Blockchain is a powerful intelligent technology that provides companies with greater transparency and collaboration capabilities. Having become mainstream thanks to cryptocurrencies, and in particular to BitCoins , it is built on the concept of a ” distributed ledger “, therefore without a centralized database, where each data is replicated at the node level of the network and therefore cannot be manipulated and inviolable. This feature makes it suitable for guaranteeing the security and uniqueness of the data and therefore its enforceability against third parties. That’s why it can be used in business contexts where factors related to the above characteristics are important. For completeness of information, on the BlockChain it is possible to perform real operations, even if basic, called “Smart Contracts “. The latter were born with Ethereum , a particular type of cryptocurrency with the power to execute operations.
SAP interconnects with open source Blockchain with the Business Technology Platform with two options:
1: Leverage Blockchain services made available with partners such as Azure, AWS, Google or other partners who provide Blockchain service
- Deploy the Blockchain Service in the BTC infrastructure. In this case it is necessary to configure and manage all the Blockchain components, i.e. databases, nodes, certificates. There are pros and cons to each approach depending on the use case, blockchain type, implementation costs, implementation efforts, and maintenance that need to be considered before finalizing the journey.
Business Scenarios
Industries that perform processes such as manufacturing, 3D printing, spare parts management, procurement, logistics, finance, etc. They can be victims of limited visibility and lack of trust between stakeholders, which can lead to process inefficiencies, misuse, fraud, intellectual property theft and litigation. Blockchain technology can meet these needs with its ability to facilitate the sharing of immutable data among all participants while providing process automation with the use of smart contracts.
Procurement with SAP Ariba
Supplier management is a complex process today. Buyers work with multiple suppliers and suppliers work with multiple buyers, in a tiered supply network. Onboarding new suppliers is a lengthy process for buyers as they need to ensure that supplier information is up-to-date and accurate to validate their claims and certifications. You need to verify various compliance and risk requirements, such as ISO certification; fair labor and business practices; use of minerals from conflict zones; certifications on the use of sustainable and renewable energy and many others.
Additionally, business and financial information must be verified to conduct business with a vendor, and information must be passed on to secondary and tertiary vendors as necessary. Multiple teams across legal, audit, risk, finance, supply chain departments need to be involved , and they all need access to various information. Likewise, suppliers will have the same needs in relation to their own suppliers.
Given the huge vendor network available on SAP Ariba , SAP is investigating ways to bring together vendors, buyers, third-party content providers, governments, standards bodies, and certifiers, and Blockchain-enable SAP Ariba to share vendor information. Some information may be public and available to all network players , while other information may be kept private and can only be shared with certain players to meet their specific needs.
Logistics with SAP TM, SAP GTS and SAP S/4HANA
Given the global nature of supply chains, shipments of goods across countries are an intrinsic part of the process. The end-to-end process today suffers from great inefficiency as numerous participants have to be involved as goods move from sellers to buyers or consignees, such as shippers, logistic service providers, port authorities, customs, agents, brokers, banks, etc.
Further inefficiencies arise from the need to exchange different documents during the process such as letters of credit, commercial invoices, packing lists, export declarations, customs clearance, bills of lading, etc. These documents are transmitted by fax, email or even hand delivered. These documents are often paper-based and involve considerable manual management.
Such a slow and error-prone process suffers from limited or no visibility, leading to shipment delays, fraud, high costs, and an enormous amount of time, effort, money, and resources spent reconciling disputes and discrepancies. Blockchain can revolutionize the processes related to international commerce by addressing all these shortcomings and providing full visibility and digital transparency to all participants in the blockchain network.
Working with its customers on a co-innovation project, SAP developed a percentage of completion (POC) using Hyperledger Fabric on SAP Business Technology Platform to model the end-to-end process in four phases: Trade Initiation, Shipment Initiation, Shipment Delivery, and Trade Settlement. Smart contracts were used to specify which parties were to be involved in each stage, specify which documents were to be provided and by whom, provide secure visibility to these documents with digital signatures, and ensure that all prerequisites were met for a subsequent stage .
In the future, with integration with SAP Transportation Management, SAP Global Trade Services, SAP S/4HANA and SAP Global Track and Trace, as well as the ability to integrate information from third-party applications, blockchain will give the potential to deliver significant value in terms of cost savings and process efficiency for all parties involved in international trade.
Finance with SAP S/4HANA
There are now several relevant use cases for blockchain technologies in finance, and SAP is enabling SAP S/4HANA Finance to connect with blockchain networks. An example of use is in the context of managing payment fraud, which poses a serious threat in international and domestic payments. To address the dangers of hacking sensitive supplier data, it can be stored as a hash on the blockchain and, at the time of payment execution, this data can be compared with the data found in SAP S/4HANA to ensure its accuracy.
Another use case for blockchain in finance is optimizing days pending sales (DSO). The recognition of revenues requires that the possibility of collection be “probable” or “reasonably expected” according to accounting rules, and for some types of contracts, revenues are recognized only upon payment of an invoice. For the service industry, considerable delays can occur due to invoice disputes. By sharing open items on a blockchain, parties will not have to wait for payment terms in the contract, being able to more easily activate invoice advance processes.
Similarly, a buyer, who is likely a seller for another customer, can in turn leverage blockchain in a similar way to reduce their DSO. Once cash movement is no longer the way revenue recognition is triggered, the actual payment may not be necessary in regards to clearing multi-party accounts receivable and payable. In fact, the data on the blockchain can be used as a “clearing house” without going through the banking channel.
Another variant of this use case is the use of blockchain to manage disputes with third parties. If a seller posts an invoice on the blockchain, but the buyer disputes it, the seller can go back and sell his claims for the disputed invoices to debt collectors. Blockchain can help reduce the effort required by third-party collections and increase transparency.
Other use cases such as letter of credit (LC) and request for quotation (RFQ) processing go hand in hand with the areas of international trade and procurement described earlier in this section.
Letters of credit often involve a lengthy process of exchanges between multiple parties: the buyer, the seller, banks, customs, logistics providers, shippers, inspectors, etc. In the traditional process the reconciliation and validation process is done on paper and manually, slowing down the receipt of goods and payments. Letters of credit using blockchain smart contracts can help reduce costs, prevent fraud, and facilitate faster payments by providing transparency about shipment status, inspection results, and required documentation, per the terms of the purchase order. on the shared ledger , thereby automating the bank’s review and approval effort.