For most companies, reaping the benefits of blockchain requires some preliminary internal work, as moving too quickly will run the risk of slowing down or even overwhelming operations, according to Matt Tillman, CEO of cloud-based TMS provider Haven.
A recent survey by independent research firm Chain Business Insights revealed that many companies in the supply chain management and trade finance industries are increasingly intrigued by the potential of blockchain to help improve supply chain visibility and transparency, to reduce transaction costs, and to enhance trust between supply chain partners.
The potential is enormous, but as with any new technology, it’s important to fully understand which business problems blockchain solves – and which it doesn’t. In the simplest terms, blockchain is a decentralized database that keeps records of transactions. These records are in chronological order, replicated millions of times across the distributed network. They provide a source of independently verifiable truth.
For shippers that move goods in which a record would be helpful, blockchain can be transformative. Food producers, for example, are increasingly asked to have an audit trail to demonstrate green business practices, or for easy traceability of food-borne illness outbreaks. For a few other business types, such as physical commodities trading, leaping into blockchain within the coming years may make sense.
For most companies, however, reaping the benefits of blockchain requires some preliminary internal work first. Otherwise, there is a risk that moving too soon will slow down or even overwhelm operations.
Many large shippers currently rely on outdated or minimal technology for basic day-to-day operations. This means there is often more easily-implementable, low-hanging fruit technology that can deliver bigger and more immediate returns, even if it’s not attracting the buzz of blockchain. As cutting-edge as it is, blockchain isn’t a substitute for the effectiveness of implementing more basic automation and standardization practices.
Shippers should first take the time to evaluate the maturity of the technology in the context of their business needs, balancing the short and long term change objectives with the risks of adopting a new technology and integrating it with existing systems. If you’re considering adopting blockchain, start by asking yourself these two questions: Are you able to efficiently locate and eliminate ‘information silos’ – the places in your workflow where information gets stuck in one person’s inbox, or another person’s spreadsheet? And is the data that drives your business decisions aggregated in one place, or on one platform?
If the answer to either question is “no,” then it’s important to first prioritize streamlining communications and removing information-flow blockages before considering a blockchain adoption initiative.
Standardizing Transactional Data. The most essential step in freeing supply chain information from legacy data silos is to add structure to your transactions. Every transaction has to be defined in the same way. One approach to creating structured data is to quantify the 5 W’s – Who, What, When, Where, and Why – of your transactions.
After establishing structure for your data, identify what level of data transparency is mission-critical for each type of stakeholder. It’s important to have roles defined so that people see the information they need to see. One reason for that is privacy and security, but a second, equally important reason is that teams can’t operate effectively when individuals are barraged by information, whether it’s specific documents, reports, prices, compliance documents, or email communication reply-alls. Technology solutions, such as a TMS built for teams, can help with this.
Structuring Organizational Workflows. All forward-thinking companies must grapple with an inevitable truth whenever they’re considering adopting a new technology: the workflow must be understood before it can be automated.
Once you’ve standardized the data and streamlined the workflow, the next step is to progressively eliminate manual processes. Don’t hold on to troublesome procedures, automated or not, simply you’ve “always done it that way.” You want to avoid migrating an existing error-prone process into a brand new technology.
This can be tricky to execute, because humans are built to maximize context. As you audit your internal business processes, people may want to avoid change, or teams may be too siloed to see the bigger picture. This tension can lead to the deployment of Band-Aids rather than true strategic solutions. Conversely, the person responsible for the high-level strategic overview may not have granular insight into the daily operation of each specific process; it’s important to be sure that both perspectives are represented.
Depending on where you are in your process optimization journey, your business is likely to see more tangible growth and improvements to the bottom line from taking these simple actions rather than from moving too quickly to adopt blockchain.
Looking Forward. Blockchain’s many benefits give it the potential to become the industry standard for many sectors in the future. When it comes to implementation, however, the devil is in the details, which means that the promise of transparent supply chains is probably a little bit further off than the hype surrounding this exciting technology would suggest.
It’s important to be prepared for a hard truth: clients and key partners may not be ready to make the change to a public ledger with you. Jumping into blockchain without assessing how your key stakeholders might be affected will create integration and productivity issues for all involved.
So before pulling the trigger on blockchain, work out the kinks in your data management and workflows first. Avoid wasting resources on premature implementations.
Putting in the early effort to standardize transactions and eliminate informational bottlenecks will lay the groundwork to enable your business to quickly adopt cutting-edge technologies like blockchain when the time is right.
Matt Tillman is co-founder and chief executive officer of cloud-based transportation management systems (TMS) provider Haven.