Supply chains and the blockchain
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