blockchain controlled supply chain management - utopia or ... · blockchain controlled supply chain...

Blockchain controlled Supply Chain Management - Utopia or near Future?

Sebastian Kummer

Head of the Institute for Transport and Logistics Management, Vienna University of Economics and Business

Endowed Chair Professor at the Jilin University, Changchun

Introduction

Blockchain – just a hyped technology?

Blockchain Applications

How to evaluate Blockchain

Applications

Agenda

Source: http://www.ibtimes.co.uk/

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(C) 2018 PROF. SEBASTIAN KUMMER. ALL RIGHTS RESERVED

Univ. Prof. Sebastian KummerHead of the Institute for Transport and Logistics, WU-ViennaEndowed Chair Professor at Jilin University, Chang Chun

Source: http://www.ibtimes.co.uk/PAGE 3 (C) 2018 PROF. SEBASTIAN KUMMER. ALL RIGHTS RESERVED

1982-87 Economics Management and Philosophy at Universitäties in Tübingenand Cologne

1987-97 Dr. and “Habilitation” at Otto Beisheim School of Management (WHU)1996-01 Chair for Management Transport and Logistics at Technical University

Dresden

Mail: [email protected].: +43 1 31336-4590

Sebastian Kummer was Head of the Research Institute for SCM, WU-Vienna (2005-2011), Coexecutive Directors of the European section of the MIT Forum Supply Chain Innovation (2006-2011) He is member of several scientific and company boards and President of the German court of arbitration for Logistics.

He is/has been visiting professor and lecturer at universities in China (Bejing, Changchun, Chengdu, Shanghai, Tianjin; Xi´an ), Indonesia (Yogyakarta), Philippines (Manila UP), Vietnam

(Hanoi), Russia (Moscow, St Petersburg), Ukraine (Kiev), Germany (Hamburg, Leipzig, Marburg, Vallendar, Zittau), Lichtenstein, Swizerland (Chur, Zürich), Austria (Leoben, Krems, Salzburg, St. Pölten). He has published more than 160 publications. He works as a adviser, consultant and management trainer for companies and government bodies.

Blockchain is a key technology enabling Bitcoin (and other cryptocurrencies), but…

Blockchain

≠Bitcoin


Short introduction to Blockchain


„classical“ data base



Block

#150

Block

#151

Block

#152

Block

#153

Block

#154

Block

#155

Block

#156

Block

#157

Time



Centralized System Decentral peer to peer structure



Centralized System Decentral peer to peer

structure



Hashfunktion as a „digital Finger print“

SHA256d(Block Header)

=

000000342bb08fa1…

Block Header

• Version

• Reference

• Time Stamp

• Threshold value

• Nonce

• Merkle Root

Transaction


=

000000a72f1ca041…

Block Header

• Version

000000342bb08fa1…

• Time Stamp

• Threshold value

• Nonce

• Merkle Root

Transaction


=

0000004d250db91f…

Block Header

• Version

000000a72f1ca041…

• Time Stamp

• Threshold value

• Nonce

• Merkle Root

Transaction

Referenz Referenz



Possibility to design and make Smart Contracts

A blockchain is…

…a shared, duplicated and synchronized

book of transactions

(ledger)

with various permissions for

reading and writing,

programmable, and immutabel.

verified by a technological

consensus prodocol,

Adapted from Jünger / Ploechl-Krejci (2018)


PLOGchain – Research sponsored and financed by the Austrian Ministry for Transport and Innovation (bmvit)

The goal of PLOGchain is to

blockchain use cases in transport and logistics

identify

conceptually model

and systematically evaluate

PAGE 14 (C) 2018 PROF. SEBASTIAN KUMMER. ALL RIGHTS RESERVED


Were are the companies?

PAGE 15

ADOPTION curve „90-9-1“ for new technologies (Thesis)

90%

9% 1%

Were are thecompanies?

First Challenge

What is a BLOCK CHAIN?

Medium Challenge

How do we start

Advanced Companies

Were to use the Block Chain as a real

case

▪ Understand distributed Ledger-Technologies and there applications

▪ Lack of maturity of Block Chain Platforms

▪ Affiliation in consortia as a common method to share risks and investments

▪ Difficulties to Quantify the advantages (ROI) and the Total cost of ownership (TCO)

► Insecurity and lacking of formal rules

► Integration with Legacy-Systems

► Security and Data protection challenges

Using Jünger (2018)



PAGE 16

There are various areas of application in logistics and supply chain management (SELECTION)

Data storage

Finance and

insurance Research

Document

management

Parcel services,

esp. last mile

Public

ledgersSmart contractsLinking services

SC transparency Collaborative

coordination


Example 1: Tracking and tracing activities in food supply chains can help to prevent fraud

PAGE 18

Dilution

Substitution

Containment

Theft

Tampering

OverrunsMislabeling

Unapproved enhancements

Counterfeiting

Food fraud


Example 1: Tracking and tracing activities in food supply chains can help to prevent fraud


Example 2: Verifying the authenticity and legitimacy of high-value products


Example 3: First blockchain for marine insurance in commercial use since May 2018


Example 4: Collaborative coordination and digital process support (end-to-end)

PAGE 23

Source: IBM


Framework to evaluate



First Blockchain Publication


Blockchain for and in Logistics: What to Adopt and Where to Start

Mario Dobrovnik, WU Vienna

David M. Herold, Griffith University,

Elmar Fürst, WU Vienna

Sebastian Kummer, WU Vienna

In: Logistics 2018, Volume 2, Issue 3, 18

Questions companies (and even entireindustries) have to ask themselves:

Q1 Do we need a blockchain?

Q2 How can the blockchain solution be designed?

Q3 Where to start?

Q4 When to start employing the technology?


Q1: Do we need a Blockchain?

There are numerous frameworks to guide managerial decision-making


Q1: Do we need a Blockchain?

I Is it applied to a (business) process with multiple actors/stakeholders?

II Is there a need to raise trust between the involved parties?

III Is it important to have an immutable history of transactions?

IV Do we have to secure and/or effectively manage assets or value?

V Does the entire ecosystem profit from more transparency?


Q2: How can the blockchain be designed?

What are you trying to do?

What value do you want to capture?

For whom?

- Record - Information and knowledge - Customers

- Track - Attribution and responsibility - Employees

- Verify - Access or permission - Suppliers

- Aggregate - Decision rights or votes - Producers or makers

- Ownership or incentives - Creditors or investors

- Reputation and trust - Governments

- Transactions - Citizens

- Contracts

Source: Felin and Lakhani (2018)

Leading questions are informing design choices:


Q3: Where to start? Applying the “Attributes of innovation framework“

Relative advantage

How is the blockchain better than

current practice?

The degree of perception that an idea is better than current practice. This

could be measured in economic or social benefits, convenience and

satisfaction. The perception of an advantage is of importance, when

considering its adaptation.

Compatibility

Is the blockchain compatible with

current practice?

Considers the degree of an innovation of being in line with adopters’ needs,

existing values and previous experiences. The more consistent with social

norms and systems the more applicable an innovation is.

Complexity

Is a blockchain application difficult to

use or understand?

Perceived difficulty to understand and use the innovation. The easier to

understand, the faster it will be accepted and adopted.

Trialability

Is it possible to test the application

before committing to blockchain?

The length that an innovation can be experimented with before

implementation. Pre-testing is considered as risk reducing and enables

“learning-by-doing”.

Observability

Are there any visible results of

blockchain utilization?

Concerns the visibility of results from the innovation. Clear and concrete

results decrease the actors’ uncertainty of implementation.

Dobrovnik et al. (2018), adapted from Rogers & Badzar


Q4: When to start employing the technology?There will be different transformation phases!

Substitution

(e.g. blockchain-based customer royalty systems)

Single use

(e.g. bitcoin payments)

Transformation

(self-executing government contracts in complex environments)

Localization

(e.g. private online ledgers to process

financial trasactions)

Degree of novelty

Deg

ree o

f co

ord

inati

on

Based on Iansiti and Lakhani (2017)


Single-use- Enables monitoring, tracking and tracing in-house transports

- Effective tracking of fleet and vehicle performance history

- Gradual increase of blockchain start-ups, and active platforms

Localization

- Ease paperwork processing

- The extent of participation and information sharing is determined and regulated by the user

- Active participation is not compulsory

- Facilitate origin tracking

- Provides actors with the choice of buying sustainable products and transport

- Customers gain the ability to evaluate the product or supplier before making a decision

Substitution

- Provides customers with the information they want concerning product origins and the freight

route

- Make load boards more reliable- Reduces risk in regard to fraud or counterfeit goods- Easier to execute transactions by using hashes instead of physical documents- Open access to information concerning the activities within the supply chain- Effective usage of QR-codes, RFID, NFC-tags, WiFi or iBeacons

- Better tracking, tracing and recycling of the product lifecycle

- Use IoT for vehicle to vehicle communication

Transformation

- Operate the internet of things

- Simplifies exchange of goods and payment systems

- Reduction of transaction costs

- Exclusion of a centralized governmental institution

- A network working on a platform in purpose of exchanging intangible and tangible resources

PAGE 32

Q4: When to start employing the technology?There will be different transformation phases!


A good surfer begins to paddle,

before he/she knows if a wave will be

great!


Contact information of the presenter

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