In his latest article, James Heidrich describes the evolution of supply chain. To keep up with James Heidrich, visit his website, JamesHeidrich.co or follow him on Twitter, @JamesHeidrich1.

1. THE EVOLUTION OF
SUPPLY CHAIN
SUPPLY BLOCKCHAIN OF THE FUTURE
JAMES HEIDRICH

2. The supply chain is an integral part of what drives the modern industry.
Whether you deal in hardware or software, you’ll need a decent supply chain
to scale up your business and to keep the demand of consumers in check.
That is why supply chain management is a topic that is constantly brought up
and its innovation is discussed ad nauseam. To a beginner and to an expert,
supply chain management may carry the same level of fascination, just
because there are so many techniques and ways to go about designing a
procedure to implement it.
In today’s world it’s not as simple as it once was. Not only is there much more
volume to move than there was even ten years ago, and not only has the
supply chain management of any and every product truly gone global, but
there are a lot of concerns to take care of the bigger the supply chain gets.
There are tracking issues, customs and duties and taxes to take care of, and
then there is the environmental aspect of the supply chain to consider.
In today’s world of conscious, politically and socially aware consumers, it is
imperative to optimize and customize the supply chain to not only fit the
needs of the current generation, but to also make sure that it efficiently
produces next to no waste so that the operations conducted are carbon
neutral.
COMPLEXITY OF THE
MODERN SUPPLY
CHAIN
INTRODUCTION

3. By and large the meaning of supply chain management has stayed the
same. It is the practice of “incorporating a company’s social,
environmental and economic goals into the coordination of inter-
business processes to improve the long-term economic performance of
the individual company and its supply chains.”
Hence, not only does the supply chain differ from company to company,
but it differs from country to country depending on the local culture,
political sensitivities and evolution of the society.
Today’s world has become more holistically concerned rather than
concerned with milking the most profit out of the supply chain as
possible. Although profit is still king, due to social pressures, the
prevalence of the media and the proliferation of social media, the idea of
the supply chain existing simply as a tool of the company rather than a
living and breathing part of the society has been flipped on its head.
DEFINITION

4. While the supply chain may seem like it always existed, at least in concept, in
the field of business, this is strictly not true. The first signs of the supply chain
and its management emerged in the early 1980s when the world was on the
cusp of being connected by digital signals and satellites.
The first recorded use of the phrase was in the British Newspaper, “The
Independent” where it was used to refer to the wartime situation. However,
the development of the concept for handling retail and business became
known in the mid 1980s when in 1985, an analysis for supply chain was
published and in the mid 1990s when in 1995, the “total cost of ownership”
model was developed. What followed was the creation of the Supply Chain
Council and the Council of Supply Chain Management Professionals in 1996
and 2004 respectively.
The “total cost of ownership” was defined as the monetary estimate that
included all direct and indirect costs which were involved in the production
of a certain good. The direct costs included raw materials and labor. On the
other hand indirect costs included the costs of running the business and the
supply chain which were not involved in making the good.
HISTORY

5. The sustainable supply chain is a concept that has been chased after as
long as supply chain management has been around. The theory of the
sustainable supply chain is very popular today because it meshes
together with environmental concerns as well as business concerns.
Businesses recognize that a sustainable supply chain will do more for
them than one that is meant to expire or eat up resources. Not only will it
guarantee continued operation, but also be better for the world
surrounding the company; something that is good for business and for
public relations management.
SUSTAINABILITY

6. Working conditions
Environmental or green issues
Corporate social responsibility
Low wages/minimum wages
Human rights
Child labor
Sustainability
Health and safety
Forced/bonded labor
Sweatshops
Ethics
Bribery
Recycling
Waste
Air pollution/emissions
Water pollution/emissions
Working hours
The person at the center of this entire management cycle is
the Chief Financial Officer of the company. Here are the
main concerns that plague the CFO:
Maintaining philosophical and ethical consistency across all
points of the supply chain
Challenging and supporting the choices that the company
makes in what it invests and what it becomes involved in.
Supervising the operations and enhancing performance and
putting efficiency of the supply chain above all else
Managing risk and continuity of business
The main issues on the mind of
industry professionals looking
for a sustainable model for
supply chain management are:

7. Nearly every single multinational company or conglomerate has a digital
infrastructure to manage the supply chain, from industry to the customer. It
analyzes the data from the beginning to the end, but the supply chain
management software built from the ground up is always falling short of one
critical thing: visibility. Most companies have very low visibility into where
their product goes and where it is at any given moment.
Tracking parcels and deliveries is a pain because there are jurisdictions,
customs and duties that are involved which are not in the control of any one
entity. At times it becomes so complicated that parcels are lost and
customers complain about the loss of their package.
The culprit for most of this is the gap that occurs where digital service isn’t
available. This is what is known as an analog gap and it endangers the process
of delivery and creates a huge vacuum in the supply chain that is hard to fill.
However, there is a certain system in operation today that may make it a thing
of the past. That is the system used as a foundation on which cryptocurrencies
were created, called the Blockchain.
THE DIGITAL
PLUNGE

8. Blockchain is an internet based system used to transfer bitcoin and various
other cryptocurrencies between digital accounts. It affords complete
transparency and anonymity along with the option to be completely tax-free
of any entity, private or public. It’s an enticing technology to experiment with,
but until last year, it was just that, an opportunity to experiment with a new
technology. However, with the boom and bust of bitcoin that occurred at the
end of 2017, Blockchain registered on the radar of every single company and
individual with an internet connection.
The allure of Blockchain for supply chain management is simple, it’s an
independent system that can work across continents and won’t be hindered
by any international tariffs. It’s also a model that is more secure than any
banking or financial model on Earth today. The automation of the Blockchain
system has also produced some remarkable innovation in the field of contracts
that is simply incredible.
The transfer of money is also incredibly smooth via Blockchain and can be
done in a matter of minutes across continents because the internet is one big
information superhighway and doesn’t know any borders or boundaries.
BLOCKCHAIN

9. Blockchain also has the option to scale up to humongous levels and
established IT companies are already experimenting with it to try making it
their primary data transfer system around the globe. This includes
Walmart, which tested an application that traced pork in China, produce in
the US and authenticated transactions with accuracy.
Maersk and IBM also worked on cross-border and cross-party transactions
using Blockchain to improve efficiency. This went on to Provenance, a
startup in the UK that raised around $800,000 for the adaptation of
Blockchain technology to track food. The pilot program was to trace tuna
in the Southeast Asian supply chain.
The advantages of Blockchain technology are limitless, yet it’s such a young
technology that no one can tell what prospective advantages it may yield
in the future. It will, no doubt, replace many of the old, mundane and slow
processes that would hinder supply chain and would contribute to the free
flow of capital and information across the globe, but it would also be
instrumental in providing digital security to supply chain all over the world.
(CONTINUED)
BLOCKCHAIN

10. SUPPLY BLOCKCHAIN OF THE FUTURE

11. Transportation and logistics is one industry that has expanded
hundredfold in the last century, not least due to the creation
of such retail giants such as Amazon and Alibaba. With such
behemoths battling it out for supremacy in the world of tech
and in the world of retail, there is cutthroat competition. And
the main problems that they’re trying to eliminate are latency
issues and last mile deliveries.
Predominantly, it’s all a game of transportation and logistics.
Whether it’s a case of not finding the right address, or the case
of shipment tracking not working at all, transportation and
logistics is an area that needs a lot of work. Blockchain can
seemingly provide a solution for all of that.
As demand for same-day and on-demand deliveries increases,
the expectations of the consumer have skyrocketed. Due to
which commercial transportation companies are faced with an
ever-increasing need to innovate.
TRANSPORTATION AND
LOGISTICS

12. Blockchain technology would seek to eliminate the issues that the old
supply chain faces, at least not to the same degree. By using the
blockchain for authentication of data, the entire network would be able
to contribute and validate the data it is processing. This means that less
of it would be subject to corruption and tampering.
The increasing reliability of tracking data would also have an impact on
the conservation of goods that are shipped. As an example, the
refrigerated and temperature controlled transportation relies on on-time
delivery. This efficiency can only be improved through the use of
Blockchain technology.
IBM has partnered with global companies to launch an initiative to bring
the “requisite efficiency, transparency and authenticity to food supply
chains around the world.”
FREIGHT TRACKING ISSUES

13. Blockchain can be particularly useful for capacity monitoring if combined
with the innovations of the IoT. The Internet of Things is a concept that is
perfect to track volumes of data and materials all across the globe. Retail
and shipping is mostly a game of calculating costs and margins to turn a
profit on shipping.
Hence, the IoT sensors on trucks and other shipping vehicles can detect
the amount of space that is taken up by a shipment and determine that
cost accordingly. This information can then be transmitted to the
blockchain and saved for future references. This way, more and more
efficient packing techniques can be realized, and better calculations for
shipping freight can be carried out.
Not only will this help with more volumes being shipped, but it will cut
down on the number of parcels and objects that are damaged during
shipping. According to a study by Freight Waves, 8.5% of sensitive
pharmaceutical shipments are damaged during shipping due to
temperature deviations.
IOT AND AI TO INCREASE EFFICIENCY

14. The Swiss firm SkyCell was able to create air freight containers with the
use of IoT sensors that were specially built for refrigerated
biopharmaceuticals. They monitor humidity, temperature, and changes in
location. Due to this innovation, SkyCell was able to bring their
temperature deviation rate down to less than 0.1%. This saved many more
of the pharmaceuticals that were hitherto being damaged beyond
salvaging.
IOT AND AI TO
INCREASE
EFFICIENCY
(CONTINUED)

15. The importance of tracking isn’t limited to just delivery. There’s also the
performance of the vehicles in the fleet. It so often happens, that certain
deliveries are stalled or just not made because the delivery truck in
question has broken down or because it’s not being replaced.
And sometimes when a second-hand vehicle is being purchased by a
small business or even a large company, there’s no guarantee that it will
run right. The blockchain can help solve this problem by keeping track of
the vehicles in question. It can maintain a record of its performance, its
maintenance history, its top speed, and efficiency, etc.
While many companies exist that do this, they are simply intermediaries,
and the blockchain will cut out the middleman.
EFFECTIVE TRACKING OF PERFORMANCE
.

16. Just as the blockchain can help track the performance history of a
vehicle, it can help track the performance history of the carrier as well.
The situation can be debilitating in a time crunch when there’s a new
carrier to be authenticated. Blockchain technology can cut that time
down by creating decentralized networks to hold the necessary records of
the carriers across the freight industry.
EASIER CARRIER
ONBOARDING

17. Smart contracts are an incredible and serendipitous consequence of the
blockchain, and they can be used as a huge advantage for the logistics
industry. These are basically self-executing tasks that can be coded
through the blockchain. They can be executed automatically when
certain conditions are met and can hence, make the entire process much,
much faster.
A basic example of this is when a company wants to release a payment to
a certain supplier. When the item reaches the destination, the Blockchain
tech in place can log in that entry and automatically execute the
command to transfer funds to the shipper. This way, the middlemen are
cut out, and the process becomes much smoother and more efficient.
This would essentially cut out the problems with late payments and the
squabbles over delayed or outstanding dues.
SMART CONTRACTS

18. Despite the advancement in digital technologies, the
procurement process is plagued with a lot of challenges that
need to be handled like transparency data inconsistency, and
speed. There are also problems with trust and time sensitivity.
Paper-based processes are still very common, and this results
in reduced transparency across many networks. The
companies that are facing these challenging using data
analytics, IT and big data may very well improve supply chain
visibility, but the blockchain can offer the best of all possible
worlds here.
PROCUREMENT

19. One of the main pain points of professionals in the procurement business
is the lack of trust they have with a lot of parties involved in deals. This is
the reason that a lot of intermediaries and middlemen have been put in
place to establish that trust. However, they take up a lot of money and
time that could be brushed to the side if the trust wasn’t needed.
Blockchain technology provides you with complete transparency; hence
the trust isn’t required anymore, since the process is already so clear. The
Blockchain enables businesses to store their information in a secure
database that is traceable and can’t be altered without the consent of the
primary users.
All the applications that work within it are layered on to a cloud-based
and tamper-proof network which ensures digital trust. This feature of the
blockchain ensures that the agreements signed and the deals made are
all verifiable. This provides encouragement to all the partners involved to
move forward without hesitation. Since it’s a digital network and not a
human being that is making these deals, it makes it their interest to move
forward.
EMBEDDING TRUST

20. The multi-party supply chain is a sequence of distinct methods that are
undertaken for manufacturing, product development and marketing.
They reach the end consumer at the very end. The digitization and
standardization of this process is a clear break from these conventions. It
allows the chain to become a more organized system which offers greater
clarity to everyone involved.
This goes for the raw materials, the manufacturing process, the finished
goods and the end consumers involved.
DIGITIZATION AND STANDARDIZATION

21. As of now, the Blockchain records every single transaction that is carried
out on its network. Due to this, the payments are transparent and public
and no one can add to the blockchain without all the stakeholders
knowing. This way any malicious or suspicious activity can be tracked
before it damages the business.
This gives a greater incentive to invest and to procure. Since the risk is
mitigated, the business decisions automatically become safer and more
financially viable to take.
MITIGATING RISK

22. In the life science industries, the business increasingly is faced
with challenges to monitor a host of different datasets. This
includes maintaining a supply chain that can prevent falsified
products, identifying defective products and also comply with
regulations, old and new. Blockchain can allow real-time
recording of each stage of manufacture, supply, and
distribution so that every part of the process is carried out by
the book.
Information like the place of production and the shipping
dates as well as the batch numbers and expiry dates can all be
recorded. Even the smallest details like the storage
temperature and the unique identification numbers can be
stored and monitored due to the placement of IoT sensors.
MEDICAL
TECHNOLOGY

23. The advantages of using Blockchain as the Supply Chain of the future are
clear, yet there are a lot of bugs to work out. These include caveats such as
the speed of the transactions, the lack of taxation and wide implementation
of the blockchain in various countries and opposition to the trade of various
crypto-currencies in large countries like China and India.
Not to mention the vast overhaul it would require shifting to the blockchain
for large retailers around the world such as Amazon and Alibaba.
However, like all things, the implementation of this new technology needs
time and acceptance. And only time will tell how successful it will be at those.
CONCLUSION

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