Blockchain In Chemicals: An Occam’s Razor Problem?

Stefan Guertzgen

Over the past few years, we’ve seen a lot of buzz around blockchain. Billions of dollars have been spent, thanks to “inflated expectations,” in Gartner’s terms. The company’s 2018 Hype Cycle for Emerging Technologies saw blockchain moving down towards the “trough of disillusionment,” and it does not foresee a “plateau of productivity” within the next five to 10 years. Only a few applications have reached commercial viability, such as the SAP Information Collaboration Hub for Life Sciences, driven by the U.S. Drug Supply Chain Security Act (DSCSA).

Why is that? An article from McKinsey compares it with “Occam’s razor problem.” In other words, the most effective solution must be the simplest solution available to solve a business problem, and there must be a clear business case and a strong commitment to make it happen.

In a recent round-table discussion at SAPPHIRE 2019, participants brought up the following possible use cases for the chemical industry:

  • Procurement: Tracking and authenticating raw materials supports overall compliance with ethical and sustainable standards (e.g., no “conflict” materials associated with child labor, unfair trade practices, etc.).
  • Research & development: Real-time information sharing protects intellectual property in open innovation networks or consortia.
  • Production and asset management: Sharing information between manufacturers, operators, and service providers, for example on Asset Intelligence Networks, tracks an asset’s entire history to prove maintenance, use of original spare parts, etc., in support of warranty or insurance claims, proof of ownership, book value, and as a foundation for pay-per-use models. Recovery of plants after disasters can be managed using retrieval of blockchain records for warranty claims and the like.
  • Supply chain management: In energy trading, onsite chemical power plants become part of a “prosumer” blockchain. In international trading and shipping, blockchain facilitates document exchange and tracks changes in product ownership. Tracking and tracing the physical integrity of products (e.g., BASF’s smart pallet startup investment) identifies physical damage to products or pallets and prevents counterfeit. In agriculture, blockchain increases the transparency of the supply chain from “farm to fork” and facilitates product recalls.

Conclusion

Despite the use cases mentioned above, it became very clear at the roundtable that we are a long way from making blockchain a viable option on a broader scale in the chemical industry. Here are a few stumbling blocks we see:

  • Development of a compelling use case
  • Formation of consortia with participants on an eye level with mutual trust
  • Ownership of blockchain and nodes as well as data security and privacy
  • Technology (e.g., limitations in scalability and management of Big Data) and interoperability (e.g., which type of blockchain, integration, legacy systems, etc.)

Government regulations can play an important role in overcoming these obstacles and paving the ground for commercially viable blockchain scenarios (e.g., the example mentioned above of DSCSA legislation).

Overall, innovative platform providers who have a strong position in chemicals have a unique opportunity to facilitate collaboration between suppliers, customers, and partners and orchestrate networks towards a common goal while disintermediating non-value-adding processes or entities.

Read SAP’s white paper The Intelligent Enterprise For The Chemicals Industry to master future challenges and delivering new customer experiences through innovative products, services, and business models.


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.