Blockchain Technology Enabling Seamless Supply Chain

Written By Srinivasan Varadarajulu, MSIPMM

Blockchain Technology Enabling Seamless Supply Chain

Written By Srinivasan Varadarajulu, MSIPMM

by Srinivasan Varadarajulu, MSIPMM

With rapid technological evolvement around the world, organisation is facing rapid change in the way the business is being conducted. This leads to disruption in the employment market thus leading to re-training and adaptability to technological changes. This development is more evident in the supply chain and logistics Industry that covers Transport, Warehousing and Distribution Network.

We look into the major areas for using Block Chain Technologies (BCT) at various nature of business.
The diagram below shows the fundamental Block Chain Structure and represents a broader approach on Peer-to-Peer transaction approach without a middle man. There are multiple benefits for the application of Block Chain Technology.

Simplified Contractual Provisions

The Block Chain Technology embed with simplified contractual provisions. These are called Smart Contracts. These contracts are designed to specific business model or specific to peer-to-peer transaction exchanges, as shown in the diagram below.

Simplified Contractual Provisions

As an illustration, consider this scenario: Service level A is price $X, Service Level B is price $Y, invoicing is 30-days after proof of delivery, issues must be registered within 15 incorrect invoices shipping issues pricing conditions all of the Terms and Conditions between organisations, the paperwork is gone. But, what about bad transactions? Consider the days of delivery, and after 1000 units, the unit price goes down 3 percent, and so on. Now, imagine instead that each one of these variables was a line of code, stored in a master system-of-record. When a new record is written, the public record-keeping system automatically checks to determine if there was an out-of-balance condition. If that occurs, the system would prevent the record being entered. That is called a ‘Smart Contract’.

Harmonized and Distributed Manufacturing

In the traditional manufacturing world, parties transacting with each other spend considerable time and money on establishing external mechanisms to ensure trust, in the form of contracts, service-level agreements, quality checks, inspections, audits, scanning, escrows and regulatory compliance reviews, to name a few. As the number of parties increases, so does the complexity. Reconciling separate ledgers, enforcing contracts, ensuring supply chain transparency and protecting intellectual property when multiple entities are involved are all laborious and burdensome processes, prone to error and vulnerable to fraud.

In a blockchain network – product designers, production shops, 3-D printers, logistics partners, sales and customer service – that tax is greatly reduced. A secure, distributed ledger infrastructure accessible to multiple parties enables a new level of real-time transparency and efficiency for transactions involving the transfer of anything of value – whether that means ideas, money or ownership.

Blockchain Supports Distributed Manufacturing Given that the blockchain enables the tracking of all types of transactions, it can create a digital thread that represents the lifecycle of a product from its initial design file and material origins to the purchase and ownership of the finished product. Since these transactions are all tracked digitally, designers and makers who are geographically separate from one another can collaborate in a trusted fashion to create products. Blockchain smart contracts can automatically compensate each party for their contributions to the process. The blockchain can even support shared and remixed designs, allowing other designers to modify the original file and submit their version, compensating every designer along the chain each time the file is produced.

Cloud Technologies, Artificial Intelligence (AI) and Internet of Things (IOT)

No one is doubting the benefits of cloud computing. However, data breaches or service interruptions aren’t unheard of, or even uncommon. Whether it’s user error or issues with the hosts themselves, data breaches in 2017 were a major story. Verizon partnered with Nice Systems to handle customer service calls who utilized an unprotected Amazon S3 storage server. Because of this, 6 million records that held logs from customers who called Verizon customer service were able to be accessed.

Another massive leak occurred when Deep Roots Analytics misconfigured their AWS server, releasing sensitive information of 198 million Americans. These failures aren’t a one-time occurrence and they show that cloud computing’s model of centralized storage isn’t as secure as it could be because it has a single point of failure.

Cycling back to the idea of client-server computing, workloads will still be centrally managed and controlled with a blockchain approach. Essentially, even if processing the data is physically distributed, the workloads remain logically centralized. This is different than a hybrid cloud approach where companies maintain data both on the public and private cloud. Blockchain creates a decentralized and distributed storage marketplace.

Blockchain technology for cloud storage can be a rather complex data structure to understand. The diagram below helps explain it a bit.

Diagram extracted from Angela Karl

Diagram extracted from Angela Karl (2018)

An A.I system being run on a single, central processor is prone to hacking, as any malcontent only needs to break into a single system to manipulate the instructions. Entries to the blockchain platform must be authenticated by the majority of nodes on the network before they are accepted and processed into the ledger. The higher the number of nodes that are operating on the network, the more difficult it is to hack the system.

While a Blockchain-based A.I. platform would not be impossible to hack, it is still far more difficult to manipulate and break such a system.

In order to be reliable, a system must be trusted by the public in general. Blockchain allows far greater transparency than a closed A.I. system. Records maintained on a Blockchain ledger can be reviewed and audited at any time by authorized people with access to the system. At the same time, users who have not been granted access would not be able to view anything, as the database is encrypted.

Take the case of Blockchain application in the healthcare industry. People with medical complications may not want their medical records to be accessed by unauthorized people. Keeping the medical history in an encrypted format instead of plain English ensures that their records could not be accessed by any individual. On the other hand, keeping the record on a Blockchain also ensures that medical practitioners would be able to provide quick medical aid in case of emergency by accessing the files.

Simplified Governance

There are two areas of concern in Block Chain Governance, namely the corporate governance of industry, as well as government regulations and standardization for larger benefits with new laws and constitutional amendments. The principles that are essential for blockchain adoption on a global scale, are as follows:

1. Standard for Blockchain Development

There are three macro factors that are essential for widespread adaptation of Distributed Ledger Technology (DLT), namely Governance; Legal and Regulation; and Industry Standards. These may be achieved through Consortium of Financial Institutions such as Banks and Central Banks such as Monetary Authority of Singapore besides Ministry of Finance or Statutory Authority such as Association of Banks Governing Councils.

2. Interoperability and System Integration Controls

The key essentials or elements to achieve interoperability and system integration controls are Security Considerations; Data Integration; Integration with legacy systems; as well as Security mechanisms and continuous enhancements

3. Audit Rules

The use of blockchain platforms will not remove audits nor the need for an independent auditor. Rather, it will transform the way in which auditor extracts, test and analyse data. Layering blockchain technology with audit analytics could yield standardised, sophisticated audit routines and analysis that enable near real-time evaluation of transactions across the blockchain.

4. Cybersecurity controls

Distributed Ledger Technology (DLT) is intrinsically linked with cybersecurity considerations. These include Key Management; Risk of an attacker overpowering a private blockchain; Centralization of authority within the network; as well as Privacy and the right.

5. Enhancement of Traditional ICT Protocols / Controls

The decentralized nature of DLT requires a systematic approach to ICT control management, which includes system development and change approach, processing of Information and data, as well as security control and management.

6. Business Continuity Planning.

As blockchain technology is still in evolving stronger day by day, its functional components to be well understood to meet high quality of business continuity planning. This may lead to collation and aggregation of existing process into a unified package.

Global blockchain distributed ledger market

Diagram extracted from Himal Srivastava (2018)

Top impacting factors

Diagram extracted from Himal Srivastava (2018)

Conclusion

With regard to revenue forecast, a survey has been conducted and published by allied market research which may be considered for reference. The domestic revenue forecast and regulatory implementations are expected in the near future. With higher revenue forecast, the earned income by the government may be distributed according to the social needs and social demographic changes. Though there are many other areas of concern for digitized economy, the above could be considered as a basis for future research.


References

Adrian Goh. MISPMM. (2017). “Blockchain Technology – The Next Revolution of Supply Chain”. Retrieved from https://sipmm.edu.sg/new-technologies-maritime-industry, accessed 10/03/¬2018

Alvin Tan. MSIPMM. (2017). “Key Strategies to Implement a Digital Supply Chain”. Retrieved from: https://sipmm.edu.sg/key-strategies-implement-digital-supply-chain/, accessed 10/06/2018

Angela Karl. (2018). “Blockchain Technology for Cloud Storage”. Retrieved from http://techgenix.com/blockchain-technology-for-cloud-storage, accessed 10/06/2018.

Dana Martens. (2017). “Building a Blockchain for Distributed Manufacturing”. Retrieved from https://danamartensmfadt.files.wordpress.com/2017/05/unumwhitepaperfinal.pdf, accessed 11/06/2018.

Himal Srivastava. (2018). “Blockchain Distributed Ledger Market”. Retrieved from https://www.alliedmarketresearch.com/blockchain-distributed-ledger-market, accessed 10/06/2018.

Jagmeet Singh. (2018). “Distributed Manufacturing: Next in line for Blockchain Innovation”. Retrieved from https://digitally.cognizant.com/distributed-manufacturing-next-line-blockchain-innovation-codex3323, accessed 11/06/2018.

Jason Tan. MSIPMM. (2017). “Artificial Intelligence on Digital Supply Chain”
Retrieved from: https://sipmm.edu.sg/application-impact-artificial-intelligence-digital-supply-chain/, accessed 11/06/2018

Ronald van Loon. (2018). “Blockchain Potential to Transform Artificial Intelligence”. Retrieved from https://www.digitaldoughnut.com/articles/2018/march/blockchain-potential-to-transform-ai, accessed 12/06/2018

VedatAkgiray. (2018). “Blockchain Technology and Corporate Governance”. Retrieved from http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DAF/CA/CG/RD(2018)1/REV1&docLanguage=En, accessed 12/06/2018.

About the Author: Srinivasan Varadarajulu (S.Raju) has 30 years of experience in various sectors such as manufacturing of capital goods, building, and infrastructure, Oil and Gas sector. He has held managerial positions in India, Singapore, Indonesia, and Malaysia. He holds an Engineering degree from Bharathiar University (India) and is a qualified member of the Singapore Institute of Purchasing and Materials Management (MSIPMM). He completed the Advanced Diploma in Procurement and Supply Management (ADPSM) course on July 2018 at SIPMM Academy.

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