BLOCNETS: Where Blockchain Meets Supply Chain

A few years back, the P-8 Poseidon—a modified Boeing 737 airplane with anti-submarine and anti-surface warfare capabilities—gathered immense media attention when investigations revealed that the aircraft contained a counterfeit component that led to the failure of the aircraft’s ice-detection module during a test flight. The same year also witnessed another major manufacturing setback in the defense space when the U.S. Department of Defense (DoD) discovered the use of forged memory chips in the computers controlling the country’s anti-ballistic missile defense system, the Terminal High Altitude Area Defense System (THAAD). Later, the U.S. Customs documented seizure of 5.6 million fake microchips from manufacturing contractors. These outrageous events reignited a long-standing debate among defense intelligentsia, not only in the U.S but around the world, on the contentious issue that has always existed in the sector: counterfeits in the defense supply chain. Although over the years, governments and international trade forums have tried implementing new laws and policies to prevent counterfeiting in the defense supply chain, it could not shake the problem from the core. Even to this day, the aerospace and defense (A&D) supply chain continues to remain a prime target to implement counterfeit parts for malicious code intent. The culprits, in most cases, are the data gaps that exist between systems across supply chain partakers that lead to limited visibility and reduced reliability. To top it off, the slow and error-prone paper-based systems further add to the problems, increasing supply chain costs, delaying fulfillment processes, and creating favorable opportunities for counterfeits to exist.

"BLOCNETS preaches the notion of a decentralized architecture for efficient and intelligent supply chain management"

Bob Betts, a 20+ year supply chain practitioner, has been implementing and operating complex, extended supply chains across multiple industries. He has been working in Aerospace and Defense extended supply chains on and off since 2002. During this time, Bob has worked to enable the supply chain to add value to multiple programs, to increase the agility of the defense-based manufacturing and supply chains to better serve the men and women in the field, and significantly improve the security of the U.S. defense based supply chains.

He describes the A&D supply chain as one of the most challenging sectors to implement new technologies in since it has numerous multi-layer suppliers that are dispersed globally. “We wanted to enable all companies participating in these extended supply chains to meet the needs of the deployed troops, and sustain the viability of the supply chain,” he asserts. Nearly two-thirds of the suppliers in the A&D sector are small companies with basic IT capacities. Thus, to bring a substantial change to this ecosystem, Betts realized a mere product upgrade would not suffice; the industry requires a complete re-engineering of the supply chain management approach. This was when Betts started contemplating what the future of all complex, extended supply chains should look like, how they should materially operate, and all companies participating can be profitable. The primary concepts for BLOCNETS had already been sown in Betts’ mind back then, but the right technologies did not exist without requiring a large capital investment, which at the time was not feasible. With the commercialization of technologies like IoT, data analytics, in-memory processing, secure cloud platforms, and most importantly blockchain, the barriers of the past opened up. Betts, along with other industry practitioners started seeing the enormous value these technologies bring, thus BLOCNETS was created. BLOCNETS is a new-age tech solution provider for supply chain, focusing on heavily regulated industries like Aerospace and Defense. With the power of blockchain-enabled supply chains, A&D companies can gain a real-time digital ledger of transactions and movements for all participants in their supply chain network. “Don’t let the simplicity of the blockchain technology overshadow how transformational it is,” remarks Betts, CEO of BLOCNETS.

Rigid, expensive and difficult to maintain applications like EDI will be replaced by far more flexible and intuitive solutions in BLOCNETS

This approach enables suppliers to improve their cash to cash cycle, get the right parts to the right place and at the right time. Additionally, this approach prevents counterfeit or out of specification parts and components from spreading unchecked throughout the extended supply chain. To make this type of impact, the smallest companies in the extended supply chain must significantly increase their technical footprint without adding significant cost.

Betts further notes that though many industry veterans have been talking about the efficacies of using blockchain and analytics in the supply chain, there are only a few companies that have been able to crack the code. “We have a working software solution that will support a truly integrated supply network,” he states. A co-innovation partner with SAP and IBM, and also working with other technology giants, BLOCNETS is one of the few companies that specialize in blockchain-enabled supply chain management solutions for the A&D and other industries with complex supply chains. BLOCNETS is specifically designed to create a true peer-to-peer system that effectively connects all the participants of the supply chain ecosystem. While BLOCNETS initially focused on A&D industry, today, the company has opened up its unique offering to other industries such as food and beverage, pharmaceuticals, utilities, and other regulated industries where supply networks are critical.

Decentralized Supply Chain Management: A New Supply Chain Era

BLOCNETS preaches the notion of a decentralized architecture for efficient and intelligent supply chain management. Substantiating the efficacy of this philosophy, Betts remarks, “The contemporary supply chain has turned into a complex web of manufacturers and suppliers, far more multi-faceted than previous generations ever thought possible.” Moreover, not all the supply chain operations take place within a single organization. The shipment data needs to seamlessly travel not only within an enterprise but also across multiple, diverse enterprises. Given the scenario, it is virtually impossible to manage the supply chain from a centralized system. The ERPs are to quote Eli Goldratt“necessary but not sufficient” into the 21st century. The ERP platforms will participate in the new supply chain networks, not as central repositories, but as peer processors in the extended network. This is where BLOCNETS’ distributed ledger technology creates a world of difference. Mr. Jim Vrieling, BLOCNETS Vice President of Client Development and Realization, explains, “We use blockchain primarily to do three things: First, the distributed ledger is used to create a digital shadow of the data, and disperse it methodically across the supply chain. Second, the technology efficiently secures the data. And lastly, it acts as a medium to collect data from the various IoT devices in the supply chain premise.” On top of this technology, BLOCNETS appends various supply chain applications. Whether it is offering better visibility into the product in its supply chain lifecycle, exchanging global trade documents to reduce the time taken for customs clearance, or ensuring compliance with the trading regulations of a country, BLOCNETS’ supply chain management solution is a “one-stop shop” for all the needs. “Instead of having to deal with separate systems and a massive amount of paperwork, our software is designed to work in tandem with existing supply chain operations, thereby making the job of supply chain participants much simpler,” remarks Betts.

Driven by its peer-to-peer philosophy, BLOCNETS also offers an onboarding system to securely integrate a new supplier with a supply chain network.
This approach not only provides an agile framework that positions a supplier precisely where they belong in the supply chain but also effectively creates a decentralized network of all the bills of materials that can be updated in real time through a simplified user interface. Explaining the effectiveness of this peer-to-peer network through an example, Betts says, “If a supplier wants to find the historical data of a jet engine, all they need to do is enter the part’s serial number on BLOCNET (much like using Google search to find something on the web), and we can derive all the blocks and provide information on each material used in the product.” This approach also enables BLOCNETS to provide material validation. “We integrate the bill of materials with a record of the different stages of the manufacturing process and quality metrics to assess the standard of the product,” elucidates Betts. Should there be any anomaly in the product at any stage of its production or tampering in the document in shipping lifecycle, it will be immediately detected by BLOCNETS’ system. “We are not just keeping a system of records, but also reducing the number of counterfeits in the supply chain,” highlights Betts. “We consider ourselves an information collector and distributor that is ushering a new era of connectedness and transparency.”

Gaining Strength from its Robust Partnership

What differentiates the company in the blockchain arena, according to Mark George, Vice President of Field Sales and Marketing, is their partnership with SAP, IBM, and other leading platforms. “Our co-innovation partnership with SAP goes back to early 2017,” he says. In fact, BLOCNETS is built on and runs on SAP’s cloud platform and utilizes SAP’s security protocols. “As one of the first companies in 2017 to partner with SAP around blockchain, our solutions are well ahead of any other solution,” says George. “We also integrate with SAP’s ERP offerings, especially around areas like product and delivery fulfillment,” says Betts. With this innovation, anyone using their ERP to track the fulfillment lifecycle has the capability to utilize BLOCNETS’ application that traverses peer-to-peer within the entire network to validate information from all the participants of the supply chain. Together with that, both SAP and IBM also test out and validate the solutions offered by BLOCNETS. In the years ahead, BLOCNETS’ association with SAP and IBM is poised to bring more lucrative applications for the supply chain domain.

"Driven by its peer-to-peer philosophy, BLOCNETS also offers an onboarding system to securely integrate a new supplier with a supply chain network"

A Company that Breeds Innovation

There is a lot of hype surrounding blockchain technology; however, BLOCNETS’ appetite for innovation constantly propels the company forward. While BLOCNETS is presently focused on creating a shift in the supply chain management approach, the company’s future endeavors encompass ushering a new supply management planning methodology. Currently, almost every manufacturing company employs planning systems that are based on two approaches: material requirements planning (MRP) and linear optimization. While MRP—one of the most widely used systems—is a concept of creating material plans and production schedules based on the lead times of a supply chain, linear optimization is a mathematical model that synchronizes complex supply chain relationships through linear functions to derive optimal results. However, both these systems run in batches and are not feasible when it comes to managing a supply chain environment where new shipment data is generated every second.

Giving a sneak peek into BLOCNETS’ upcoming ventures, Betts mentions their plan to roll out a new planning system— which uses multi-company network-based algorithms—to enable an econometric-based supply chain operation and replace outdated MRP and linear optimization models. The aim is to create a whole new dimension in the supply chain planning segment. As a concluding note, Betts says, “While it might seem like we have already reached the apex of new technologies, the truth is we are only at the onset of this modernization.”