Bringing blockchain, IoT and analytics to supply chains
Supply chains must meet multiple goals: a high level of customer satisfaction, profitability goals, and resilience to disruption. Companies are also starting to prepare their supply chains for a responsible future by ensuring that their production and transportation systems are safe and environmentally friendly, that raw materials are obtained from sustainable sources, and that workers receive a fair wage. Until recently, the cost of achieving all of these goals was prohibitive, forcing organizations to compromise. However, analytics combined with the Internet of Things (IoT) and blockchain technology are quickly making these goals achievable.
My research has shown that blockchain can greatly improve the performance of supply chains. But seizing its potential to do so requires new authorized blockchains (i.e. blockchains in which participation is limited to known supply chain partners), data standards and rules of governance.
Capacities to develop
There are four kinds of steps that companies need to take to strengthen their supply chains, but they need to be patient; it will take time to complete these steps and realize the gains.
1. Add IoT and tracking functionality.
Organizations need to equip their supply chains with IoT capabilities and the ability to track individual units of components and inventory of finished goods. Simply put, IoT refers to the ability of machines to use sensors to automatically collect data such as temperature, pressure, GPS location, and barcode readings, and to autonomously download that data. on a cloud server via the Internet.
The IoT enables organizations to collect new types of data at different stages of their supply chain. For example, such devices can track the production of a packaged food product from the sourcing of ingredients to production, shipping and retailing, including inventory status and working conditions within. manufacturing and logistics facilities.
In some industries, laws and regulations, such as the Food Safety Modernization Act (2011) and the Drug Supply Chain Safety Act (2013) in the United States and the Medicines Directive falsified (2013) and the European Green Deal in Europe require companies to trace the movement of their products, keep records of this movement to prove their identity and measure the environmental impact of activities throughout the supply chain. supply. Collecting data is the critical first step towards achieving these goals.
2. Record the transaction data.
Organizations need to record transaction data from IoT devices on a blockchain, which can capture extremely detailed decentralized data and can be used to verify that transaction records are genuine. A business can use this data to ensure sustainable sourcing, improve supply chain contract fulfillment, and secure better financing.
Since the implementation of a blockchain-based system can be done in a decentralized, step-by-step manner, it does not require large investments in information technology systems or expensive third-party certification.
3. Standardize and align data from different sources.
This is necessary to use the data collected from IoT devices in a supply chain.
Suppose a business uses temperature sensors in a distribution center to record storage temperature on an hourly basis and inventory scanners to track the movement of inventory to and out of the distribution center. The company needs to align these data tables to know which stock units have been stored at what temperature and for how long.
Here is another example. When a consumer products company uses blockchain to source palm oil from sustainable agriculture without deforestation, the unit of data collection changes throughout the supply chain, from the fruit to the palm tree. oil, derived products and finished consumer products. The data at each stage is combined with the BOM to completely trace the entries into each batch of finished products. This requires capacities for data storage, interpolation of missing values ââand descriptive analysis.
4. Develop predictive and prescriptive analyzes.
For example, temperature data from distribution centers can be used to predict how long a food product will ripen or spoil. This predictive model can then be used to guide inventory planning and design promotions for soon-to-be-spoiled food products. This will improve profitability and reduce food waste.
Ripe.io, an agro-tech organization, used tomato production traceability data to relate the flavor of ripened tomatoes to growing conditions. Predictive analytics has enabled the company to grow different types of tomatoes based on the needs of different customer segments.
Another organization, Dibiz, which is a blockchain platform for sustainable palm oil sourcing, discovered that the data for smallholder farmers, which its platform made visible to everyone in its supply chain , allowed resellers and factories to optimize pickup routes based on actual data. -time of fruit harvests. This reduced logistics costs, benefiting farmers and mills. In addition, it improved the quality of the fruit arriving at the mills, resulting in a higher oil extraction rate (in terms of quantity), reducing the risk of deforestation and generating higher income for the farmers. (Disclosure: I’m on Dibiz’s advisory board and own a small amount of its stock options.)
Where to start
It is not necessary for an organization to develop all four capabilities simultaneously. He can develop them in any order and at any scale.
For example, a business can start recording existing transaction data on a blockchain and use it to track the movement of units before investing in IoT devices to collect new data. Alternatively, the company can start using IoT devices and analytics before acquiring blockchain technology. Indeed, these capacities are complementary: each makes the development of the others more viable and fruitful. Therefore, even small investments in IoT technology, blockchain, and analytics can offer significant long-term rewards.
How to measure success
The gains made from blockchain, IoT devices, and analytics can be viewed as a hierarchy.
At a fundamental level, the fastest reaped source of value creation is reducing runtime errors and improving productivity through visibility, traceability and automation of supply chain tasks. . This advantage – which is particularly useful in the pharmaceutical, food and maritime industries – can be realized very quickly because it can be achieved simply by collecting and recording data which was previously hidden; it does not require additional analyzes. For example, Walmart Canada and DLT Labs used IoT data and blockchain to improve billing accuracy for third-party trucking logistics providers. They reduced billing disputes from 70% to less than 5%, resulting in significant cost savings and faster disbursement of payments.
The next level of earnings is based on predictive analytics and optimization applied to the data collected. Such applications take longer to develop but can be of great value. The Ripe.io and Dibiz examples I described fall into this category.
In addition, applications of this type are possible in areas such as closed-loop supply chains where manufacturers are responsible for collecting used products from consumers and recycling or recovering them in a safe and respectful manner. of the environment, by tracking the greenhouse gases used at each stage of the supply chain and reducing food waste. For example, it is normally impossible to distinguish lots of perishable food products from one another in a distribution center. But if each batch is tracked individually, its remaining shelf life can be calculated and this data can be used as input to design new algorithms for allocating inventory to retail stores, soup kitchens and pantries.
The biggest potential source of earning is the use of data and analytics to create new products and services such as the creation of new markets that use blockchain data to match buyers and sellers, drafting of more efficient contracts that take advantage of a blockchain-based system’s ability to measure effort and performance more easily and by taking advantage of visibility of activities across layers of the supply chain to create personalized products.
Thanks to these advancements, supply chains can ultimately be more environmentally friendly and offer better wages, safety against contamination and more transparency for all members of the supply chain and consumers. .