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 – just a hyped technology?
PAGE 4 (c) 2018 Prof. Sebastian Kummer. All rights reserved
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Blockchain is a key technology enabling Bitcoin (and other cryptocurrencies), but…
Blockchain
≠Bitcoin
(C) 2018 PROF. SEBASTIAN KUMMER. ALL RIGHTS RESERVED
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Short introduction to Blockchain
(C) 2018 PROF. SEBASTIAN KUMMER. ALL RIGHTS RESERVED
„classical“ data base
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Short introduction to Blockchain
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Block
#150
Block
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Block
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Block
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Time
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Short introduction to Blockchain
(C) 2018 PROF. SEBASTIAN KUMMER. ALL RIGHTS RESERVED
Centralized System Decentral peer to peer structure
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Short introduction to Blockchain
(C) 2018 PROF. SEBASTIAN KUMMER. ALL RIGHTS RESERVED
Centralized System Decentral peer to peer
structure
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Short introduction to Blockchain
(C) 2018 PROF. SEBASTIAN KUMMER. ALL RIGHTS RESERVED
Hashfunktion as a „digital Finger print“
SHA256d(Block Header)
=
000000342bb08fa1…
Block Header
• Version
• Reference
• Time Stamp
• Threshold value
• Nonce
• Merkle Root
Transaction
SHA256d(Block Header)
=
000000a72f1ca041…
Block Header
• Version
000000342bb08fa1…
• Time Stamp
• Threshold value
• Nonce
• Merkle Root
Transaction
SHA256d(Block Header)
=
0000004d250db91f…
Block Header
• Version
000000a72f1ca041…
• Time Stamp
• Threshold value
• Nonce
• Merkle Root
Transaction
Referenz Referenz
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Short introduction to Blockchain
(C) 2018 PROF. SEBASTIAN KUMMER. ALL RIGHTS RESERVED
Possibility to design and make Smart Contracts
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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)
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Blockchain Applications
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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
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Were are the companies?
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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)
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Blockchain – just a hyped technology?
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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
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Example 1: Tracking and tracing activities in food supply chains can help to prevent fraud
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Dilution
Substitution
Containment
Theft
Tampering
OverrunsMislabeling
Unapproved enhancements
Counterfeiting
Food fraud
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Example 1: Tracking and tracing activities in food supply chains can help to prevent fraud
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Example 2: Verifying the authenticity and legitimacy of high-value products
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Example 2: Verifying the authenticity and legitimacy of high-value products
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Example 3: First blockchain for marine insurance in commercial use since May 2018
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Example 4: Collaborative coordination and digital process support (end-to-end)
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Source: IBM
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Framework to evaluate
Blockchain Applications
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First Blockchain Publication
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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
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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?
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Q1: Do we need a Blockchain?
There are numerous frameworks to guide managerial decision-making
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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?
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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:
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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
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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)
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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
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Q4: When to start employing the technology?There will be different transformation phases!
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A good surfer begins to paddle,
before he/she knows if a wave will be
great!
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Contact information of the presenter