech investments to improve enterprise competitiveness in the digital economy; secondly, as cybersecurity is recognized as a grave business risk in every industry sector; and thirdly, as CFOs improve finance-function effectiveness with automation and AI.
  1. David Williams, SAP, VP, Global Product Marketing, Analytics (EPM & GRC) @daveswilliams
    Financial applications are about to get much more intelligent. Whether it be in the form of embedded compliance to reduce risk, automated routine processes to improve efficiency/reduce errors, guided machine discovery with prescriptive actions to make better decisions, or natural language processing to simplify search for answers, in 2018 it gets real. Modern financial apps will have these capabilities woven in, in a way that finance teams can actually use without having to rely on IT.

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


Judy Cubiss

About Judy Cubiss

Judy is director of content marketing for Finance at SAP. She has worked in the software industry for over 20 years in a variety of roles, including consulting, product management, solution management, and content marketing in both Europe and the United States.

Five Easy Ways To Streamline Your Higher Ed Invoice Process

Caitlin Strickling

For decades, higher education institutions have been utilizing an “it’s good enough” operating model. But that model is no longer sustainable.

Today’s educational institutions are experiencing several unique challenges. First, changing public perception has left students and parents alike questioning the necessity of traditional college degrees. Enrollment is declining, regulatory pressures are increasing, and for many public institutions, state funding is being cut.

The challenges aren’t limited to these external impacts. Institutions are still operating with outdated, paper-based systems and department silos, restricting their ability to adapt to the changing environment and maintain a student-first strategy. Budgets are shrinking and, as a result, resources are becoming more strained. The bottom line: It’s time to change the “good enough” approach.

Where do you start?

Fortunately, adopting a new model isn’t as complicated as it may seem, especially when you begin by taking a look at your invoices. If your institution is like half of respondents in a recent Webinar for higher ed, your invoice process is paper-based and manual, and data is still hand-keyed, making it difficult to see and accurately control your spend. Even so, it may seem like your invoice process is a difficult first task to tackle. However, it’s actually easier than you may think.

  1. Work with the systems you are already using: Adopt a solution that integrates your invoice process with Banner and your ERP systems, and automatically match POs to invoices to validate purchases. To take further control of all your school-wide spend, pair your invoice process with your expense data so you have all the information you need in one place. The result? Your institution could see an average productivity increase of 11%, all by making your invoice process mobile.
  1. Empower users with their own devices: Your faculty and staff are already using their mobile devices daily, so why not adopt a mobile-friendly invoice process that uses tools your institution already has? Mobile devices could allow for approvals to be made on the go, so invoices won’t be in limbo while the approver is in meetings across campus.
  1. Consolidate the data you already have: Whether across departments or across systems, your spend data is already out there. But if your invoicing is paper-based, or even just partially automated, it is difficult to see all that spend in one place, let alone capture what is being initiated directly from your staff. By connecting your invoice spend to the rest of your user-initiated spending, you’ll get a more complete picture of your finances, so you can make strategic decisions for your institution, like negotiating better vendor rates and finding areas where you can cut costs.
  1. Bring out the best in existing staff: You already have valuable staff in your departments; leverage them for analyzing and identifying inefficiencies, not chasing down information and approvals. By automating and streamlining your invoice process, you can decrease staff time on invoice management by 34% so they can get back to helping your institution adapt to today’s challenges.
  1. Repurpose your budget: Research from Ardent Partners showed organizations can reduce their invoice processing costs by up to 70% through automation. By capitalizing on those cost savings, leveraging early-payment discounts, and negotiating better vendor rates, AP begins to look more strategic, and not just a back-office function. Cost savings here means money back to student-first initiatives and more smiles for your decision-makers.

A better way for managing university spend

Higher education has many new challenges to tackle. And likely, your institution’s current operating model isn’t cutting it.

Understanding the current status of your finances is important, but making adjustments today is necessary to ensure the financial success of your institution tomorrow. Establishing the areas in which your invoice process can easily improve is the first step to ensuring a successful spend management model. And, when you can showcase the value your departments gained from small changes, you can help shift your culture in ways that lead to lasting improvements in spend and beyond.

With an automated accounts payable process, your institution can eliminate manual invoice routing, approvals, and payments as well as the costly errors that go with them. Plus, you can get full visibility into your users’ AP spending so you can control it before it’s spent. What’s holding you back from making lasting changes in invoicing? After all, your faculty, staff, and students deserve better than “good enough.”

Learn how SAP Concur helps higher education institutions streamline spend management. 

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


Caitlin Strickling

About Caitlin Strickling

Caitlin Strickling is an associate content marketing manager for the Enterprise Americas team at SAP Concur. Caitlin earned her degree in Communication from Santa Clara University and enjoys leveraging her experience in SMB, enterprise, and product marketing to create thought leadership content for organizations of all sizes. When she isn’t in the office, she’s out exploring Bay Area breweries or relaxing with a good book.

Automation, Simulation, And Talent Management For Finance

Tony Klimas

Part 4 in the 4-part “SAP Finance and EY Talk” series by Tony Klimas of EY and Joel Bernstein of SAP

When I graduated from business school, my first job was managing accounts payable at a U.S.-based shared services center for a large manufacturing company. This was an entry-level, management-track position — and it was a great experience. Not only did I learn the ropes at the most basic level, but I also made some good contacts and started thinking about where I wanted to go next. These positions are necessary for developing talent in finance, and this first job set me up for success later on in my career.

The reality today is that many of these entry-level jobs in finance and other business functions are being automated. In financial services, such automation is not only a story about robotics, but also “machine learning” — and machine learning isn’t so much about machines as it is about pattern recognition and business process optimization.

Machine learning, a subset of artificial intelligence, is the process of using sophisticated algorithms to train systems to “learn” from massive volumes of data — rather than performing rote tasks programmatically. In finance, machine learning can be used across a wide range of areas. These include optimizing credit assessments, detecting and preventing fraud, improving compliance — the list goes on. The question is: what does this mean for traditional career paths in finance?

The uses of simulation

I believe one potential development is the new finance employees just out of school spending some of their first year working with business simulation tools to replace real-world experience that is no longer possible. New hires are often not fully prepared to take on more advanced positions in finance without first spending some time in the “trenches” — so one option might be simulation tools that teach them the business before they move into more hands-on roles?

Fortunately, young professionals in finance can learn a lot from simulation tools because they’re increasingly sophisticated and based on detailed competency models and career paths. At EY, we’ve worked hard to develop specific technology to help our clients meet their training and staffing goals by understanding the various competency models required, and the potential skill gaps that might exist in the current state of the organization. This helps our clients address immediate issues related to talent, but also allows them a more strategic view to prepare more effectively for what’s coming.

Getting out more

What’s coming, of course, is the need for greater agility to help keep pace with the demand for innovation. To help finance organizations prepare for this, simulation technology, competency models, and skills assessment can be helpful for people at every stage of their careers — and this doesn’t necessarily mean sitting behind the desk.

This point, certainly, is not lost on my colleague Joel Bernstein, CFO of Global Customer Operations at SAP. I recently spoke with Joel about his own internal efforts with digital transformation within the finance team at SAP.

“In many ways,” Joel said, “what we’re trying to do is drive a mind-shift where instead of doing a job or managing a process, our people are asking first and foremost: ‘What can I do to help the business succeed?’ This requires getting out, talking to people, figuring out what’s needed, creating data, running analyses, and impacting change.”

To help his team get there, Joel’s transformation efforts have included “simulation events” of sorts. These are workshops where people from across the global finance team gather to run simulations in a group context that highlight issues and help zero in on solutions. At the end of the training, teams actually present their solutions to business leaders.

The advantages of this program run at multiple levels. For SAP as a business, it helps to facilitate innovation. For employees, it exposes them to non-finance business colleagues and helps them to better understand how to serve and interact with the business. And for the finance team at SAP, it helps create a pipeline of valuable talent, while generating for the team a reputation as an agent of transformation.

So, for CFOs and other finance professionals who might be reading this: Think about the changes impacting your workforce and how you will be creative in making sure your people have what they need to help your businesses succeed in a digital economy that requires all of us to be at the top of our game.

To learn more about why CFOs need to facilitate innovation by building top-notch teams, take a look at this animated infographic and the Agile Finance 2.0 white paper.

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.

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


Tony Klimas

About Tony Klimas

Tony Klimas, global finance practice leader with EY, LLP, is a member of EY’s Advisory Executive team with global responsibility for the Finance consulting practice. He is an experienced consultant with 20+ years of experience across a variety of industries. His areas of expertise include finance strategy and transformation, shared services/offshoring, and BPO advisory. Tony also has significant experience with finance and accounting systems and has traveled and worked extensively in Asia, Europe, and Latin America. He spent most of his consulting career in the Southeast U.S. before moving to the greater New York City area in 2009.

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.



Why Blockchain Is Crucial For FP&A: Part 1

Brian Kalish

Part 17 in the Dynamic Planning Series

In these times of almost continuous technological change, there is a natural tendency to be suspect of whatever is being heralded as the “flavor of the month” or the “next best bet.” In early 2017, I was graciously given the opportunity to speak on what I believed to be the technologies that were transforming finance and specifically, the FP&A function. The talk I ended up giving covered five areas:

  • Advanced analytics and forecasting
  • Robotic process automation
  • Cloud and Software-as-a-Service
  • Artificial intelligence
  • Blockchain

While all these topics deserve further investigation, for this article, I want to focus on blockchain. Part of the reason for diving deeper into blockchain is the lack of understanding of what it actually is and the great amount of time people in the finance function are currently spending talking about it. This has greatly changed in the past nine months.

Last March, while hosting an FP&A Roundtable in Boston, I ask a group of 25 senior FP&A professionals how familiar they were with the concept of blockchain. Out of this august group, there was only one participant who felt truly comfortable with the concept. I still get asked on a regular basis, all over the world, “Blockchain. What is it?”

Blockchain: What is it?

By allowing digital information to be distributed but not copied, blockchain technology has created the spine of a new type of Internet. Picture a spreadsheet that is duplicated thousands of times across a network of computers. Now imagine that this network is designed to regularly update this spreadsheet, and you have a basic understanding of blockchain.

Information held on a blockchain exists as a shared and continually reconciled database. This is a way of using the network that has obvious benefits. The blockchain database isn’t stored in any single location, meaning the records it keeps are truly transparent and easily verifiable. No centralized version of this information exists for someone to corrupt. Hosted by many computers simultaneously, its data is accessible to any authorized user.

Blockchain technology is like the Internet in that it has a built-in robustness. By storing blocks of information that are identical across its network, the blockchain 1) cannot be controlled by any single entity and 2) has no single point of failure. The Internet itself has proven to be durable for almost 30 years. It’s a track record that bodes well for blockchain technology as it continues to be developed.

A self-auditing ecosystem

The blockchain network lives in a state of consensus, one that automatically checks in with itself on a regular basis. A kind of self-auditing ecosystem of a digital value, the network reconciles every transaction that happens at regular intervals. Each group of these transactions is referred to as a “block.” Two important properties result from this:

Transparency. Data is embedded within the network as a whole, and by definition, is available to all authorized users.

Incorruptibility. Altering any unit of information on the blockchain would mean using a huge amount of computing power to override the entire network. In theory, it is possible; however, in practice, it’s unlikely to happen.

A decentralized technology

By design, the blockchain is a decentralized technology, so anything that happens on it is a function of the network as a whole. Some important implications stem from this. By creating a new way to verify transactions, aspects of traditional commerce may become unnecessary.

Today’s Internet has security problems that are familiar to everyone. However, by storing data across its network, the blockchain eliminates the risks that come with data held centrally. There are no centralized points of vulnerability that can be exploited. In addition, while we all currently rely on the “username/password” system to protect our identity and assets online, blockchain security methods use encryption technology.

I hope this little tutorial helps describe what blockchain is. In my next article, I’ll discuss the value of blockchain to the FP&A profession.

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

2018 will be a busy year with FP&A Roundtables in St. Louis, Charlotte, Atlanta, San Diego, Las Vegas, London, Boston, Minneapolis, DFW, San Francisco, Hong Kong, Jeddah, and many other locations around the world to support the global FP&A community.

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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.