Web3.0 and Inventory Management
Meet the Experts
⇨ Blockchain usage is percolating across many different functions beyond finance and supply chain is one of those functions.
⇨ Blockchain enabled WEB3.0 can help transform the inventory planning and management processes.
⇨ While Web3.0 is far from maturity, organizations can build an internal version of it to transform their supply chain networks.
Leveraging Blockchain enabled Web3.0 for Inventory Management.
The genesis of this article lies in a banking transaction I was planning. I was planning to deposit a check and was exploring using the deposit feature available at the nearest ATM of my bank. I read some reviews online stating that the funds are withheld for a few days before being released. That made sense to me. After all, there needs to be some validation in the backend before the transaction gets executed. And that is where I thought about how Blockchain can help accelerate the process, and make the funds instantaneously available, even when the issuing the depositing banks are different. We have been talking about replacing the current form of banking leveraging Blockchain, but that replacement will not happen overnight. Or can or should not be a massive replacement exercise. Mapping the current transactional categories and processes, then starting to build infrastructure that helps transform one process at a time, but with the end state, a big-picture view is the way to go. And everything banks need to start in terms of technology is already available. With that thought, I returned to my desk, where I had to finish summarizing a deck on upcoming SAPinsider research, Inventory Management, and Optimization. That is when I transcended from banking into inventory management and blockchain applications, specifically Web3.0, in inventory management.
If you cut through most business problems that, on the surface, seem complex with a wide variety of levers at play, you will find that at their core lies a few simple root causes. So while service level may be one of the many levers you have to manage for inventory optimization, a high service level requirement may result from another underlying problem. And one challenge that lies at the core of most inventory management challenges is information transparency and tracking. And this is the reason blockchain can play a significant role in inventory management. It was also within the scope of SAPinsider 2021 research report, Modernizing Logistics and Inventory Tracking.
Understanding the difference between visibility and transparency
As I have indicated in many articles, supply chain challenges like the Bullwhip effect are not a result of visibility. Keeping Black Swan events like the pandemic aside, bullwhip is always in play in supply chains in many industries. The magnitude of the effect increases in the time of crisis. And this effect is in play in supply chains that share data extensively. Partners have visibility into each other’s data. But they still manipulate numbers because what is lacking is trust in that data. Transparency is the scenario where they have complete trust in the data. It is a scenario where they know this data is integral, true, and has not been massaged. That they can use that for their planning purposes. Leveraging blockchain in inventory management can help bring this level of transparency. And blockchain is a key supporting technology in Web 3.0.
Key Aspects of Web 3.0
Assuming that users are familiar with the evolution of the Web and hence are familiar with Web 1.0 and Web 2.0, let us explore some of the key aspects of Web 3.0 before we discuss its usage in inventory management. Based on the premises of having an open and permissionless worldwide web, the four key features of Web 3.0 are:
- Web3.0 will allow information Decentralization: Blockchain can help decentralize data and also help establish trust among the network users. Web3.0 will allow users to retrieve information based on its content and hence can be stored in multiple locations simultaneously. User’s data will be secured through a network of smart contracts, which will be stored in a blockchain, a decentralized network that nodes will control.
- Web3.0 will be trustful and permissionless: Users can interact directly without needing permission from a trusted intermediary. So if you need to search for information, you will not have to accept any cookies and/or provide your personal information, as there is a trusted bond between you and the web.
- Web3.0 will extensively leverage AI and ML: Embedded within Web3.0, AI and ML technologies will help decipher user context in more advanced ways, thereby helping them leverage the web in more productive and new ways. It is because of AI and ML technologies that Web3.0 will leverage that it derives its other name of the semantic web. The semantic web is often explained as the computers interfacing with the weeb having the capability to understand the context of the data vs the structure of the data. And this is made possible by leveraging AI and ML algorithms.
- Web3.0 will be ubiquitous: We are already in the “everything connected” age. Technologies like IoT will keep on pushing the boundaries of connectivity, and the devices connected to Web3.0 will not be limited to computers.
Web3.0 and Inventory Management
Based on the four key aspects above, we can see how Web3.0 can help address the challenges in the example shared earlier in the article. While Web3.0 may take time to mature enough to replace Web2.0 if an end-to-end supply chain can develop an internal network based on the underlying principles of Web3.0 defined above, it can address the following challenges of inventory management (illustrative examples, not exhaustive):
Information transparency: The decentralization of information between entities will help build trust and significantly enhance collaboration and planning across the supply chain. Stakeholders within the network. With rapid digitalization, every movement in the supply chain today is captured in some form of a transaction within systems. A secure and transparent record of these transactions, accessible to all players in the network, can be leveraged for collaborated supply chain planning. This type of collaboration can go much beyond traceability and quality aspects. There is an opportunity to see consumer-level demand in real-time, which will completely transform demand planning and management. It can truly help build a demand-driven inventory planning and management capability.
Advanced planning and analytics: The same technologies that aim to provide semantic capabilities to Web3.0 can also address data management issues regarding inventory. Algorithms, in conjunction with other smart devices on warehouse floors, can flag if the transaction captures a product that is not being moved in the physical world. There will be no “manual entry” or even “system errors” that can impact inventory data quality. Similarly, AI and ML algorithms can take over many manual inventory planning and management tasks due to access to real-time transactions. With these AI and ML algorithms, Web3.0 can help you build your Inventory planning “smart” digital twin.
Ubiquity: Inventory in any form, whether pipeline, in transit, or on-order, can be traced and tracked, thereby leaving no dark corners when it comes to inventory management and planning. When we talk about real-time visibility in the supply chain from an inventory perspective, it is mostly in the physical location of inventory. But the fact is, many other aspects and transactions need to come together to complete the full picture.
What Does This Mean for SAPinsiders?
While a public Web3.0 may seem futuristic at this point, the fact is that companies that have strategic and close partners in their supply chain network that are technologically well equipped can build a significant component of this type of network with current technology. They can leverage the underlying concept of public Web3.0 to build a network that can not only solve inventory management challenges but will eventually transform the end-to-end supply chain planning if we can execute it prudently.
The amount of money that many companies are investing in building visibility networks is not significantly less than the investment with which you can build a foundational, private Web3.0 network. Our problem is that when we see a competitor investing in building or being part of visibility networks or building supply chain visibility within their ecosystem, we blindly start on working to replicate. But why not enhance ? Companies WILL eventually build such networks. I expect that there will be interoperability standards that will eventually come into play. This will allow private Web3.0 networks to plug into other Web3.0 networks. Once they have built their Web3.0 private network, large companies should encourage their smaller partners to build these networks, helping with expertise and investments, and then plug into their network, thereby extending the network.
This can be a really exciting foundation for many futuristic visions that we have of a supply chain that is almost fully autonomous.