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The Digital Transformation of a Supply Chain – Blockchain and IoT

The Internet of Things and Blockchain are two major disruptors impacting us in our daily lives, from Fitbits, Apple Watches, Alexa, Siri, Smart Refrigerators and even our Smartphones. But what is Blockchain and the Internet of Things? How do they work? And how is it impacting the supply chains across industries?

This article attempts to breakdown the concepts of Digital Transformation and its enablers Blockchain and Internet of Things to gain a deeper understanding to how it is applied to our Supply Chain World.

First, let us get some terminology agreed:

Digitization vs digitalization vs digital transformation

Digitization is converting physical information, data, processes and actions into digital form. Capturing data and information throughout the value chain is the first step to ensuring an organization can move towards becoming digital. 

Digitalization is applying technology to transform a business process to provide data transparency, efficiency and revenue gains. Digitization is used as an input to the process of digitalization. 

Digital Transformation is undertaking the business change end to end, with technology underpinning the business processes, activities, competencies and models to enhance business efficiency, customer centricity, streamlining and profits.

Blockchain and Internet of Things (IoT)

In the new world where Blockchain and IoT exists, data becomes the centerpiece of everything. This in itself is a major departure from the process-oriented world of the past where data was treated as a stepchild. Like with anything in life the more data we have available to us, the better it can inform our decisions. Data has become the driving force behind the rapid global changes and new age industry revolution 4.0; with increased consumer demand and centricity, quicker turnaround times and higher expectations for efficiency. The challenge, however, is how to extract information from data that is useful in decision making; a theme already discussed in Eli Goldratt’s book “The Haystack Syndrome” which describes the search for the needle in a haystack.

To understand the impact of Blockchain and IoT, we want to compare it to another revolution, which happened in software development. The below diagram shows two different approaches to software development, being Traditional and Object Orientated Programming (OOP). Traditional programming is based on logical procedures, which require data input and produces a data output. Object Orientated Programming is organized around objects rather than procedures or actions, and data rather than logic.

Blockchain is essentially a data-centric trace of events through managing data along its lifecycle. It decentralizes transactions and creates visibility and real-time information flow throughout its movement, with no central control point. Blockchain is a virtual world of externally housed blocks of data. Each block has unique identities, attributes and behaviors encrypted into each block, creating a chain of interconnected blocks. It does away with the concept of a transaction moving from point to point along a process or system, and with no central authority to manage it. Blockchain has a number of applications today, one example is the management of fresh products such as meat in a cold supply chain. Each step of the supply chain, from the cow to the restaurant serving the meat, will create a blockchain with unique information regarding quality and logistics. If any issue arises, then the blockchain can trace the issue back to its source.

The Internet of Things is about capturing data and applying methods to the data. It starts with capturing data of certain attributes and sharing that information with other blocks of similar nature. It becomes a platform which enables the communication of interconnected devices and systems, providing real-time data and information. It expands communication with single devices to entire networks of devices. Like blockchain, it increases transparency, traceability, and allows for predictive analytics and alerts to extract vital information from the data collected, hence allowing monitoring and proactive decision making.

As the impact of software development, the impact of blockchain and IoT is a major disruption. Let us explore this disruption further on some key application areas used in today’s supply chain world:

The Demise of ERP

Enterprise Resource Planning (ERP) systems are designed to manage all aspects of company operations by storing all a company’s data and transactions. An ERP system is process-centric rather than data-centric. ERP systems support a central and company-centric world.

ERP systems are the opposite of the blockchain world. They are based on logical procedures i.e. business processes rather than data; centrally organized rather than distributed. If we apply the learnings from the OOP world to the ERP world, then the ERP system should become the local method applied to the distributed blockchain. The local methods can be managed and operated by each trading partner operating along a global supply chain.

The Demise of Planning

Planning is mostly based on using historical information to predict future behaviour. IoT is enabling the flow of real-time information, so instead of trying to plan ahead using historical data, the supply chain is triggered by the various connected components of the chain which provide current data and signals; allowing it to respond more rapidly. Complementing data streams from IoT can allow us to make more informed decisions based on recent information rather than waiting for historic data to become available.

How far away are we?

IoT and Blockchain have grown significantly, and year on year industry trends forecast these two major disruptors to revolutionize the Supply Chain Industry, but how far away are we really? In recent statistics and research, we are not quite as close as we expected. We see more multinational companies being open-minded to test the technology in their business, but still no major transformation as such. Not many software houses have broken through the trends with ground-breaking newly defined ‘ERP’ systems or merchandise planning tools, but we are for sure on a path to creating a more digital-centric industry.

We at ebp Global have our Hong Kong Team code crunching, having already created an Integrated Assortment Planning tool applying AI technology and soon to launch a Supply Planning tool using real-time scenario-based planning.

Let’s work together on the next generation…

Contact us for more information on info@ebp-global.com!