As someone who has spent their entire career building software to help solve problems, I have a theory: balancing costs with conscience using modern technology is feasible. Now, there are plenty who will challenge me on this, seeing technology more as a mirror that can provide a view of the truth and the source of the truth, rather than a tool that can be used to proactively drive ethical behavior. And years ago, they would have been correct.
In traditional ERP systems, transactions were sliced and diced for faster processing. The data was fragmented and it was difficult to get to the story behind it. But technology has come a long way. The advent of analytical data marts and data warehouses have given rise to newer and more powerful big data aggregation technology. Things like artificial intelligence and machine learning are making data incredibly smart so that businesses can make more intelligent decisions. With the emergence of the cloud, new applications are now taking advantage of connected data to drive meaningful insight, not only with extreme speed, but at scale.
In the last decade, for instance, there has been an explosive growth in innovations that enable connectivity beyond the four walls of the enterprise. Machine signals now predict operational disruption across a vast array of connected machines. They operate on the principles of distributed processing to converge multiple activities on a single, broad global network, with digital signatures and cryptographic authentication. This ability to connect blocks of disparate data linked to related activities into a single blockchain, combined with the power of networks to scale impact and the power of analytics, effectively drives insights to action. And these innovations are empowering companies to act in more coordinated, informed and ethical ways.
In a 2016 podcast with Andreas Antonopoulos, he talks about how Bitcoin-based financial applications not only can make each of us as powerful as a bank, but can reduce fraud in wage distribution. How? Many wage rights issues stem from physical dealing of cash to the worker who is typically unbanked due to their economic or migratory situation. Enabling digital payments that are accessible by the worker without having to depend on the ‘middleman’ to deliver it to them eliminates this problem.
And then there is the ability to track and trace the provenance of goods and services. It’s one of the biggest issues that companies face right now. All too often, a seller will ship something to a warehouse where it is swapped for a knockoff without the buyer knowing. 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 fraud as far down the supply chain as you can reach.
I recently sat down with Thomas Benjamin, the Chief Technology Officer of SAP Ariba, to dig a little deeper into all of this.
Padmini Ranganathan (PR): There’s a lot of hype around blockchain these days and what it can and can’t do. How do you see it helping companies to create ethical and transparent supply chains?
Thomas Benjamin (TB): The advent of new frameworks like blockchain (hyperledger, quorum, multi-chain, etc.) have orchestrated a collection of mature technologies, cryptographic security, immutability, etc., in the framework that could be applied to any data set that’s managed by this framework. A connected data set associated with the provenance of pharmaceuticals, precious stones, or aircraft engines could be stored and shared with everyone interested in consuming it, so that this digital representation of provenance is made available as a utility to anybody accessing it and permissioned users could modify it.
This underlying digital capability enables information provenance to become a utility which can be trusted and shared across multiple applications in a standardized manner. This unlocks many opportunities and provides transparency to supply chains. It allows producers, orchestrators and consumers of the supply chain to be creative and overload the information provenance with risk, sustainability and other dimensions that democratize with trust the lifecycle with which this information train is managed and shared.
PR: Supply chains are rife with some pretty sensitive data. How secure and reliable is blockchain when it comes to collecting and storing it?
TB: The technology building blocks used by the different cloud providers—ingestion frameworks like Kafka, Apache Flink, storage systems like Hadoop, Object Stores or processing engines like Apache Spark, for example—are the same standardized frameworks that cloud providers like AWS and Azure provide as a service (utility) for any consumer/organization who wants to pay for it. Given that they have invested in making this utilitarian and commoditized it, I would argue that they are more secure and reliable in 95% of the scenarios given that they are exposed to a wide variety of use cases.
PR: So, what’s holding companies back in adopting technology to make their supply chains more transparent?
TB: The key blockers are the ability to collect data from the different sources and fear of exposing competitive differentiators. The processes in a supply chain transaction are optimized for speed. This naturally excludes relevant data collection for transparency, as it takes significant time. In addition, the focus of the transaction is on ensuring the purchase order is received and shipments happen on time, along with quality. So, when you look at transparency, there is no step in the process where the buyer asks the supplier for source of material, for the process metrics that reflect usage of depleting resources like water, energy, for labor metrics and standards applied. This is gathered at a higher level of supplier relationship and typically as a code of conduct check box. This does not necessarily create the transparency required.
Let’s be clear: the fear of sensitive data and information being shared on the cloud is real. But as cloud technologies mature in addressing data sensitivity—creating a good basis for shared and common data that does not take away from the competitive growth differentiators—companies will need to embrace the positive outcomes of this shared economy. This will take time but is not impossible.
PR: What in your mind are the benefits of embracing these new technologies as part of a procurement strategy?
TB: An immediate benefit of transparency is lower cost of risk. But there is also the ability to proactively identify risk factors that will help reduce costs of mitigation after risk occurrence.
So, going back to my theory: technology can in fact be used not only to manage costs, but to balance them with conscience. But only if you pick the right technology, trust in the technology maturity that is evolving, create internal checks and balances and make transparency and purpose front and center of the procurement strategy.