We’ve all heard about blockchain for years, yet many of us in the high tech supply chain still view the technology as some sort of enigma, or saying we’ve become accustomed to using yet really don’t understand. Kind of like the word enigma itself, which truth be told I had to look up the definition of when I wrote this article; enigma [ uh-nig-muh ] noun, plural e·nig·mas; a saying, question, picture, etc., containing a hidden meaning; riddle.
The truth is that blockchain is no enigma or riddle. Frankly speaking, blockchain is actually very boring and mundane and as a supply chain professional, blockchain can help you just like a lot of technologies before it. You see, blockchain is classified as a general purpose technology (GPT) due to its wide applicability across industries and use cases. Other GPTs include the steam engine, electricity and the Internet (http communications protocol) itself. When comparing GPTs, it’s clear that each solves a different problem of some kind. For instance, comparing the Internet GPT to blockchain is another good place to start learning blockchain for the high tech supply chain.
Simply put, all that blockchain networks do is restrict access to a group of permissioned participants so they can gain consensus on the true state of whatever the heck they want to gain consensus on, at regular intervals. That’s it. That’s all she wrote. Memorize that statement and you’ll be the smartest person in your next Zoom cocktail party as it relates to defining what blockchain actually does in B2B and B2C commerce.
While we thought the Internet was about frictionless commerce and global trade, we were absolutely wrong. What makes the Internet unique is its ability to deliver free information, to everyone, everywhere, and at any time. Sure, you can still buy things with credit cards over the Internet, but that’s not much help in the $1 trillion+ annual global B2B direct materials supply chain. Keep this in mind as a high-tech supply chain professional: Unlike the Internet, what differentiates blockchain is its unprecedented ability to 1) verify, 2) transfer and 3) enforce the transfer of intellectual property rights for both physical and digital goods. Not a bad capability to have around in the new normal.
Regardless of your years of supply chain experience, once you understand the technology, you’ll be able to visualize how to solve problems in your business with this new and innovative architecture. And if you happen to get the blockchain bug like I did, the more years of experience you have in supply chain just means you’re that much more tortured with a desire to solve the plethora of supply chain inefficiencies you’ve encountered over the years.
You see, blockchain at the highest levels impacts two primary costs in business. 1) the cost of verifying stuff 2) the cost of networking. And in an industry with arguably hundreds of billions of dollars of verification related inefficiencies, the high tech supply chain has a lot to benefit from blockchain.
As we start this 5-part blockchain series, I offer Exhibit A; the eHitex global exchange announced in 1999, shortly thereafter renamed Converge, now an Arrow company, which provides sourcing and excess inventory management services to the world’s supply chain.
In 1999, HP’s then CEO, Carly Fiorina, led a coalition of 12 high tech companies including AMD, Compaq, Gateway, Hitachi, HP, Infineon, NEC, Quantum, Samsung, SCI Systems, Solectron and Western Digital to form eHitex, “an open internet exchange to serve the needs of the high-tech supply-chain community”. Run by an independent group or consortia, the intent of the exchange was to “provide services to buyers and sellers involved with computing and electronics-related industries with the intent of enabling these businesses to manage their supply chains more efficiently and effectively.”
While the industry’s eHitex exchange experiment crashed and burned over $100 million worth of investment, its intentions, goals and value propositions were spot-on. In 2000, more than $600 billion was spent each year in the design, procurement and movement of goods across the high tech supply chain, $60 billion of which the consortia estimated was inefficiencies. Fast forward to today and these numbers breach $1 trillion and $100 billion, respectively.
What we’ve learned these past 20 years is that the true key to ‘frictionless’ B2B digital trade lies in a combination the old and new tech - specifically the Internet and blockchain - two GPTs combining to produce a unique business result – the ability to verify, transfer and enforce the transfer of IP rights across physical and digital goods anywhere in the world at any time.
If you have not used blockchain in your business or enterprise business function, please consider this as a parting thought until next time; Do you think the companies that embraced electricity ahead of their peers tended to outperform or underperform those in their peer group who chose to wait and see how the enigma of electricity worked out?