Tag: blockchain

OM Podcast #39: AI, Sustainability, Cybersecurity, & Blockchain in Operations

We’re back with another exciting episode of the Heizer Render Munson OM Podcast! Today, Barry Render sits down with Dr. Subodha Kumar, Paul Anderson Distinguished Chair Professor at Temple University and Founding Director of the Center for Business Analytics and Disruptive Technologies.

Barry and Subodha dive into the transformative role of artificial intelligence in operations management, exploring how AI is reshaping sustainability practices, enhancing cybersecurity, and driving innovation in blockchain applications. Subodha shares real-world examples from industries like retail, dairy, and luxury goods, and discusses how AI is helping companies tackle greenwashing and improve supply chain visibility.

They also discuss the evolving threat landscape in cybersecurity, especially in logistics and supply chains, and how AI and IoT are both part of the problem—and the solution. Subodha also shares some powerful advice for students preparing for a future where AI will be central to every workplace.

 

Transcript
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Prof. Subodha Kumar
Prof. Barry Render

OM in the News: Is Blockchain Fading?

The value proposition of harnessing blockchain technology to transform supply chains is not new, as we discuss in Chapter 11 (see pages 451-2). The idea of a distributed ledger, that is transparent and immutable, lends itself to imagining a world where all participants involved in the process of producing, distributing, storing, selling, and consuming a product can view its origin and status in real time. The benefits of such traceability include improved food safety, reduced fraud and optimization in the distribution of scarce resources.

However, like any emerging technology, the early years of blockchain witnessed the launch of numerous projects and a wide variety of use cases with a mixed level of success. Reports conclude that as many as 92% of those early projects in blockchain have failed, writes Supply & Demand Chain Executive (June 4, 2024). While all early technical experiments don’t turn out as planned, it is critical to look at them closely.

There is a wide range of reasons why technology-led transformations fail: a lack of thorough strategy and planning or an inadequate understanding of what the market needs; insufficient time invested in truly understanding the problem definition; underestimating the time and effort needed for new regulatory frameworks; or simply not being able to access sufficient, affordable, talent at the right time.

These are all real challenges that are also applicable in the blockchain world. A major example is the Australian Stock Exchange blockchain project which was built to transform clearing and settlements. It started in 2016, originally planned for 2.5 years but finally dismantled in 2022. The team had set out to build a private blockchain infrastructure which proved too difficult.

Blockchain applications for supply chain rely on two primary elements: token services and decentralization. Token services, established by companies, facilitate real-time visibility throughout the value chain. Meanwhile, decentralization empowers independent entities to exchange and trust supply chain data securely, all while maintaining privacy. This type of visibility simplifies and automates the overall management of the supply chain and, in practice, reduces inefficiencies and intermediaries, which ultimately reduces overall costs.

But the concept of privacy in the context of a distributed ledger is often viewed as a paradox; that there is no room for privacy in a transparent world. Yet the true nature of a public blockchain operates with the goal of confidentiality.

Classroom discussion questions:

  1. Identify a major blockchain project that has failed.
  2. What makes blockchain success so difficult?

OM Podcast #2: How Does Blockchain Work?

Welcome to our second Operations management podcast! Today, Jay Heizer and Barry Render delve into the topic of blockchain, which is a topic in Chapter 11, Supply Chain Management. We will talk about its cryptocurrency origins and the work of Gerber, Nestle, Unilever, Walmart, and IBM to create a blockchain system called Food Trust. We also discuss blockchain’s shortcomings and how both shipping giant Maersk and retail giant Walmart have had to cut back on their original goals dramatically.

 

Instructors, assignable auto-graded exercises using this podcast are available in MyLab OM.  Contact your Pearson rep to learn more!  https://www.pearson.com/us/contact-us/find-your-rep.html

See you every two weeks in our new podcast series. Next up, on April 24th, is a discussion about the formidable task of managing large projects, which ties into Chapter 3 of our OM text.

OM in the News: Sprawling Supply Chains and Sustainability

Companies are rushing to more closely track materials across their sprawling supply chains ahead of expected new human rights and environmental laws, reports The Wall Street Journal (Jan. 24, 2023). Businesses, including consumer-goods company Unilever, clothing retailer H&M, and Renfro (which supplies socks to Ralph Lauren), say they are turning to technologies to help gather data on their supply chains and track materials.

Last year, H&M began rolling out a traceability platform for its recycled polyester and man-made cellulosic fibers, such as viscose, that can contribute to deforestation. It uses blockchain technology (see Chapter 11) to track and verify the use of sustainable fibers in garments. H&M has more than 600 commercial product suppliers who make their products in over 1,500 factories in Europe, Asia and Africa. The company says: “The closer we get to our 2030 goal for all our materials to be either recycled or sourced in a more sustainable way, the more traceability we gain.”

A host of supply-chain regulations went into effect in recent years and more are on the way, exposing companies to potential penalties and public criticism if found to be negligent. Many businesses, especially small and midsize ones, have a limited view of their supply chains and are struggling to broaden their oversight.

New European Union rules require larger companies operating there to identify, prevent and remedy risks to human rights and the environment in their supply chains, such as minimum age requirements, worker safety, pollution and biodiversity loss. There are a host of other regulatory developments threatening to affect companies’ supply chains. These include modern slavery laws in the U.S., such as the 2021 Uyghur Forced Labor Prevention Act.

Unilever has a sprawling global supply chain, with around 54,000 suppliers in 150 countries. The company tracks commodities such as palm oil and soy with satellites, geographical data and photos. But software that simply manages supply-chain data isn’t a silver bullet as it is difficult for companies to self-police the information they get from their suppliers. One startup, Wiliot, provides tiny tracking tags the size of postage stamps that can follow goods as they move, helping companies ensure materials aren’t coming from areas at risk of deforestation.

Classroom discussion questions:

  1. What other regulations in the US and the EU govern industry sustainability standards? (Hint: see Supp. 5 in your Heizer/Render/Munson text)
  2. Why are supply chains so difficult to manage with respect to human rights and the environment?

OM in the News: Blockchain Fails to Gain Traction

Blockchain, the technology underpinning bitcoin and other cryptocurrencies, for years has been viewed by some companies as a way to drive industry-transforming projects, among them the tracking of assets through complex supply chains. So far, that hasn’t happened, writes The Wall Street Journal (Dec. 16, 2022).

We have followed the topic (Chapter 11, pages 451-2 in your Heizer/Render/Munson text) relentlessly, with 22 blogs over the past few years. To review them, enter “blockchain” in the search box on the right.

Maersk and IBM discontinued a blockchain-based program to track shipments

The latest effort to run aground was that of Maersk and IBM, which hoped to follow shipments via the blockchain. Another big effort, Walmart’s attempt to track groceries on the blockchain, continues, but very slowly.

“There’s not one company that has really shown, let’s say, a material change,” said Moody’s VP, of blockchain efforts in supply chains. It has been slow going or worse for big bets on blockchain for a number of reasons: the complexity of the technology, the time required to get a blockchain into operation and the difficulties in enlisting participants.

TradeLens, the Maersk- IBM blockchain platform, was launched in 2018 to help digitize container shipping on a secure global tracking platform. Had it worked, it would have been a game-changer, cutting down on paperwork to clear customs and offering cargo owners more visibility of their boxes during transit.

In 2018, Walmart partnered with IBM to start tracking its produce items through blockchain. The effort began with leafy greens, and in the four years since has added just one more item: green bell peppers. Walmart said it took time to get buy-in from suppliers who found the onboarding process daunting. Many didn’t have digital record-keeping systems and had to make large upfront investments before they could start using blockchain.

“There used to be a time, 4 years ago, every interview that I would get into, the question was about blockchain and how’s UPS going to use blockchain. Are you guys going to solve all the problems in the world with blockchain?” says a former UPS exec. “It’s been a long time since anyone has asked me about blockchain,” he added. “It never really took off in my world.”

Classroom discussion questions:

  1. Describe exactly how blockchain works.
  2. Why has blockchain faltered?

 

 

Teaching Tip: Glossary of Supply Chain Terms

The Financial Times  (Nov. 22, 2022) has just issued a report called How Technology Can Help Redraw the Supply Chain Map . In it, the newspaper provides this useful glossary of current SCM terms for your students to keep handy.

Internet of things (IoT) The IoT consists of sensors that make goods “smart”. These can both send information and communicate with each other. The IoT is used in the supply chain for tracking and monitoring. (See p. 451 in your Heizer/Render/Munson text).

Blockchain Blockchain is also known as distributed ledger technology. It allows for the digital recording of transactions and tracking assets in a business network. It introduces trust where this is scarce. The verifiability of transactions can help to reduce fraud. (See p. 451 and 591).

Artificial intelligence (AI) and data analytics These involve statistics at a huge scale processed at a blistering speed. They can help with warehousing and inventory, improving sourcing relationships and predicting demand AI and machine learning. (See p. 823-831).

Machine Learning (ML) is a facet of AI that applies an algorithm to data. It then taps into previous experience and then accomplishes tasks without human involvement. The algorithms can, for instance, make predictions, form personalized recommendations and recognize images in photos. Examples of ML with which you may be familiar include TikTok recommendations, photo portrait recognition and sentence completion.

Robots and automation This covers the physical side of distribution centers and includes optimizing storage, moving stock and picking and packing. It is increasingly sophisticated. (See p. 277, 292, 371, 490).

3D printing This involves the creation of three-dimensional objects by a machine that uses a computer model. It applies layers of substrate (plastics, liquids or powders) to create physical goods. It allows for the making and replication of extremely complex shapes that cannot be constructed by hand. (See p. 170).

OM in the News: Using Blockchain to Trace Your Clothes

Labor exploitation, like environmental degradation, is baked into fashion supply chains around the world, writes The Financial Times (March 13, 2021). One contributory factor underlying these issues is a lack of traceability: most brands work with so many layers of middlemen that they don’t actually know who is sewing their garments, much less who’s dyeing the fabric or picking the cotton. Researchers at the Transparency Index (which ranks clothing brands based on how much they know and disclose about their own supply chains), say companies have a “total lack of knowledge about where the components of their products are being made, and at what cost to people and the environment”.

Hence a more technological approach to trace apparel supply chains: block-chain. U.K.-based Fibretrace is offering something unprecedented: a way to store supply chain information within the very fibres of a garment.

Here’s how it works: a bioluminescent ceramic pigment as fine as dust is added to the fibres at the beginning of the supply chain (for cotton, it’s added in the ginning stage, when the cotton fibres are separated from their seeds; for synthetics, it’s added at the fibre production stage). Each batch of pigment is created according to a unique “recipe”, which acts almost like a serial code.

Then, at each stop in the supply chain — dyeing, weaving or sewing — the fibre is scanned and that facility then adds new information about what they did to the fibre to a secure blockchain. The pigment is so safe for humans that it’s classified as an “edible product.” The cost: roughly 3 cents for a T-shirt.

Although being able to track a supply chain doesn’t necessarily ensure it will be free of forced labor or manufacturing practices that are bad for the planet, traceability is a very useful first step.

Classroom discussion questions:

  1. Describe how blockchain works in general, and in this industry in particular. (Hint: see page 453 in your Heizer/Render/Munson text)
  2. What other tools do brand name garment firms have to control supply chain sourcing ethics?

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OM in the News: Chinese Form Blockchain on the Sea

China’s state-run container line Cosco Shipping will work with Alibaba and Ant Financial, on using blockchain technology to track goods across seaborne supply chains, reports The Wall Street Journal (July 8, 2020). The initiative is the latest in a string of agreements in the shipping sector aimed at connecting cargo owners, vessel operators, ports and logistics companies through digital platforms that use blockchain technology.

Blockchain allows trusted participants to share information as goods move through supply chains. The system promises to reduce the cost of administering shipped goods, cut down on paperwork and speed the flow of goods by letting companies transmit information quickly and reliably. Ant Financial Services runs the biggest business-oriented blockchain platform in China, processing payments and other services for as many as a billion users a day.

Denmark’s Maersk, the container shipping giant, and IBM in 2016 introduced a blockchain platform for container ships called TradeLens, which other big operators such as Switzerland’s Mediterranean Shipping, France’s CMA CGM and Germany’s Hapag-Lloyd have since joined.

It’s unclear so far whether significant freight flows have been handled through the platform. Use of the blockchain platform has waned during the coronavirus pandemic because global trade flows have fallen sharply while shipping lines have dropped hundreds of port calls, paring down and effectively simplifying many supply chains.

Large companies such as Walmart and Procter & Gamble, along with hundreds of ports, have been testing the technology to get a better view of their supply chains, from raw materials to finished goods.

Classroom discussion questions:

  1. Why is a firm like Walmart implementing blockchain? (Hint: See Ch. 11 in your Heizer/Render/Munson text)
  2. Describe how the concept of blockchain works.

OM in the News: Walmart Unveils Largest Blockchain for Supply Chain Management

Walmart Canada and DLT Labs are partnering together to launch a blockchain-based freight and payment network, reports Supply & Demand Chain Executive (Nov. 15, 2019). The solution (going live in Feb.) will be the world’s largest full production blockchain for any industrial application. “Just as the Roman’s concept, ‘dictum meum pactum’ (meaning ‘my word is my bond’) was fundamental to building trade, this product creates a secure digital handshake using blockchain to renew trust and efficiency in global trade,” states DLT’s CEO.

The new system uses distributed ledger technology to track deliveries, verify transactions and automate payments and reconciliation among Walmart Canada and its carriers which deliver inventory to over 400 retail stores across Canada. The blockchain-based freight and payment network manages, integrates and synchronizes all the supply chain and logistics data in real time, aggregating the data between Walmart Canada and its fleet of third-party trucks on a shared ledger. The solution also automates the many calculations enabling real-time invoicing, payments and settlement.

“Our carrier partners move over 500,000 loads of inventory nationally, which creates an extraordinary volume of transaction data. This new dynamic and interactive blockchain technology platform is creating complete transparency between Walmart Canada and all of our carrier partners,” adds Walmart’s VP for SCM. Walmart Canada operates 8.75 million square feet of distribution center and moves more than 853 million cases of merchandise annually. These goods are transported by a combination of 3rd party fleet as well as Walmart Canada’s own fleet of 180 tractors, 2,000 trailers and 350 drivers. Each third-party trailer tracks approximately 200 data points per shipment. Automating this data collection and management using blockchain results in a significant cost-saving.

While the application of blockchain technology in industry has long been discussed, this is the first practical implementation at scale, and it clearly demonstrates blockchain’s significant benefits.

Classroom discussion questions:

  1. As an Operations Manager what OM tools might you find helpful for successful implementation of blockchain?
  2.  What would you expect to be the major impediments to a successful implementation?

OM in the News: Blockchain on the Seas

As discussed on pages 453 and 586 of the text, blockchains have huge potential to add efficiency and security to operations. Two major European ship operators have just joined a blockchain platform formed by Maersk and IBM, in a significant boost for the adoption of the technology across the logistics industry, reports The Wall Street Journal (May 28, 2019).

The addition of France’s CMA CGM and Swiss’s Mediterranean Shipping to the effort called TradeLens means the 3 carriers that control 1/2 of all seaborne containerized cargo capacity will make the movement of freight in international supply chains more transparent and potentially generate substantial annual savings.

Maersk and IBM in 2016 kicked off the blockchain platform for container ships, which carry the vast majority of consumer goods, furniture, manufacturing parts and other basics of global commerce. Large companies such as Walmart, P&G and DuPont, along with 100 ports, have been testing the technology to get a better view of their supply chains, from raw materials to finished goods.

For ocean carriers, the blockchain technology allows trusted participants to share information as goods move through supply chains. The system also promises to reduce the cost of paperwork. Maersk said the cost of the required documentation to process and administer many of the goods shipped each year makes up 1/5 of the actual physical transportation costs.

The French carrier’s decision to join TradeLens  is “a signal that the whole notion of blockchain tourism is over and that we are at a tipping point for scale where participants will share data in a trusted fashion,” said an IBM exec.

Classroom discussion questions:

  1. Explain how blockchain works.
  2. What impact is blockchain intended to have on this industry?

OM in the News: Blockchain and Strategic Mineral Supply Chains

Congo mines are in the hands of rebels at times

Ford, Huayou Cobalt, IBM, LG Chem and RCS Global are beginning to use blockchain technology to trace and validate ethically sourced minerals, reports Mining Review (Jan. 16, 2019). The group, which includes participants at each major stage of the supply chain from mine to end-user, will begin with cobalt in exploring an open, industrywide blockchain platform that could ultimately be used to trace and validate a range of minerals used in consumer products.

Cobalt is in high demand for its use in lithium-ion batteries, which power a wide range of products such as laptops, mobile devices and electric vehicles. By 2026, demand is expected to multiply eightfold. The typical electric car battery requires up to 20 pounds of cobalt and a laptop requires an ounce of the mineral.

Cobalt produced at Huayou’s industrial mine site in the Democratic Republic of Congo will be traced through the supply chain as it travels from mine and smelter to LG Chem’s cathode plant and battery plant in South Korea, and finally into a Ford plant in the U.S. An audit trail will be created on the blockchain, which will include data to provide evidence of the cobalt production from mine to end manufacturer. An important objective is to help increase transparency in small-scale mining and enable these operators to sell their raw materials in the global market, while they meet their internationally ratified responsibility requirements.

Built on the IBM Blockchain Platform, the platform is designed to be adopted across industry and to allow parties of all sizes and roles in the supply chain easy access, including manufacturers across the automotive, electronics, aerospace and defense industries and their supply chain partners such as mining companies and battery manufacturers. Work is expected to be extended beyond cobalt into other battery metals and raw materials, including minerals such as tantalum, tin, tungsten and gold, which are sometimes called conflict minerals, as well as rare earths.

Classroom discussion questions:

  1. Why is blockchain an important OM tool?
  2. What other products are experimenting with or using blockchain?

OM in the News: Making Sense of Supply Chain 4.0

McKinsey, Cap Gemini and the Boston Consulting Group all suggest Supply Chain 4.0, digital transformation, is about applying digital technologies– Artificial Intelligence (AI), Machine Learning (ML), the Internet of Things (IoT) and Blockchain– to operational processes and creating improvements.

 If digital transformation is to “transform” SCM, then it must as efficiently as possible match supply to real demand, writes IndustryWeek (Nov. 2, 2018). In SCM, there are 3 key factors that impact the ability to match supply to demand: (1) Demand uncertainty and the inability to accurately forecast demand; (2) Production uncertainties leading to changes in supply; and (3) Lack of synchronization among supply chain partners.

(1) Traditional forecasting methods can be impacted by one-time events (such as economic changes, special promotions, fashion trends, or a spike in social chatter) that affect the stability of historical sales patterns. Digital transformation can improve traditional forecasting methods in 2 ways. The first is to gather new data, such as sentiment information from social channels, weather inputs, economic performance or information from new IoT or Fog Computing sensors that can provide insights into customer demand. The second is to use ML to continuously “learn” from this data to determine the contributions of these factors in predicting demand.

(2) Digital transformation can use IoT to continuously monitor machines on the shop floor, track key performance metrics and then use predictive analytics to understand what these performance metrics mean for yield, quality or the likelihood of machine failure.

(3) At one end of the supply chain, a retailer may determine a particular demand based on what end consumers are buying. This demand signals the next tier in the supply chain, which sends its own demand signal to the next tier and so on. The end result is a view of demand a few tiers into the supply chain that is very different from the original demand requirement from the retailer. The supply chain, in effect, becomes unsynchronized.  Blockchain is a distributed ledger, with information instantly visible to all parties of the blockchain and ensures a single version of the truth – such as a single understanding of true end-customer demand – in the supply chain. This is what synchronizes all supply chain partners.

Classroom discussion questions:

  1. How does digital transformation differ from traditional forecasting?
  2. What is IoT? Give an example.
  3. What is blockchain and how can it help SCM?

 

OM in the News: SAP, Blockchain and Drugs

SAP is working with 65 produce, pharmaceutical, tech and shipping companies on an automated blockchain-based supply chain tracking system that it believes will bolster visibility and ensure the authenticity of goods such as food and drugs, reports Computerworld (Aug. 24, 2018). The software giant is piloting its SAP Cloud Platform Blockchain with the goal of helping customers use manufacturing and supply-chain products – augmented by blockchain – to enhance transparency, safety and collaboration.

SAP is not alone in developing such a supply chain tracking system. In January, Maersk and IBM announced a joint venture to deploy a blockchain-based electronic shipping system that will digitize supply chains and track international cargo in real time.

But the pharma industry, in particular, has been under scrutiny to ensure it can trace from origin to consumer the drugs it makes and sells. Last month, the Chinese pharmaceutical firm Changchun Changsheng Life Sciences came under investigation for falsifying records related to the production and shipment of a rabies vaccine. This has led to calls for the entire pharmaceutical industry to adopt blockchain tamper-proof ledgers to track the manufacture and shipment of drugs.  There’s also the problem of drug knock-off companies, which mass produce generic drugs and flood the market with products that may not yet be approved by regulators. Having a product certified as having been tracked from manufacturing to store shelf would ensure authenticity.

Additionally, certain drugs must be transported and warehoused at specific temperatures. IoT sensors would enable that to be tracked, as well as checking the amount of vibration incurred during the shipping process, which could alert managers as to whether damage may have occurred. SAP’s “Advance Track and Trace” application is piloting the blockchain technology with pharma companies such as Merck., Amgen Merck, Glaxo Smith Klein, McKesson, AmerisourceBergen, and Boehringer Ingelheim.

Classroom discussion questions:

  1. What are the similarities between the drug and food supply chains?
  2. Describe how blockchain works.

OM in the News: Farm to Cradle–Tracking Gerber Baby Food on the Blockchain

Gerber traced the ingredients of its sweet potato, apple and pumpkin puree on the Food Trust blockchain

Gerber is putting some of its baby food products on a food-tracking blockchain to test whether the technology can trace the fruits and vegetables that go into its products, writes The Wall Street Journal (Aug. 1, 2018). Gerber’s effort is part of a wider food-industry exercise aimed at improving food recalls by using the technology behind bitcoin to trace a worldwide ingredient supply chain. Food recalls can diminish consumer confidence and lead to lost sales. News of tainted baby food hits an especially sensitive nerve – stakes that in part prompted Gerber to choose blockchain.

Gerber has discovered that putting blockchain technology to use in a corporate supply chain takes some grunt work, mainly centered on moving data from the company’s SAP SE enterprise software onto the shared digital ledger. Another wrinkle is dealing with the mix of paper and electronic data in different formats, from farmers, processors and others in its supply chain.

Gerber (and parent Nestle) are working with 9 other large food companies, including rivals Unilever and Walmart, and with IBM on a blockchain system called Food Trust, to trace food and ingredients worldwide. (The 107-year-old IBM sees blockchain as a key area of growth). The theory is that having partners and competitors share a single record-keeping system can speed up investigations of bad food and make recalls more accurate and less expensive. IBM supplies the blockchain technology and a mobile app that farmers and others can use to enter data onto the Food Trust system. For companies using Food Trust, data about harvests, processing, packaging and shipping is stored electronically on the blockchain system, which can allow trace-backs in seconds compared to days and weeks.

Classroom discussion questions:

  1. Why blockchain?
  2. Why is Gerber working with competitors on this technology?

 

Good OM Reading: AI + Blockchain

This new book (www.mkpress.com) alerts readers to the impending collision of the two largest foundational technologies for the coming decades: Artificial Intelligence and Blockchain.

AI has had a long history of hype and excitement about how we can externalize our human skills. Blockchain is the newer technology that is motivated largely by a change in control of cryptocurrencies and inventory.  AI, claim the authors, seeks to displace individuals while blockchain seeks to displace a controlling team of individuals. AI will continue to disrupt business in many ways, leading to job loss and rendering irrelevant many human cognitive skills. Blockchain too is challenging and will continue to change the position of trust of central authorities, whether in the government or in big business.

Both these technologies, however, have enormous potential to make positive changes in the world of operations management. AI, rightly engineered and deployed, has the potential to become humanity’s servant, freeing up humans. Blockchain, responsibly governed and deployed, has the potential to democratize society, by eliminating friction in the world’s transactions and eliminating middlemen, and by facilitating a more equitably distributed internet of value. The most efficient and effective ways for this to happen is through a partnership between these two powerful technologies, where blockchain delivers trusted and immutable information for AI, and AI delivers cognition and automation to business processes.