The Y2K program actually came about as software developers assumed, in the early days of computing, that newer, better systems for enterprises would come very soon, as well as that their efficient two-digit date systems are going to be replaced long before the year 2000 came along.

Supplier collaboration – the best blockchain solution

There were actually very few CIOs in those days, and a lot of them can be carefully explained to these efficient software developers that if something is not broken,  don’t try to fix it, which is usually followed by the corporate view on IT problems.

You may also think of CIOs as technology enthusiasts, and they in fact are, but these days, IT systems are almost always mission-critical. Changing them out actually means enterprises accept a considerable operational risk. While you cannot make a car with an electronic data interchange message, if such messages do not go out or come in, there is going to be no raw materials for the manufacturing line to boil together.

As a result of that, risk management in some larger enterprises actually means that we cannot drop in blockchain technology whatever we see a good app. Processes which work at scale, even those that do not work particularly well, are still less risky than adopting some new ones, mainly if you need to bring a bunch of business partner together with you for the ride.

When it actually comes to deploying blockchains in the enterprise, it means that some things which seem like apparent applications are not necessarily going to get traction.

The most typical blockchain solution which does not gain traction although, on the surface, it looks like a great idea is supplier collaboration. Blockchains are, in fact, ideal for complex and multi-party solutions.

Tokenization is a more powerful tool for managing supply chains

In particular, tokenization is a much powerful tool for managing supply chains as it actually means that each piece of inventory is the subject of double-spend controls and reconciliation when it is tokenized.

Also, you may think that such things can already occur today. But, they do not occur.

It turns out that while you cannot put money in someone’s bank account without moving it from another one, most enterprise IT systems are not going to permit you to create inventory only about anywhere – and without reconciliation.

With the use of tokenization and a blockchain to link up the supply chain, people can also subject inventory tokens in order to double-spend controls, as well as force reconciliation across the network. The result is actually a process which looks much more like banking. When you model this for EY clients, the can find a 20% or more reduction in inventory easily, just with the improvement of the accuracy of operations. The return on that investment is often huge.

The obstacle is that almost all large companies already have supplier relationship management systems. They also handle the exchange of shipment messages, invoices, as well as inventory data. They are usually point-to-point, between one customer and one supplier, without including third parties such as contract manufacturers or shipping companies, and usually detached from payments too. Additionally, such systems cannot see past one tier back in the supply chain so a factory fire or some big shipping delay two tiers back will not be visible until it is too late to react appropriately.

Businesses look for more procurement solutions

Is this inadequate or too expensive? A far cry from what a combined blockchain answer can actually do? Yes and yes. However, do these systems work from a day-to-day operations standpoint without some significant disruption? Well, most of them. Also, would it be risky and scary to replace when without some major crisis or burning platform? Yes.

As a consequence of this, while you build supply chain collaboration, as well as integration systems, your expectations about where, as well as when you can push a blockchain solution are somewhat different.

Some businesses are also seeking some more procurement solutions where the ROI is tremendous and measured or those scenarios where operational success in the supply chain actually depends heavily on actions which take multiple tiers out of the supply chain.

In both the cases, there is usually enough value or big enough capability gaps in order to justify the new solutions for the investment of enterprises.

Blockchains will probably become the standard mechanism by which companies will interact with each other, covering everything from the business agreement for the tokenization of products, as well as services, delivery, and supply chain tracking and integrated payments.

There, the path is going to be an indirect one, starting with one very specific problem at a time.

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