Blockchain-enthusiastic tones from the ranks of the World Economic Forum: Many of the effects of the coronavirus on the global value chain could be mitigated with the help of decentralized technologies, according to a recent article by the NGO.
The coronavirus pandemic affects not only life and limb, but also supply chains. Although goods currently have greater freedom of movement than people, this does not help much if a link in the supply chain has to close down due to corona contamination. Nor does it help that supply chains have now become so complex that it is increasingly difficult for individual participants to keep track of their suppliers' chains. The World Economic Forum (WEF) has published an article on the corona-related threat to global supply chains - and calls for block-chain-based solutions.
The authors justify this demand with three characteristics with which block-chain technology can lead the global value chain into the age of the fourth industrial revolution.
Corona crisis reveals shortcomings of the paper economy
"Doing paperwork" - what is a strain on the nerves of consumers, at the latest when filing their tax returns, is a daily occurrence for suppliers and producers.
The authors believe that the fact that many companies are still struggling with the digitalisation of their supply chains is due to a lack of suffering. The costs of converting existing systems were therefore considered in many places to be higher than the promised efficiency gains. With COVID-19 this could now change:
The COVID-19 safeguards have made it clear that operations that depend on physical assets such as paper can be seriously disrupted if a physical presence is not possible. Wet signatures and paper printouts are usually processed by operations personnel who need to come into the office or other workstation and coordinate with others.
Rebecca Liao and Ziyang Fan, WEF
However, the decisive advantage of a digitized supply chain does not lie in saving the trees. Rather, it consists in the facilitated troubleshooting in the value chain. Those who have taken the digital path at an early stage can also better meet the logistical challenges of the Corona crisis:
In the current COVID 19 pandemic, governments and companies with a strong digital infrastructure and the corresponding regulations, such as the laws on electronic signatures and electronic transactions, are dealing with supply chain disruptions much better than without them.
However, the transparency of the block chain is a double-edged sword for companies. For obvious reasons, it is not possible to make your value chain visible to everyone on a public block chain like Ethereum.
Decentralized trust in the supply chain
It is not without reason that there are block chain solutions tailored to companies with restricted access, such as the hyperledger platform of the Linux Foundation. These offer a technical framework environment that, among other things, guarantees a flexible level of privacy. This means that only authorized parties can access data. However, the approval restricted enterprise networks have only remotely something to do with a public block chain such as Bitcoin or Ethereum.
The WEF experts, however, emphasize the data protection advantages of a (pseudo)decentralized system as a second game changer for supply chains:
A decentralized system that is nevertheless owned by a large buyer is the best way to give suppliers the necessary privacy and buyers the desired transparency. A block chain with either private or public permissions meets this criterion. When properly created, suppliers can check their data sharing permissions directly on their own block chain node.
However, block chain technology is intended to create not only trust and transparency in the supply chain, but also new economic incentives, for example by setting their own conditions for financing a supply chain:
With the help of the block chain, buyers can, for example, use payment obligations on the block chain as an alternative to a letter of credit, pay suppliers later, reduce the cost of the goods sold and protect themselves against bankruptcy of the supplier. Suppliers, in turn, recognize revenue earlier and replace their current supply chain financing arrangements with much lower financing terms,
The authors conclude with an appeal to companies to use the Corona crisis as an opportunity to accelerate the digitization of their supply chains.
An appeal which, however, loses some of its impact if one considers that it comes from interested parties. Co-author Rebecca Liao is co-founder of a block chain platform for supply chain management.
