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Sup­ply chains and the blockchain

Business Spotlight - - CONTENTS - MEDIUM AU­DIO

Our world is volatile — earthquakes in In­done­sia, Ryanair strikes, cur­rency cri­sis in Turkey — drama ev­ery day. The funny thing is, though, that de­spite chaos, you can al­most al­ways count on get­ting that pair of hik­ing boots you or­der on­line when­ever you want them. So how is it pos­si­ble to pre­dict the ar­rival of a DHL or UPS courier nearly to the hour with that pack­age? The answer is sup­ply-chain man­age­ment, or SCM, as in­sid­ers call it.

The SCM in­dus­try is global and com­plex, and it’s an in­creas­ingly at­trac­tive area of work for peo­ple who are in­ter­ested in the busi­ness of keep­ing cus­tomers happy. You can even get a de­gree in SCM now. The Univer­sity of Bath, in south­west Eng­land, for ex­am­ple, of­fers an MSC in op­er­a­tions, lo­gis­tics and sup­ply-chain man­age­ment.

When it comes to SCM, Ama­zon is the boss. The speed with which it can get a set of bed sheets or a 2019 desk cal­en­dar to your door at an at­trac­tive price is re­mark­able. Not sur­pris­ingly, Ama­zon doesn’t say much about its sup­ply-chain in­fra­struc­ture, and very few peo­ple out­side the com­pany know much about how it man­ages its lo­gis­tics op­er­a­tions.

Com­pa­nies like Ama­zon can af­ford se­crecy be­cause they can af­ford to write their own sup­ply-chain soft­ware. For the rest of the world, there’s SAP. The com­pany, with its 93,800 em­ploy­ees and rev­enue of €23.77 bil­lion in 2017, of­fers a suite of ap­pli­ca­tions joined to­gether through a data­base. Com­pa­nies buy SAP “mod­ules” and the sup­ply-chain mod­ule

“Ama­zon can af­ford se­crecy be­cause they can af­ford to write their own sup­ply-chain soft­ware”

in­ter­con­nects with the rest of the suite. And that’s how SCM works to­day, but that might not be how SCM works to­mor­row. You see, there’s a new kid on the block: blockchain.

Blockchain is the tech­nol­ogy be­hind cryp­tocur­ren­cies, and the idea is that for each “link” along a chain of users, a data­base as­so­ci­ated with a par­tic­u­lar coin (or pair of hik­ing boots) up­dates au­to­mat­i­cally to regis­ter the change of own­er­ship or sta­tus. The iden­tity of each user is recorded and the list of all the trans­ac­tions is avail­able to ev­ery­one along the chain.

In the­ory, then, blockchain could make it pos­si­ble for com­pa­nies and cus­tomers to ver­ify the ori­gin and back­ground of the things we buy. Were chil­dren in Africa in­volved in min­ing the cobalt that’s part of the lithium-ion bat­tery in my mo­bile phone? Is the sex­ual ha­rass­ment of women in Myan­mar’s gar­ment fac­to­ries be­ing re­ported and recorded? Some peo­ple would like to know. “Sup­ply Chain 24/7”, a news­let­ter that cov­ers the tech­nol­ogy, calls blockchain a “game changer”.

To make blockchain use­ful, of course, ev­ery sup­plier and man­u­fac­turer would have to agree to dis­close in­for­ma­tion about their prac­tices, in­clud­ing in­for­ma­tion about ori­gin, work con­di­tions and en­vi­ron­men­tal im­pact. Real­is­ti­cally, in a high-speed world where the goal of SCM is to as­sem­ble and trans­port things quickly, it’s hard to see that hap­pen­ing.

As we wait for all those boxes to ar­rive in the run-up to Christ­mas, here’s a near-fu­ture SCM sce­nario in­volv­ing ma­chine learn­ing, where com­put­ers “learn” by us­ing data. In­stead of caus­ing chaos, earthquakes, air­line strikes and cur­rency crises would see in­tel­li­gent SCM net­works au­to­mat­i­cally re­con­fig­ur­ing them­selves to find less risky sup­pli­ers.

In the mean­time, I’m con­fi­dent that my 2019 desk cal­en­dar will ar­rive early on Fri­day, 21 De­cem­ber.

“To make blockchain use­ful, ev­ery sup­plier would have to agree to dis­close in­for­ma­tion”

Ef­fi­cient sys­tem: Ama­zon dis­tri­bu­tion cen­tre

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