When Frost & Sullivan paired up with IBM to learn more about the progress that companies are making with their digital supply chains, it made some interesting discoveries. Despite the progress that’s seemingly being made on the supply chain visibility front, for example, a full 84% of chief supply chain officers pinpoint a “lack of visibility” across those supply chains as their biggest pain point right now.
“In our global economy, disruptions in logistics—whether upstream supply chain or downstream delivery—can be detrimental to a business,” IBM reports in “Digitally Perfecting the Supply Chain.”
“Delayed part shipments can wreak havoc on manufacturing plans, and have ramifications that reverberate both down to the customer and across to other product lines,” the company continues. “Errors in the logistics networks, equipment failures, parts shortages, customs delays at ports or border crossings, inclement weather, and even political disruptions can cause a domino effect across the factory floor, possibly affecting an entire business ecosystem.”
Filling in the Gaps
According to IBM, most companies in the industrial space are aware that information from their process and operations can help guard against failures, and make production more efficient. For example, Frost & Sullivan estimates that, on average, 35% of global automotive plants will be “smart factories” by 2025—meaning that automotive OEMs will need to spend 8% to 10% of their revenues on these new or upgraded facilities.
“An increasing number are also learning that they can apply these benefits across the logistics space—however, involving suppliers, customers, and other entities complicates an already daunting concept,” IBM explains in the report. “Adding to the perceived challenge is how rapidly technology is evolving, with features such as artificial intelligence (AI) and blockchain providing new and changing opportunities.”
On the whole, IBM says that supply chain platforms, systems and designations remain firmly entrenched in old silos. For example, a freight forwarder may use a different enterprise resource planning (ERP) system than a port or the end producer. Each participant may use different database structures and terminology or may take records with different levels of detail.
“Spreadsheets and paper-based record keeping are still prominent across many aspects of supply and logistics,” it concludes. “Because of this, as soon as one party emails a spreadsheet to a counterpart, the information is already out of date and difficult to trace, confirm, and secure.”
Is Blockchain the Answer?
A time-stamped series of immutable records of data managed by a cluster of computers not owned by any single entity, blockchain is made up of secure data blocks that are bound to each other using cryptographic principles. In absence of a central authority, blockchain oozes transparency because everyone that touches it is accountable for his or her actions.
While blockchain is rapidly adopted as a mainstay for the business and financial services industry, it could revolutionize the industrial supply chain in the coming decade. “It can step in and solve the problems of discordant platforms and communication,” IBM states in its report. For instance, the information about a component’s build, transportation and usage in a finished good can be visible to parties in the blockchain through permissions.
“This makes it possible for an automaker with a part recall to quickly and comprehensively track all the vehicles with that part,” IBM states, “or for a food supplier to trace a bag of lettuce or a steak back to the farm where it originated.”
Beyond Track and Trace
Because blockchain can help with the management of trusted suppliers, its applicability in the supply chain goes beyond just effective track-and-trace. For example, suppliers can be pre-verified through data stored on a blockchain to provide immutable auditability of a supplier’s status and business.
“The verified, immutable supplier profile data can then be used to streamline supplier evaluation and reduce the time to onboard a new supplier registration from weeks to days,” IBM states.
“Blockchain is unique in its ability to build a network across value chain participants while still controlling the type and security of data shared,” it continues. “It addresses the challenges of data integrity, confidentiality, value, and relevance that would otherwise hinder cross-market networks composed of competitors, regulators, suppliers, and customers.”
