Public crises highlight the importance of supply chains. Shelves are scoured for everyday items (bleach, toilet paper, instant noodles, etc.), then serve as photo-ops. Bonus points for pictures of shoppers clutching teetering stacks of precious items.
Supply chains extend far beyond supermarkets. The ongoing semiconductor shortage continues to have a wide-ranging impact. “Beginning in 2020 and accelerating into 2021, a chip shortage has, to various extents, plagued the estimated 169 industries which depend upon them,” wrote the American Institute for Economic Research (AIER) last month.
“Manufacturing semiconductors involves not only a network of highly specialized firms in an often multistage production process, but a dependence upon firms which produce the ultra-high precision equipment for the fabrication procedure,” wrote the AIER. “Thus, while silicon is a metalloid and accordingly a commodity, the various chips employing it describe a spectrum of complexity that runs from basic microcontrollers to high-performance processors: each of which rarely has substitutes.”
Commodities without substitutes will torture-test any supply chain. Expect spin-off effects. And spin-offs are unpredictable.
Chip-and-PIN chain
Credit and debit cards are more secure now because of chip-and-PIN technology, which has supplanted the less secure magnetic-stripe variety. But according to tech market advisory firm ABI Research, chip shortages affect the supply of payment cards now and in the future. “Driven by significant chip shortages, up to 1 billion payment cards are at risk of not being issued over an 18-month timeframe, with 347 million at risk in 2021 and up to 740 million in 2022,” said the firm.
“Although not necessarily getting the attention or the support from governments they deserve, payment cards are a critical enabler for global economies, both from a consumer and enterprise perspective,” says Phil Sealy, digital security research director, ABI Research. “A lack of payment cards will directly translate into less purchases, which will ultimately have a detrimental impact on GDP.”
Critical planning
Businesses often plan for a quarter or a fiscal year, in line with financial reports. But supply chains are like supertankers: powerful and bound by inertia. Even simple maneuvers must be implemented well in advance to be effective.
The term supply chain management (SCM) is well known, but supply chain planning (SCP) is equally apt. “The job description of supply chain planning leaders today looks totally different than ten years ago,” says Marko Pukkila, vice president and team manager for supply chain at Gartner. “It’s no longer enough to provide copious amounts of data ― supply chain planning leaders must use the data to draw conclusions about future risks and opportunities.”
In May, Gartner published their “Supply Chain Top 25 for 2021” with Cisco atop the list, “followed by Colgate-Palmolive, Johnson & Johnson, Schneider Electric, and Nestle.” New to the research firm’s list: Dell Technologies, Pfizer, General Mills, and Bristol Myers Squibb. Given the ultra-cold conditions under which the Pfizer–BioNTech COVID-19 vaccine (developed by German biotech firm BioNTech) must be handled, it’s no surprise that the pharmaceutical giant leaps onto the 2021 list.
Blockchained supply chains
Stalwart Cisco is accustomed to scalability issues in its supply chain. But Amazon Web Services (AWS), a subsidiary of Amazon, didn’t exist until the 2000s, and by its business nature should have less severe scalability problems. And a recent earnings report shows the profitability of AWS: “Amazon.com has released its Q2 2021 earnings, and revealed that revenue from its cloud business Amazon Web Services had jumped 37% to an annualized rate of USD 59 billion ― a figure that takes it past Cisco’s annual revenue,” writes Laura Dobberstein in The Register. “AWS only commenced operations in 2006, so creating a Cisco-sized business in the 15 years since is quite an achievement.”
And the Amazon ecosystem now offers a managed blockchain service. While blockchain technology is part-and-parcel of cryptocurrency, it has many other uses. Blockchain can provide provenance for specific items which can be used in “track-and-trace” operations. The applications for such technology to the post-COVID world ― where online ordering and delivery has largely supplanted bricks-and-mortar businesses ― are obvious.
“Track and trace is often a challenge for today’s supply chains due to outdated paper processes and disjointed data systems that slow down communication,” says Amazon. “The lack of data compatibility exposes supply chains to problems like visibility gaps, inaccurate supply and demand predictions, manual errors, counterfeiting, and compliance violations.” Anyone who’s experienced the frustration of waiting for a critical item to be delivered can relate.
Blockchain now, for the future?
Amazon isn’t the only major vendor to offer BaaS (Blockchain As A Service). For example, IBM leverages the TradeLens ecosystem to advance global trade with blockchain, preventing counterfeiting of pharmaceuticals and encouraging responsible sourcing of minerals. “TradeLens has already processed 42 million container shipments, nearly 2.2 billion events, and some 20 million documents,” said IBM in a statement. “In total, five of the top six global shipping carriers are now integrated onto the platform contributing to the digitization of documentation and automated workflows.”
“Oracle is the enterprise blockchain dark horse,” wrote Alan Pelz-Sharpe of U.S.-based research firm Deep Analysis in a research note. “Its stealthy but deeply funded and well-sourced entry into the market follows Oracle’s well-established pattern: the firm has a history of first dismissing new technologies, only to work quietly and then launch into the new market with full force. That being said, with Oracle’s deep roots in the supply chain, financial services, and government sectors, blockchain always made more sense for it to embrace than for some of its competitors.”
“All blockchain technology is complex, and its correct application remains difficult. Less than 20% of blockchain pilots proceed to production,” wrote Steve Wilson, vice president and principal analyst at Constellation Research, in a research note. “So far, the best non-payments applications for managed blockchain appear to be supply chain documentation (especially in shipping), some interbank and stock exchange settlement, and some aspects of decentralized digital identity management.”
Constellation name-checked Hedera Hashgraph, IBM, Infosys, Microsoft, Oracle, R3, Salesforce, and Wipro as vendors to watch in this space.
As crypto continues to hog headlines and attract the eyeballs of digital nomads, blockchain tech lives in its shadow. But this won’t always be the case. Expect blockchain to play a more prominent role in securing future supply chains.
Stefan Hammond is a contributing editor to CDOTrends. Best practices, the IoT, payment gateways, robotics, and the ongoing battle against cyberpirates pique his interest. You can reach him at [email protected].
Image credit: iStockphoto/Tomwang112