Supply chain networks face an increasing demand to integrate information of globally distributed customers and suppliers. As supply chain processes are deemed to lack sufficient transparency and security, blockchain solutions are piloted to offer an IT infrastructure covering these needs. This post sums up the most important steps to consider when choosing blockchain – based on the following publication: Link
1. Preliminary Considerations
First, it is necessary to choose a relevant use case and gather opportunities and challenges of the respective blockchain solution. Subsequently, all opportunities and challenges are compared to traditional payment solutions. The most important opportunity to be considered usually is the enhanced transparency of the payment processes. This includes the verification of identities before allowing multiple parties to interconnect on a trustful basis. The most important challenge usually is to establish the whole consortium of partners, which should be then connected via the blockchain solution.
2. Analysis Phase
In relation to the first phase, the project team evaluates specifications of the existing business processes and the different blockchain platforms. Most of the public solutions are built on Ethereum platform, especially if there are multiple external parties involved. However, in a B2B environment, private protocols can be considered to keep the transactions private. In this case, the Hyperledger Fabric protocol is commonly used where participants are known to one another and jointly decide to participate in the network. For this reason, they are provided with suitable credentials to be part of the ecosystem.
3. Integration Planning
In the third phase, management has to decide if the software solution is to be developed in-house or development is outsourced to an external company. In the former, team members are hired based on their skillsets such as smart contract development. Also, the adaptability and scalability of a technology stack has to be evaluated to ensure core processes can be performed seamlessly.
In the design phase, firstly, the use of complex smart contracts and micropayments are assessed, which often come in an either/or relationship. As such, the project team decides how to create the architecture of the smart contract interactions and how the functions will interact with one another. Throughout this phase, stakeholders are engaged, and their feedback is captured whenever necessary. Secondly, data governance principles have to be defined. All parties must mutually agree on the types of data to be shared or to be kept confidential. Lastly, user interfaces of the blockchain solution must be designed with user experiences in mind, making the interface easy to use.
In the integration phase, the blockchain solution needs to be tested to ensure all requirements are fulfilled and the solution is functioning as expected. In this phase, the project team should consider the interconnections between the chosen consensus mechanism and the system’s modularity ensuring data integrity and scalability of the solution. Lastly, user trainings are included in the integration model.
As a final step, the following positions should be considered.
(1) Partner acquisition costs: This can be related to marketing costs or to drive users’ adoption or compliance activities.
(2) Influence on IT infrastructure and maintenance: A good infrastructure regardless of a centralized or decentralized system has to be considered.
(3) System interfaces: As the blockchain solution needs interfaces to existing systems, the ease of integrating the solutions also with partners’ infra-structure needs to be evaluated.
(4) Data governance and analytics: Consensus relies on the parties making rational decisions. Controls such as transaction monitoring can be explored to detect any high-risk transaction.
Blockchain technology is rapidly transforming various supply chain processes in organizations. However, there are cases where the blockchain solutions remain in the proof-of-concept phase. As such, the steps mentioned above can be utilized as a guiding compass to resolve roadblocks or issues before a more efficient blockchain systems can be developed.