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May 24, 2017

From Diamonds to OEM: How blockchain will transform the entire supply chain

In this latest Tech Express, SAP Ariba's Joe Fox looks at the potential impact of blockchain on business processes.

By Ellie Burns

EB: What is blockchain?

JF: Blockchain is among the most disruptive technologies of the day. From banking and insurance to agriculture, energy and healthcare, it is shaking-up entire industries and transforming global supply chains. At its core, blockchain is a digital ledger of transactions, agreements, contracts – anything that needs to be independently recorded and verified as having happened. However, the ledger isn’t stored in one place, it’s distributed across several, hundreds or even thousands of systems globally.

Joe Fox, Senior Vice President of Business Development and Strategy, SAP Ariba

 

EB: What business processes does it have the potential to disrupt?

JF: Blockchain will have a massive impact on the way people look at business. It will enable companies to reach out to the boundary of their trade relationships and bring them into a new governance model where all processes and transactions are captured in a secure but decentralized way. It will enable trusted inter-enterprise business processes because of its distributed trust and transparency. This will bring more companies into connected and digital collaboration.

 

EB: How does it help companies have visibility into the entire supply chain?

JF: Among the biggest issues that companies face is the provenance, track, trace and recall of goods. Tracking and tracing issues occur before, during and after shipment. For instance, it often happens that a seller will ship something to a warehouse where it is swapped for a knock-off without the buyer knowing. The food industry specifically has a significant problem with replacement fraud. The distributed ledger capability of blockchain provides buyers and sellers with increased visibility and control from shipment to receipt, which ultimately reduces the risk of such fraud. Additionally, it provides OEM manufacturers with visibility to provenance of component parts prior to assembling finished goods and after delivery of their finished products.

 

EB: Do you know of any innovative use cases of this technology?

JF: Everledger is a global digital registry for diamonds, powered by blockchain. It securely captures the defining characteristics of valuable objects (provenance), such as diamonds, and creates a digital thumbprint of the asset that is stored on the blockchain. This information, including history, transport, events and ownership, is relied upon by multiple stakeholders across global supply chains to verify authenticity.

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Everledger has built a global platform of provenance by connecting records of authenticity to a physical object and its certification as it moves throughout the supply chain. If you can track and trace diamonds, you can track and trace anything.

We’ve teamed with Everledger to bring blockchain to procurement. One of the first applications we see is around smart contracts. With blockchain technology existing trade contracts can come to life and be applied within the transaction system to take effect and enforce business terms at the point of transaction within the blockchain ensuring rules are followed and business becomes more digital and more efficient.

 

EB: How do you see the application of blockchain developing in the next few years?

JF: Blockchain will become a default aspect of many technologies at the platform level bringing broad global access to business collaboration while also ensuring that core problems are solved at the source.

Land ownership, something managed very closely in first world countries, will be managed closely in all countries ensuring that owners have rights to their land regardless of their financial position or relationship to government entities. Global trade will leverage blockchain as the standard for ensuring provenance and creating global track and trace, making it very difficult for counterfeit goods to enter supply chains.

Additionally, we will see blockchain at the root of all global asset movement, including cross border payments, transforming the banking industries by giving financial institutions a completely new role in global and regional commerce.

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