On-demand visibility with blockchain

Transcription

1 On-demand visibility with blockchain

2 Visibility across the key supply chain pillars of procurement, manufacturing, transportation and distribution networks is the strategic need of the hour. It s well-known that all upstream and downstream supply chain processes can t run independently and are at some level mutually dependent on each other to guarantee quicker and reliable delivery of goods. Today s visibility is reported real-time in silos or is recorded after the event has occurred. The challenge lies in knowing the event s occurrence in real time simultaneously by all involved actors to facilitate proactive action. Blockchain is the database and the network that can bring various actors to be in continuous sync with the rest of the supply chain network using what is known as a distributed ledger. Blockchain is the buzzword in the market today, and even more so with the financial and insurance industries, for its reliability and speed. Blockchain provides a secure and robust platform for sharing information quickly. However, in this change-constant economy, customers expectations are to receive goods at the earliest. With the rise of e-retailers, challenges increase for brick-andmortar stores to optimize their supply chain. e-retailers such as Amazon offering two-day shipping to customers at increasingly competitive rates, it is becoming very important for companies and retailers to solve the puzzle of, How soon can we get the product in customers hands? To solve this puzzle, a couple of key parts are how all actors in the supply chain process talk to each other and how the latest information reaches the relevant and involved parties on the supply network quickly and reliably. Hence, it is not hype to state that a reliable, distributed, peer network ledger lifted by blockchain technology is the apt solution for complex real-world scenarios where we have multiple actors with tons of transactions and deficiency of trust in their supply chain process. Organized chaos indeed. Exploring the need for active visibility across the chain of supply and how blockchain complements it By Gaurav Malhotra, Vikram Sriram and Sindhu Nachimuthu B On-demand visibility with blockchain 1

3 Integrated platform for procurement, manufacturing, transportation and distribution We will look at two scenarios where employing blockchain in the supply chain planning and execution space can add value. Manufacturing network Procurement managers, while obtaining raw materials from vendors and suppliers, can quickly update the quantity, material attributes and location on the transaction and share with other actors such as manufacturers and shippers via the blockchain platform. The manufacturer then gets alerted about the shipment far in advance of it arriving at the destination. Any challenges and special requirements can be communicated to procurement and shippers instantly via the blockchain network. For instance, the manufacturer updates the warehouse receiving calendar and publishes to relevant parties in their blockchain-powered supply chain network. The shipper, as a participant of the same network, can then plan the shipment pickup and delivery dates much in advance of shipment execution based on business hour updates from the manufacturer. The procurement team also receives the changes and can take proactive corrective action, thereby letting the shipper know of any impending delays or challenges. Distribution network The shipper can then plan and communicate its schedule to the manufacturer, procurement and distribution teams preemptively for better planning. Based on the agreed route confirmation, warehouse operations can view the trail of order changes for planning the storing and/or re-routing of the arriving inventory. Thus, ASN communication over a blockchain network becomes real-time. All this information exchange can be leveraged and fed to the customer as shipment LIVE tracking. A blockchain-enabled process significantly enhances visibility, thereby increasing the accuracy of transactions (such as customer lead time) and reducing the execution time based on synced information from multiple parties on the blockchain. Not to mention the benefits it brings in tracking the service level agreement (SLA) adherence of actors. 2 On-demand visibility with blockchain 3

4 Enabling smarter execution and planning firstand last-mile delivery Blockchain, with its enlisted attributes, thus is the baseline network to establish such effective and distributed data sharing For industries in which delivering to customers on time is what drives value for the company, this technology can help notify in near real-time if the shipment that is en route should take an alternate route for optimal supply chain execution savings. Traffic analysis by pattern recognition, for instance, can help trucks re-route to take a less-congested path. Logistics tracking (product trade history) Location at point in time Chain of ownership Product recalls B2B BC Customer PO PRO NO RRD Event Datetime Stamp Source Location Geo Multiple parties TL Product tracking Provenance tracking (product component history) Cross-border trade Multiple jurisdictions Numerous documents Financial settlement Customer PO/PRO#: LA to ueens, NY Scanner data interface Source of origin Composition audit trail Trade ethics Order LA to FONTANA FONTANA to DENVER DENVER to KEARNEY KEARNEY to UEENS ualification: Customer PO/PRO#: POD In this use case, we notice that there are multiple parties that can benefit from the alternate route suggestion. For starters, there is the truck driver, who is the direct beneficiary of getting the load on time. There is the customer, who benefits from knowing the near-exact arrival time of the load in order to make arrangements to allocate a dock door, and then there are other parties such as traffic data sources and shippers, who are both feeding relevant data to the blockchain network. As noted, it s obvious that establishing trust among these parties is of primary significance. Establishing such trust can be challenging, given that each party belongs to different companies. Having a tamper-proof record of transactional and master traffic data is also relevant in this scenario, as that is the main fuel that helps derive the information from the data inputs such as customer delivery date, time, location, route from shipper, shipping location. Do all these parties benefit from a transparency of the information fed into the blockchain by each party? Yes the changes in the driver arrival time is relevant to the goods receiver, and the change to route by driver is relevant to the service provider who hasn t yet transferred the ownership of goods to the next party in the supply chain and also to the consignor whose eventual financial payment depends on the successful execution of the shipment delivery. Note how the custody and ownership of the goods as they travel the complex supply network is being recorded at every instance in time on the blockchain product transaction ledger. This is the pertinent information that is on record to refer to for any kind of reconciliation involving multiple organizations owning the product at different points of supply chain execution. For example, goods custody in cross-border trade, accidental claims, true-up of payment accounts and several import/export dealings in complex international trade across nations. Decentralized peer-peer network Trustless trust Blockchains improve trust between participants by providing multiple points of verification as each participating party also has a relevant interest in verifying the trust in data submitted by other parties Immutability Create permanent records that cannot be deleted or modified without another real transaction BC Customer PO PRO NO RRD Event Datetime Stamp Source Location Geo BC Customer PO PRO NO RRD Event Datetime Stamp Source Location Geo Security System is designed to prevent double counting of assets and record ownership and transfers, such as in the number of shipments delivered and actual quantities whose ownership is transferred from one to the next downstream party Transparency Blockchains are transparent in design to track the ownership or control of assets 4 On-demand visibility with blockchain 5

5 How to quantify blockchain technology to customers and customers to their senior leadership? EY can work with you to identify the value-add and lost opportunities that can be reclaimed in using blockchain. At a high level, we can start with answering questions and dealing with problems such as: Why does the payment process take so long? Which business entity owns and approves it? How to quantify blockchain? I am not sure if the information provided by a vendor is accurate! I don t trust Vendor ABC s data for SLA adherence data! Why is this business process so complex and requires so many hoops? Why are my business partners taking such a long time to circle back? Vendors don t prefer us on priority, as our pay cycle is long. Customer-Vendor dispute resolution is manual, tedious and nasty, and brings ill will between us. I am frustrated with my supply chain visibility! Too much paperwork and manual work in issue resolution audit.. audit...audit! 6 On-demand visibility with blockchain 7

6 Customers must understand that even though blockchain is an apt technology for scenarios you have read so far, it requires participation from all major stakeholders for it to succeed. Hence, the question is not whether this technology will work, but how to prove the value-add to all stakeholders and secure their buy-ins to participate in the blockchain network. Adoption and next steps Understand the business use case. Identify the chaos. Determine if that chaos revolves around trust. Analyze if this process with chaos has a long tail and heavy involvement of actors. Finally, does the client have a controlling or majority say in the overall execution of the process? If the answer is yes, then we have a blockchain use case on hand to explore in detail. With process maturing for meeting business need, involve external partners from the marketplace in limited numbers to promote viability Expand and integrate with other platforms and IoT technology/platforms to realize true valueadd of this blockchain foundational technology Talk about initiating a small proof of concept (POC) involving identified internal actors using small use case(s) e.g., customer manufacturing and its private fleet departments Plan phased rollouts based on business and strategic needs 8 On-demand visibility with blockchain 9

7 Contact Gaurav Malhotra EY Digital Supply Chain & Operations IoT and Blockchain Leader, Advisory Services Vikram Sriram EY Digital Supply Chain & Operations Manager, Advisory Services Sindhu Nachimuthu EY Digital Supply Chain & Operations Senior, Advisory Services EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US Ernst & Young LLP. All Rights Reserved. SCORE no US ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice. ey.com