Supply Chain

The Blockchain Impact: How It Will Change Your B2B Network

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Gartner positions blockchain distributed ledger technologies on the “peak” of its Gartner Hype Cycle for Emerging Technologies, which says “blockchain will have a transformational impact on business” and industries.[1]  This impact will extend to B2B networks, but this is a longer-term potential. In the meantime, however, most organizations should not wait and see how blockchain will impact B2B. You can and should be thinking today about ways to use blockchain to meaningfully and incrementally augment currently established practices. Click here to read about the benefits of blockchain to supply chain networks.

Blockchain: A new type of B2B standard

For supply chain organizations, it’s useful to think of blockchain as a potential innovative, new type of B2B standard. This is because its long-term impact and success will depend on widespread adoption across B2B networks. The eventual impact is not the near-term impact, of course. And near-term impacts in B2B integration never happen by attempting to rip ‘n’ replace well-established practices and technologies. We know from the history of B2B standards, new technologies are much more likely to succeed initially if positioned to augment current practice, for incremental, but meaningful improvement. So, too, with blockchain.

For example, when the Internet emerged and started achieving widespread use, technologies like XML and AS2 for secure Internet messaging emerged and were predicted to replace EDI. But instead, they ended up augmenting EDI. Even today, a certain set of core EDI messages (around the buy-sell-ship-pay transaction lifecycle) have and continue to enjoy widespread adoption and are almost universally required by major retailers and manufacturers. Overall EDI information flows across the globe are still growing. However, the growth is constrained to a core set of message types. Where EDI has not gained popularity over the years – for example, in collaborative planning, pricing and promotions – other approaches and technologies have filled the void.

Using blockchain to augment current practice

Today, blockchain is a potential “new kid on the block” for B2B – so we need to be thinking about how it can augment current practice. And we need to think about ease of deployment, because firms are loath to take on new complex integration projects. So, the key question: Where might blockchain augment B2B integration and be easy to deploy?

Consider the situation today with B2B networks: Suppose a given supply chain process involves a buyer, seller and third-party logistics provider. Today, information flows between these entities are typically one-way and point-to-point, either through EDI or XML-based messages or other mechanisms, such as API-based interactions. It is often the case that a buyer and seller might exchange certain messages, but an intermediary logistics service provider doesn’t see those messages. Or a seller and logistics provider might exchange certain messages not exchanged with the buyer.

With traditional forms of point-to-point B2B each party has its own view of information flows, and through mechanisms like acknowledgement documents, each party thinks that supply chain information flows are synchronized. But no such shared state situation exists; we know this is the case because supply chains establish complex sets of rules for various kinds of exception handling and reconciliation. This is done precisely because information sharing is one-way, point-to-point, and often also batched as opposed to near real time.

If shared state visibility truly existed, many of these exceptions and dispute situations would not arise in the first place – or would be remediated as they occur. Enter blockchain for B2B networks. As a “distributed ledger” technology, think of blockchain as first and foremost as a way to deliver a secure, auditable record of events for shared visibility of supply chain information flows. Events representing the exchange of B2B documents, for example, could be recorded on a blockchain, and made visible to all participants in a particular supply chain process. In addition, blockchain could record supplemental events, such as those provided by IoT and smart devices, providing a more detailed synthesized record of all information flows. The actual exchange of B2B documents that occurs today can continue to operate as is, and a blockchain could simply provide a shared visibility “overlay.”

In an upcoming blog post, I’ll examine how this “Blockchain for B2B networks” can work and the benefits to organizations in applying it.

Blockchain is just one of the areas where IBM is investing in innovative technologies to help companies improve visibility and optimize their supply chains. Read about how IBM is applying its Watson cognitive technology to supply chain visibility.

[1] Gartner Hype Cycle for Emerging Technologies, Gartner, August 2016

 

Senior Product Management, Watson Supply Chain

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