The COVID-19 pandemic has left no supply chain untouched with impacts varying from supply shortages to unexpected demand spikes for some products while no demand at all for certain products and services. For instance, factory closures in the most affected provinces in China accounts for tier 2 suppliers of at least five million companies around the world, which has resulted in supply shortages. As a result of the pandemic, the global economy is projected to contract by 3% in 2020.
India is no exception. The impact of COVID-19 on the Indian economy has been disastrous; the GDP shrank by 24% in the second quarter of 2020 compared to the same period last year. Automotive, tourism and aviation, which accounts for 10%, 9% and 2.4% respectively of the Indian GDP are few sectors that are worst hit by the crisis. The magnitude of the disruptions caused by COVID-19 in Indian businesses and their supply chains makes them unreliable. The question is – what is the way forward? Can emerging technology, such as the blockchain, play a role to recover, restore and promote Indian economic activities through regaining trust among supply chain members?
Blockchain: Development & implementation
Interestingly, the development of the blockchain roadmap called: ‘Blockchain: The India Strategy’, demonstrates the Indian government’s commitment and strategic importance of this technology in stimulating the Indian economy. This publication provides invaluable information on the blockchain use cases implemented by several state governments in areas, such as land records, assurance of educational certifications, verification of claims in the disbursement of fertiliser subsidy and tracing the pharmaceutical distribution.
However, the implementation of this technology could be a daunting task. Challenges may arise from technological to organisational issues, from an external environment and supply chain aspect. Our research with consultants, developers and clients (steel manufacturer and bank) in India, identified several challenges of varying magnitude of criticality which require considerable efforts to overcome. Technological challenges relating to complexity, compatibility & trialability and organisational challenges, such as financial resources and top management support are identified as critical (Figure 1) requiring the effort of varying degrees (Figure 2).
Based on the analysis of ‘criticality of challenges’ and ‘level of effort required’ the identified challenges are placed into the criticality-effort matrix (see Figure 3). As a matter of priority, managers must first address the ‘Big Rock’ challenges before focusing on the challenges of other clusters.
Big Rock challenges
Traceability through blockchain systems are only possible when the blockchain technology is compatible with the existing systems & existing business practices and are interoperable with existing software. A respondent from the steel manufacturer stated, “Our supply chains are complex and constantly expanding requiring multiple systems from various organisations to be compatible.”
The use of complex cryptographic algorithms to validate and record the transactions on blocks portrays blockchain technology as a complex idea. One of the consultants highlighted, “The structure of our client bank is so complex, with duplications in roles across several departments, which made it challenging for us to implement blockchain technology.”
Trialability is the degree to which an innovation may experiment on a limited basis. To assess the impact of the technology on supply chains, it needs to be implemented across multiple organisations and several functions. Another consultant interviewed indicated, “It is not easy to identify a supply chain that is comprehensive with the involvement of many members to trail the technology.”
Blockchain-as-a-service allows businesses to use cloud-based solutions to build, host and use their blockchain apps, smart contracts, and functions on the blockchain infrastructure offered by vendors. Since the introduction of this service, the costs of developing software have decreased or became irrelevant. A developer stated, “Despite the lower technology costs, it is the cost of the data capturing devices required to provide supply chain traceability that became a major concern of implementing the technology.”
A lack of understanding of how the technology fits with the organisation’s policy and no evident benefits offered by the successful full-scale implementation of the technology, makes it difficult for the senior managers to support the technology. A bank executive that was interviewed points, “The lack of knowledgeable and skilled workforce to implement the technology has demotivated us from the technology implementation.”
The development of implementation strategies around the ‘Big Rock’ challenges could promote the implementation of blockchain technology in Indian firms.