“Blockchain will improve supply chain visibility & diversification”
Pankaj Dayama, Senior Researcher and Master Inventor at IBM Research India, asserts that the robustness of a supply chain to any disruptions is largely dependent on the topology of its supply chain network. Blockchain technology can enable supply base visibility, supply chain visibility and supply chain diversification and fix supply chain inadequacies.
TPCI: Recently, the World Economic Forum noted that blockchain technology can be quite instrumental in tackling supply chain failures. How can businesses incorporate this to enhance operational efficiencies?
Pankaj Dayama (PD): COVID-19 has caused an unprecedented impact on supply chains in various industries. It has highlighted significant faults across the supply chain that have had huge financial impact on companies, as they are not being able to serve their customers. Trusted real-time collaboration and coordination between supply chain participants can help tackle some of the daunting challenges faced by these supply chains. Below are three major factors that can help companies tackle such failures:
(1) Supply base visibility: The robustness of a supply chain to any disruptions is largely dependent on the topology of its supply chain network. Most of the companies have limited visibility beyond tier-1 suppliers in multi-tier supply chains. Tier-1 suppliers need to share the data with the buyers to help do the mapping of the supply chain. Blockchain technology can enable trusted data sharing amongst the participants while protecting business sensitive information. This information can help companies decide optimal ways of diversifying their supply chains to help maintain business continuity.
2) Supply chain visibility: Companies also do not have adequate demand sensing and planning capability to handle these abnormal situations. They are not equipped to handle quick changes in demand or uncertainty in supplies. The trusted visibility of the state of the supply chain that can be provided by blockchain technology can help companies quickly make the right decisions.
(3) Supply chain diversification: Companies may want to quickly identify the critical parts whose supply may be impacted and may want to quickly onboard new suppliers to meet the demand. But, identifying, vetting and onboarding the new suppliers is typically a long process that takes 30-40 days. Blockchain technology can play a role in providing access to trusted and verifiable information that can enable quick onboarding of new suppliers.
TPCI: How exactly does blockchain technology operate? What advantages does this technology offer in this regard? How is its use going to rise in the Post-Covid era? Please tell us some major use cases for blockchain in the industry post-Covid.
PD: Blockchain technology provides greater transparency and security in carrying out business transactions by maintaining immutable transaction records within a distributed network of mutually untrusting entities. A secure distributed consensus protocol is used for maintaining the ledger and blockchain has a framework for automatically executing smart contracts based on the state of the distributed ledger.
In Permissioned Blockchains, entities are accountable for the data they share on the network. But data owners still have control over the data and can share it with entities on need-to-know basis. This controlled visibility of data helps them collaborate without losing its competitive advantage. Thus, Blockchain provides a platform for the network to collaborate by enabling trusted data exchanging while preserving privacy.
In the Post-COVID era, blockchain can play a critical role in helping companies operate a resilient supply chain that is well prepared for any large-scale disruptions by providing trusted and timely visibility of supply base, supply chain state and support rapid onboarding of new suppliers. For example, Trust Your Supplier blockchain platform is being used for enabling quick onboarding of suppliers and providing inventory visibility by IBM Rapid Supplier Connect solution. This solution helps hospital quickly onboard new medical equipment suppliers to help fight the medical supply chain shortages.
TPCI: At a time when the global opinion is in favour of diversifying production from China to other countries, how can India leverage the blockchain technology to become a global manufacturing hub?
PD: Companies are focussing on strategies for making their supply chains resilient, wherein the supply chain is able to withstand, adapt and recover from disruptions effectively. Companies are seeking enhanced visibility of the multi-tier upstream supply chain so as to enable effective handling of operations of supply chains during abnormal situations. As government and businesses try to evolve strategies to grasp a significant share of manufacturing pie from China, there is a need to focus on improving supply chain visibility within the region.
Suppliers are reluctant to share this information on their upstream partners due to fear of losing competitive advantage. Any initiatives that can help increase the multi-tier supply visibility, using technologies like blockchain, will be crucial as global businesses try to look for alternatives that can help them build a resilient supply chain.
TPCI: What challenges exist to the adoption of blockchain technology in India? How can these be resolved?
PD: Improving digitization and reducing the processes managed on paper for the SMEs in India is the first task. COVID pandemic is forcing companies to digitise for survival. This would definitely be the first and most important step as we try to adopt blockchain technology. Moreover, Indian SMEs are not very inclined to adopt the blockchain technology as they do not trust it mainly due to lack of awareness. Also, there is huge dearth of people skilled in Blockchain in India.
Accelerated adoption of blockchain technology will depend on clearly defined regulations from the government on the distributed ledger technology and initiatives for skilling of talent. It would require close collaboration between important stakeholders such as policy makers, regulators and industry to work together to help increase adoption of the technology in India.
TPCI: Which are the international cases that could serve as a source of inspiration for India in this regard?
PD: Blockchain technology has been seen as a very promising technology in supply chain and logistics industry. In fact, it is one of the key industries that has seen lot of early adoption of the technology by big giants such as Walmart, Maersk, De Beers, etc. Applications related to product traceability, international trade finance, paperless trade, etc. are the initial ones that are getting deployed.
At this time of supply chain disruption, the buyers are looking to diversify their networks by onboarding new suppliers in different geographical regions. Cross-industry blockchain platforms like Trust your supplier, developed by IBM and Chainyard, can be leveraged by both the suppliers as well as the procurement organizations to help improve discoverability of supplier by new prospective buyers in the network. Blockchain network maintains trusted information related to the supplier and its digital identify. Suppliers can provide access to required data (regulatory compliance, legal data) to potential buyers. Buyers can focus on supplier qualification. It also helps suppliers by reduction of the operational cost in the onboarding process and time taken to start transacting with the buyer.
TPCI: What issues can blockchain resolve for Indian SMEs in particular in the post-COVID era? How can it benefit banks in this challenging environment?
PD: Blockchain technology can help Indian SMEs become an attractive alternative to the low-cost suppliers in regions like China as businesses try to reconfigure the supply chain. Blockchain will help map the upstream supply chain and also provide the trusted visibility of the state of the supply chain for the downstream participants and thus, reduce the business risk. Blockchain will also reduce the risk for banks in financing SMEs to help improve their cash flows and manage regular operations as economic conditions worsen due to the pandemic. This technology provides the trust, transparency and integrity in the supplier financing process by maintaining all the transactions on shared and immutable ledger, thus reducing the risk.
Pankaj S Dayama is a Senior Researcher and Master Inventor at IBM Research India. He is currently leading Blockchain Solutions group at IRL. His current work spans different aspects of Blockchain technology including building innovative solutions in supply chain space working directly with clients, and enabling privacy preserving network collaboration on Blockchain using techniques from applied crytography and game theory. His research interests are broadly in the areas of Game Theory, Mechanism Design, AI, and Applied Cryptography with specific focus on multi-enterprise business networks and blockchain.
He has a Ph.D. in Mechanism Design from Indian Institute of Science, Bangalore. His thesis topic was “Mechanism Design for Strategic Crowds, Markets, and Networks”. He has published about 20 papers in peer reviewed conferences and journals in premier CS venues such as AAMAS, WINE, IJCAI, ICBC and AAAI. He also has more than 10 issued patents and about 40 filed patents in the USPTO to my credit.