How Blockchain will Intersect with the Wholesale Distribution Industry
Author: Frank MARGUIER Site:SAP.com
How Blockchain will Intersect with the Wholesale Distribution Industry
Business continues to become more and more global, making it important to optimize each process of the supply chain, where wholesale distribution plays a key role several times throughout the total end to end value chain.
A new concept called “Blockchain” is very promising for facilitating and safeguarding these end to-end process in the global world.
Let’s start with a rapid reminder of what Blockchain means. Blockchain is a distributed ledger where transactions (the blocks) are encrypted and always associated with their previous transaction. This is the reason why Blockchain is also a type of what we call a Distribution ledger technology (DLT). Blockchain could be public or private, in this last one only approved members could get in. Then you have also the consortium which is a private but with multiple owners. Now let’s see how Wholesale distribution will benefit from Blockchain in various areas.
Business transactions
This global world is not a gentle world; non-payment, counterfeit, or simply bad quality are happening to all economic members.
Wholesale is in the middle of the process, wholesale distribution is engaging with multiple stakeholders: suppliers, inbound transportation, customs, insurance, co-packers, outbound transportation and banks. They represent a kind of eco-system which is the foundation of a private blockchain environment. That will then allow the following shared blocks: contracts, orders, deliveries, stock movement, invoices, payment, return, credit notes… These act as a mirror in the inbound supply chain with suppliers to be all enrolled in the same private distributed ledger.
As this is auditable activity, this is a proof of provenance that will guarantee against counterfeit product. At the same time, having registered each leg of the supply chain, this is also a full track and trace system. This capability is available by nature to the relevant tiers in all sub-segments of wholesale distribution like food and pharmaceutical, but also industrial and high tech segments where counterfeit is a real risk.
Easier Finance Payments need a special point because the bitcoin is somehow at the origin of Blockchain.
This could be through a private blockchain from the banks, which will accelerate payment transaction and slightly reduce them.
These payment transactions could be one day also completely free of charges if the wholesale eco-system choose one day a guaranteed-public Blockchain. Even though the banks are investing massively and still have the confidence of the politics, public Blockchain could replace some banking services.
Asset management
Wholesale distributors have assets and they need to track the use of their own assets like Computers, trucks, but also in pumps in warehouses, and refrigeration systems….In all cases, the life cycle of the asset is key for the safety of the chain.
Each step of the life of the asset, like maintenance operations, change of location, assignment to a driver, quality control, un-forecasted breakdowns, when assets are sold second hand could be managed in the private blockchain and allow for reporting of necessary actions for a smooth transaction which is auditable for the benefit of all to avoid long discussion and research in case of conflicts.
Imagine that all the spare parts and their provenance, all the technicians subcontracted or not having been involved will be memorized in the life cycle. In connection, the spare parts itself will have its own life cycle and variant creation in a connected, but different blockchain allowing to know which one is necessary for a repair between the numerous variants.
Here SAP with SAP Asset intelligence network has proposed a very similar private environment.
People management
To fight against the market places like Amazon supply presenting a hundred of millions of articles in B2B, Wholesale distributors need to innovate and attract the best talent. But they need to be sure of these talents. Here Public Blockchain will soon be able to certify the CV’s on each point: university and experiences, again by a distributed ledger where tiers will automatically confirm the CV’s point.
To be in or out
If public blockchains have been designed to cut the middlemen and the billions of Euros of expenditure at the same time, banks and wholesale distributors are both at risk.
Banks have rapidly gone into the mix and started to create private blockchains claiming them much more secure when they are owned by them. This is not the case of the wholesale industry which still looks at Blockchain from a more futurist perspective.
The right response will certainly come from a consortium where the Blockchain will be owned by a group of entities. Wholesale distribution must wake up otherwise their business will be squeezed to a logistic provider.
They really need to be at the forefront of the innovation and the starting story, and this is why SAP has now a dedicated Blockchain service in his SAP Cloud platform, to help the early birds to innovate in this key area.