Blockchain’s potential reaches far beyond cryptocurrency. Blockchain ledgers can include land titles, loans, identities, logistics, and more to bring transparency to any multi-party transaction.
The Blockchain revolution may just change the way contracts are tracked between parties. Incidentally, this is the same technology that drives the controversial Bitcoin. Simply put, Blockchain is a file system that creates blocks of transactions, called the distributed ledger in a multi-party system, where all parties have access to the ledger and know the nature of transactions in their chain.
“No one party can tamper with the price, for example, and hide information from the other parties,” says Mukul Bafna, co-founder and CEO of Arvind Internet. The technology is revolutionary, and will ensure fair business. “At least that is the thought,” he says.
Blockchain works when there is vast amount of data, and uses Artificial Intelligence (AI) to determine the authenticity of complexities in multi-party transactions. The technology is such that there is no way a human can tamper with the system unless all parties agree to manipulate the system across the business chain.
As an introduction, small and medium enterprises (SMEs) have been at the mercy of larger companies because credit cycles were essentially not under their control. Payments were delayed, and credit terms were not honoured even though contracts stated specific dates.
For such SMEs, legal recourses are an expensive proposition, and here Blockchain can solve their problem as it can execute contracts because the information is secured in a ledger and cannot be tampered with.
The case of Stayzilla versus Jigsaw Advertising, where Stayzilla’s founder was taken to court for alleged non-payment of dues, captured the imagination of every young entrepreneur about the legality of contracts. If both parties were on a Blockchain, neither could obfuscate the case to the police or the courts.
So, would this serve better justice? The answer to this is no, because technology only captures the flow of information without being tampered. Interpretation of the law is different to how the parties present their case. Blockchain is not a panacea, but a system of efficiency that is faster than siloed technologies like customer relationship management, enterprise resource planning (ERP), and warehouse management systems.
According to SAP Labs India, Blockchain is based on distributed ledger technology, which securely records information across a peer-to-peer network. Every participant can see the data and verify or reject it using consensus algorithms. Approved data is entered into the ledger as a collection of “blocks” and stored in a chronological “chain” that cannot be altered. Although it was originally created for trading Bitcoin, blockchain’s potential reaches far beyond cryptocurrency. Blockchain ledgers can include land titles, loans, identities, logistics manifests – almost anything of value.
“The technology is still new, but the potential impact it can have on business is exciting, and immense,” says Neeraj Athalye, Head – SAP S/4HANA, GST Adoption, SAP Leonardo – India, SAP Indian Subcontinent.
“Smart contracts over the cloud are a big opportunity, but the problem also begins here. Blockchain is an ecosystem problem and not a technology problem. Unless you have all parties in the chain, the system does not work,” says Prasad Joshi, VP and Head, Infosys Centre for Emerging Technology Solutions.
Retail/E-commerce: According to consulting firm E&Y, the size of the retail industry is $650 billion, and only 10 percent is organised. Of the $65 billion that is organised, only 1.5 percent is spent on future technologies. The opportunity for Blockchain implementations are plenty, especially in supply chain management.
In a retail transaction, a store manager can integrate the point of sale (POS) system to the ERP of the company. So, a company knows exactly what is being ordered, and what needs to be sent out for replenishment. When a request for replenishment is generated from the POS, the ERP triggers an alert to the warehouse system that stock X should be shipped to the store. This is where Blockchain comes in.
There are four parties transacting in this system, and each party has a challenge. The store manager may want a particular variety of goods, and the merchandise department has to ensure the factory and warehouse have the said goods in stock. Today, multiple calls and emails add to the complexity of communication, and the stock reaching the store on time is not guaranteed.
Once the factory gets an alert, it generates a transaction with the warehouse, informing the merchandise team and store manager in case the particular style is available and the number of units there are. Also, instances like styles going out of production are sent as an alert to the concerned parties.
The merchandise team can use data analytics to figure whether it has to move stock to any particular store based on the demand. Any changes to the procurement and supply are communicated to all four parties.
The complexity begins when there are 1,000 stores interacting with all parties. Services like AI and machine learning (ML) can be built on top of Blockchain to allow retailers to take decisions faster.
“These technologies are in the pilot stage today. They can change the very nature of business and make it efficient,” says Vikash Lachhwani, co-founder of MCaffeine. He adds any technology should be used efficiently to make sure customer loyalty is served, and that the benefit is incremental whether it is AI or ML. “Technology should increase the topline and customer loyalty, there is nothing else to retail,” he adds.
Manufacturing: Transactions would work similar to retailing but the applications can be used to track credit cycle payments, design stock movements and purchase decisions. A car manufacturer, say Tata Motors, works with hundreds of vendors. Each department from design to product planning to marketing must be in sync, and a Blockchain system ensures design communicates its plans to the entire chain and only if the chain accepts the viability will the business move forward with execution.
Here, the Product Planning department could get in to its own distributed ledger and integrate its vendors on to the Blockchain platform, so the “bill-of-materials” is executed with precision. There cannot be additional items billed and neither will there be graft in over invoicing. The marketing team can have a Blockchain system for its dealers to track all orders and contracts on the chain. At the board level, these transactions are observed on a real-time basis.
“In manufacturing, the best use case is ensuring contracts are executed,” says Vijay Ratnaparkhe, MD of Robert Bosch Engineering India Ltd. He