Brian Fugate is the Chair of the Department of Supply Chain Management in the Sam M. Walton College of Business. Brian's research focuses on advancing the scholarship and practice of strategic, global integration of demand and supply, knowledge flows, and sustainability across the supply chain.
Remko Van Hoek is a clinical full professor of Supply Chain Management at the University of Arkansas in the Sam M. Walton College of Business. He took this position in January 2018. In addition to this, Remko also serves as an independent advisor of sourcing and procurement.
Episode Transcript
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00:00 Matt Waller: Hi. I'm Matt Waller, Dean of the Sam M. Walton College of Business. Welcome to Be Epic, the podcast where we explore excellence, professionalism, innovation and collegiality, and what those values mean in business, education, and your life today. Today I have with me two of our top faculty in the Walton College of Business, Professor Brian Fugate, he is Chair of the Department of Supply Chain Management. And I also have with me, Professor Remko Van Hoek, a faculty member in the Department of Supply Chain Management. And Brian got his PhD at the University of Tennessee. Earlier in his academic career, he had an undergraduate degree in engineering and he worked as an industrial engineer for Delta Airlines, Toyota Motor Corporation, and John Deere and he eventually went back and got a PhD and has had a extremely successful career as an academic and we hired him from Colorado State, and it was a good thing that we did. And Remko, and I've known both of these guys for quite a long time, Remko got his PhD and eventually went back into industry and worked for companies like PwC. He was an executive in global procurement, he was Senior Vice President of Sourcing and Procurement for Walt Disney, he's worked for other companies as well.
01:47 Matt Waller: But both of these individuals, Brian and Remko, are not only successful academics, but they've also been successful in industry and continue to be involved in industry. Remko, Brian, and I co-authored a book recently with a doctoral student, Marat Davletshin, and it is titled Integrating Blockchain Into Supply Chain Management, and the subtitle is A Toolkit for Practical Implementation, and it will be out soon. I'm really excited about this book for a number of reasons: One, Remko, Brian, and I all have long histories of practice and academics in supply chain management, but also, we have very complementary backgrounds, from an academic perspective, in terms of the topics that we've focused on. But we also have this doctoral student, Marat who worked with us on this, and again, he has a very different kind of a orientation in terms of his look at supply chain management, his background. So we've got four authors on this book, and again, the title is Integrating Blockchain Into Supply Chain Management: A Toolkit for Practical Implementation."
03:30 Matt Waller: So what we've done here, as we've used theories from supply chain management and from business in general, because theories, a lot times, people, when they think of theory, they think, "Oh, that's not practical," but really a good theory is very practical because a theory describes, explains, and predicts phenomena. Well, when would be a better time to be able to predict phenomena than now, with all of the disruptions that are going on. Blockchain is a new technology, truly new, and people are starting to see that it's got tremendous applications. So we applied our knowledge of theory and practice to come up with a toolkit for practical implementations. So today, we're gonna be talking about elements from our book, and we will be talking about, also supply chain management, in general, because really, supply chain management is what's interesting. Blockchain, per se, might be interesting to a computer scientist, but we're interested in business, we're interested in supply chain management. So we're interested in how is blockchain going to affect supply chain management.
04:50 Matt Waller: And to that end, I think we should start off talking a little bit about supply chain management. And in the introduction to this book, I wrote a little bit about how I became interested in blockchain. And it's really a long story. It started back in the late '80s or early '90s when I was in the doctoral program at Penn State, and I read an article in one of my doctoral seminars from an economics journal, the professor used an article from the Economic Journal, it was titled something like, Information Substitutes for Inventory. And I thought "What?" It was my first taste of this really abstract... These abstract concepts that we deal with in academics, and it really turned out to be the basis of my career. Really, I've always looked at how can information substitute for inventory or for transportation or for stock-outs or for whatever it may be. How could we collaborate to get more information? How could we use data and forecasting better to get this?
06:05 Matt Waller: But basically, there's different views of what supply chain management is. But logistics, the way I had always learned about it was that logistics is about managing the flow and storage of inventory such that total costs are minimized and customer service targets are achieved. Whereas supply chain management was more about the integration of business processes within a firm between functions and across firms. And so, obviously, when I started learning about blockchain, I thought, "Wow, this will help". Regardless of what your perspective is of supply chain management or logistics, it's real easy to see how this could apply. So Brian, why don't you talk for a minute just about your perspective of supply chain management logistics.
07:01 Brian Fugate: I think my perspective of supply chain management is quite similar to yours, in that it's about coordinating the functions within a firm and across a firm. And one of the things I think that we're starting to see, whether it's in just your traditional managing inventory, forecasting, sourcing, transportation, your traditional functions. Or whether it's in terms of things like sustainability across the supply chain or food safety or security or managing disasters is... What we're seeing today with with the complexities, consumer demands is the need to really go beyond a buyer and a supplier, and looking at that, but to go to a supply or supplier. But really in food safety, for example, going all way to the source, to the raw material end of the supply chain.
08:05 Brian Fugate: And I think, when I look over my history and the things I've read of those before me, we have done a relatively good job at looking at, within the four walls of the firm, and with that buyer-supplier relationship. But where we're moving into now and the biggest challenges I see are at both ends of the supply chain. Both the consumer and all the various technologies and changes in the way that consumers are changing their demands, but just as important and perhaps more challenging is at the far end, the beginning of the supply chain, where the raw materials are, is having visibility of that, and being able to understand and connect the pieces of information across the supply chain. And so that's, for me, where blockchain became so exciting to me, is that I'm real... I've been someone who's pretty skeptical when it comes to the hype of technologies, and this one has won me over. Blockchain, the more I dug into it... I started out as a skeptic, but the more I dug into it, I think it has real promise to actually make a significant change in the way we manage our supply chains.
09:24 Matt Waller: That's great. Well, that leads really well into Remko, 'cause Remko, I know you have a tremendous academic and practical experience in sourcing and procurement. So what's your perspective on supply chain management, logistics, sourcing, procurement, and the role of blockchain?
09:42 Remko Van Hoek: Yeah, I think if you look at sourcing and procurement as part of the supply chain, I think a lot of those themes that both of you touched upon play out very, very concretely. So historically, sourcing and procurement has been the upstream part, far removed from the consumer, in fact, the buyer is looking upstream, and suppliers with their back, figuratively speaking, to the consumer. The truth of the matter is if you get sourcing and procurement right, you can directly impact consumer value, not just customer valuable but also consumer value. It has to do with if something goes wrong, you shut down a factory so you have nothing to ship. But more importantly, if you really get it right, working closely with suppliers, you can be innovative, you can create new service capabilities, you can do it at a lower cost so that your proposition in the market can be more compelling to consumers. So if you get sourcing and procurement right, even though it may be positioned far upstream in the supply chain, it has a direct connection to consumer value.
10:41 Remko Van Hoek: And it's not surprising, from that perspective, that a lot of the use cases around blockchain very much have to do with, how can we improve visibility on a line of sight into what happens before us and before those that are before us in the supply chain, if you like? So if you look at use cases around international shipping, around food safety, or product integrity, or all of those things, they're facing upstream, and they are enhancing our capability to see things earlier to be more proactive in anticipating things rather than be responsive. And one of the ultimate consequences, tying back to your inventory point, is, as a result, we're able to hold less speculative inventory, just in case something goes wrong. So it's a tool, it's an enabler, but it's an exciting tool and it's an exciting enabler to accelerate our journey towards the promise of supply chain management, and to help us make practical progress against a theoretical promise, if you like.
11:46 Matt Waller: Being in this region we're in, with the largest retailer, the largest company on earth, Walmart, and the more than 1,500 supplier teams that are here, and they're not just sales teams, they're cross-functional teams, and then of course we have one of the most innovative logistics service providers, JB Hunt Transport Inc, the largest protein producer in the world, Tyson, enormous LTL carriers, FedEx, Freight and ArcBest, but this region has had a history of sharing information, of utilizing information, to make the supply chain more effective. We really do. It seems to be in our DNA. When I moved here back in 1994, I was just amazed that Walmart was sharing... People always talk about them sharing point-of-sale data but they were sharing... Yeah, they were sharing daily point of sales data by SKU, by store, but they also were sharing inventory data on hand, on order, the forecast, all different types of information with their suppliers.
13:14 Matt Waller: And back then, when I first moved here, again, as I mentioned, one of the things that intrigued me about what was going on here was... Of course, my area of interest was looking at how information can substitute for costs and poor performance, etcetera, etcetera. So seeing what was going on here was intriguing to me. And I remember... Again, I moved here in '94 and I started really talking a lot to the supplier teams that were moving into town. When I moved here, there were about 15 to 30 teams here, most of them weren't cross-functional yet, they were just sales teams, and the largest team at the time was Procter and Gamble, they had about 30 people on their team. But they were putting some of the best and brightest on these teams because no other retailer was providing this kind of information. And we were fortunate in that we were able to start placing our students on those teams. Some of these companies had never recruited from us before. And they moved these teams to town here and they needed help, and our supply chain students were going to work there, of course, that was over 20 years ago. And now, they're leaders in industry because of that, 20-some years later. It's been fun to watch.
14:28 Matt Waller: But from my perspective, I was really intrigued, and I thought... Remember, at this time, a few years after I came here, the Internet boom started. And I remember, by 1997 I was talking with some team leaders here in town, of some big teams, supplier teams, consumer products companies. And we were speculating that by the year 2000, all retailers would be sharing this data. And the reason we thought that, was that we thought the Internet is gonna make this easy, and everyone's seen the benefit Walmart is getting from it. Walmart wasn't just getting benefit because they were using the inventory to reduce stock-outs or to reduce inventory to make transportation more effective. It was also creating competition amongst the suppliers for innovative ideas, because suppliers were using all this data to say, "We should introduce this new product." Well, buyer then was hearing well-informed arguments for all kinds of things. From packaging, pricing, promotion, placement, etcetera, because of this data. So it was creating not just efficiency but innovation. And I've still, to this day, been amazed. Here we are in 2019, and there still isn't as much sharing going on as there is here, and it's a huge benefit. And now with e-commerce, I think that Walmart's benefiting from that as well.
16:02 Matt Waller: But you see JB Hunt doing this as well, they've created some technologies, JB Hunt 360, where data, again, it's... JB Hunt has become more of an information type of a company than a logistics company. And we see this... And so what's interesting is, as we've seen, these companies, Walmart has been dabbling... Doing a lot, not just dabbling, but actually implementing blockchain processes for years. Now, Tyson and JB Hunt and some of the suppliers in town are too. And so that's been a benefit to us because we've had a source to draw on here for that. And again, I start wondering, are other players going to catch up to what's going on here or not? I don't know. Of course, our information systems department, which collaborates with our supply chain management department, created the Blockchain Center of Excellence. We hired Mary Lacity, who came in. She's a blockchain expert. She also has a lot of expertise around robotic process automation. And Zack Steelman. But now others in the college are getting interested in blockchain. But we thought, "We don't wanna just look in Northwest Arkansas." So for our book, we interviewed companies from around the globe. We have tremendous amounts of hours of interview. And on top of that, we did surveys. And some of the results of the surveys were quite interesting. Remko, would you like to say anything about that?
17:38 Brian Fugate: Yeah. So just to echo your point about the collaboration with, in particular, Walmart. First of all, they are one of the top innovators in the blockchain field when it comes to supply chain. They are truly leading amongst those that are leading the charge, figuring out how to integrate blockchain into supply chain, and we've been very grateful for their generous support and openness, and willing to do events with us to talk about how they're approaching it, and openly sharing some of their lessons learned with their peers in the supply chain, for the good of advancing the science and the practice of supply chain in collaboration with us. So they've been a fantastic partner, and the partnership continues.
18:22 Remko Van Hoek: On the survey, I think we did a couple of surveys which also, as to your point, weren't solely done in our region where we actually collected... Data was collected around the world. And it really revealed a pattern of great excitement in the executive suite about the theoretical potential of blockchain. So there's a clear indication that most executives are turning around and asking their teams, "What are we doing about blockchain? Because there might be something here." And that's positive because a lot of questions are being asked, and a lot of consideration is being given. Obviously, there's the risk of this driving a little bit of a hype, and I think it's fair to say that there is a certain amount of hype around blockchain. And where our book fits in is that we're trying to get practical. So, alright, there's hype, there's interest, what's real and how can we begin to figure out what can become real? How can we turn this into action? And our data shows that that is specifically where companies need the greatest amount of help today. So yes, there is great interest, there's a recognition that there may be something there, and many companies are beginning to develop use cases for how they might integrate blockchain into supply chain.
19:36 Remko Van Hoek: A growing number also is doing pilots, and we cover many different use cases in pilots in the book. What very few companies have today is an articulated road map, an articulated, dedicated team, a programmatic approach, and real hard knowledge around, how are we going to turn from an exciting use case and an interesting pilot to something that we can use throughout the supply chain? And I think that's where companies need the greatest amount of help, and where the greatest opportunity is for our book to help make a little bit of progress. So in addition to writing the book, we've hosted events. In fact, we did one recently for alums of the Walton College. And we had to relocate the session three times because we overbooked.
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20:28 Matt Waller: We were originally hoping to do 15 people around the table to just compare notes, and we ended up stopping registration within two weeks when were at 100 people, because we wanted it to still be interactive. So if there's any case in point to be had about there's interest, there is interest. And what was fascinating in the discussion was to see that people were asking lots of questions. "What really is the business case? How are we really going to implement it, and how are we going to scale it?" So now I'm getting to your point about, is everybody going to do this? That's the scaling question, right? What's cool about blockchain is it's easy to get started, unlike other technologies that we've had in the supply chain, it is easy to get started. It doesn't take a lot of time, it doesn't take a lot of investment, it's fairly inexpensive, it can be done pretty quickly. That's different from saying, "Hey, should we do something within ERP?" or "Hey, should we roll out RFID?" So that's different about blockchain, and it's exciting. What we haven't fully figured out is, "Okay, so if we have a pilot that works, it doesn't mean we have a supply-chain-wide application." And that's where we have a lot of work to do, and we'll see. And it will go into, "Are we all going to develop our different applications? Well then, how are we gonna have them talk to each other?"
21:51 Brian Fugate: It's interesting to... Back to the, is everybody gonna adopt this? And it'll be interesting to see how that plays out on... One perspective is niche type of supply chains potentially can jump on this faster. And one example of that is, a couple of years ago, I met with an individual, Cody Hopkins, who runs a company, a cooperative, called Grassroots Farmers Cooperative, and they raise premium non-GMO chickens and turkeys and cattle and pigs that they sell through the cooperative, and through the Internet, to restaurants etcetera, etcetera. And when we met with Cody a couple of years ago, at the time, they were the first company that we were aware of, at least, that we could find, that had implemented blockchain end to end. So from the farm all the way down to the consumer. And it's based out here in Arkansas.
22:57 Brian Fugate: And now, back to my earlier point about a niche company, they have a relatively small, simple supply chain relative to the ones we've been talking about, Walmart, Maersk, etcetera. But they were able to implement that and it provided that visibility, it provided... The company values are about transparency, transparency in pricing, but also making sure that it came from a certain farm, non-GMO, etcetera, etcetera, that consumers care about. And so he actually sent us some chicken, and you could scan with your QR code the label, and it tracked and you could see the blockchain, every step of the supply chain. And so it's possible that that's a path that this goes on, while the larger, big, thousands of supply chains take a little bit longer to implement this.
23:56 Matt Waller: When I think about logistics, managing the flow of and storage of inventory, such that total costs are minimized and customer service targets are achieved, one problem has always been that a lot of times we really don't know how the flow is working. We really don't know what the flow is. And if you're not measuring something and you don't know what it is, you can't manage it. So if you look at the definition of logistics, the management of the flow and storage. Well, to manage something, you've gotta really understand that you... You gotta know when things arrive, when they're put away, when they depart. The flow is so critical, the flow determines the performance of the supply chain to a large degree. And information is the key to that. So blockchain... A lot of information in the blockchain could be created through databases. Some of the information that we're getting. However, the immutable nature of blockchain is so important, because one thing that... It's not that you can't change things. So, for example, if in a blockchain, you included a forecast, people sometimes will say, "Well, it's there forever, you can't change it." It is there forever, but you can change it. And that's a good thing.
25:33 Matt Waller: Because one problem that has always occurred in the supply chain is that people change things, and there's no record of what originally existed. With blockchain, the record is there. So I think just that is going to give us better management.
25:51 Remko Van Hoek: I think the other thing, the point about, what is it more than a database is... Because of its distributive nature, there's also a component of speed. So in particular, in situations where speed is at a premium, blockchain can be a step forward, right? So I can check transactions along the supply chain, going one at a time, sequentially, and going all the way up into supply chain. But if I'm tracking it, for the purpose of something went missing or I'm not sure that I'm actually receiving what I should be receiving, or I received something that is broken or wrong or has a quality problem, going through those steps takes time.
26:35 Remko Van Hoek: If instead, I use a blockchain, where I can nearly instantly track all the... See all the transactions, no matter where I'm positioned in the supply chain, I can do it a lot faster. So, the very commonly used example is that of the lettuce scare, right? One farmer makes a mistake and there's a trace of salmonella in the lettuce supply chain. And what do we do? We shut down the entire supply chain. We take all the product off the shelf... Think of the economic waste of that, and we shut down the supply chain for a couple of days, a couple of weeks, until we find the source and we fix the problem. Then, we have to start to supply chain back up and it takes a little bit longer, and finally shelves are getting replenished. By the time the shelves are replenished, consumers are still fearful. There was a problem... Is it safe to buy it yet or not? If instead, when I find a trace of salmonella, I can trace that individual product back to the farm that it came from in seconds, not days or weeks, and I can address it immediately at the source, I do not have to go through that whole economic waste, create the consumer fear, mess up the entire supply chain. So that's an example of speed of information holds a huge premium. Not just for the supply chain participants, but also for the consumer, right?
27:56 Remko Van Hoek: And so, now it gets to what am I doing with this visibility, right? 'Cause if I could use blockchain to create better visibility into existing supply chain processes, if I do that only for the purpose of visibility, one might say, "Is that good enough?" Because if I have visibility into a broken process, I see more of a broken process, right? Or if I have better visibility into bad data, what I'm seeing is more bad data. If instead I use that visibility to figure out, how can I improve those processes so that problems that arise will not reoccur? Or that we can find fixes to those problems. Now I'm leveraging it, that capability to make the supply chain better. And preferably I do that across parties in the supply chain, so that they work with my upstream and my downstream partners to collaboratively unleash the power of that visibility to make the process flow better.
29:03 Matt Waller: So again, it's not the solution, it's a path to a solution, and I think that ties us back to the whole use case. Why blockchain? And because there is a degree of solution-looking for a problem going on, there are a lot of use cases that the companies that we work with in the process are seeing, like, "Well, those could be resolved with existing technology. Why do we need something new for that?" right? So there is a degree of established good filters of, "Do we really need blockchain for this? And are we mindful of running towards a new technology? Should we at all?" And the final nuance is that whereas some of the other technologies we use commonly in the supply chain, such as ERP, assume a switch into main dominant technology that they use. What's different and unique about blockchain, it does not have to imply, "Throw everything outside of the window and start all over, and now blockchain is the only thing we do. In fact, we've seen a lot of pilots where data from RFID, from EDI, or from barcodes is pulled into the blockchain application to make it work better, so it can be a complement rather than an alternative. It can be, "Well, let's make what we have function better, rather than throw it all out of the window and start all over again." So, couple of nuances.
30:26 Brian Fugate: Remko, it's interesting, and Matt, both of you hit on this idea of... We keep talking about visibility, and this idea, and how do we make it better? How do we take what we have and not just speed to understanding where the problem happened and remove the problem, but how do we make things better? And if you look at the great companies historically, and lots of research has shown this, that one of the foundations is that they're great at learning and just continuously improving. And we also found that the starting point of that is to be able to see problems when they occur, right when they occur, 'cause if you can't see it, if you don't see the problems immediately, then you can't address it, you can't get better. The blockchain promises the potential of being able to have that visibility to see the problems.
31:25 Brian Fugate: Then, when you see the problems, what do you do? You can go in and you can not just remove the problem again, you can test, you can experiment with, how do we make it better, improve the process, and potentially come up with innovations? Have ideas that you haven't seen before because you saw this nuance immediately, you can address it immediately and learn from it. And it provides... As an old industrial engineer, it provides that starting point to any problem-solving or any improvement process of, what is the current state? What's the current state of our supply chain? If you look at most organizations, again, they can't map out their suppliers. At best, they can see their first-tier suppliers, they could have guesses of their second-tier suppliers, but beyond that they don't see what's happening. And so I think that's one of the exciting things about blockchain is it's not just making us more efficient, it's helping us get better at getting better.
32:28 Remko Van Hoek: Yeah.
32:30 Matt Waller: Along these same lines, one weak link here, in blockchain, is getting the information into the system. In other words, when a transaction occurs or when a product arrives, it needs to be entered into the system somehow, into the blockchain. And sometimes people use this phenomena as a reason to discount blockchain. But it's a really interesting... The opposite is probably true, because there's a trend occurring right now, that is one of the most transformative and disruptive trends in almost all industries, and that is sensors. If you look at the variety of sensors that are being created today, they're enormous. There are so many sensors being created, and the cost of sensors continues to decrease.
33:38 Matt Waller: Here in Walton College, 15, 16 years ago, we used to do a lot of work on RFID, and we did it for many years. In fact, I remember back in, I think, 2010, I did a study with some colleagues of mine here, and Walmart, and some other industry organizations, to look at the potential of applying RFID in the apparel supply chain. And so we went through the whole supply chain and we actually created a white paper about this. And in hindsight now, eight years, nine years later, I realized we were taking a tool and applying it to a problem. And I think blockchain is not like that, blockchain is very... It's a framework.
34:36 Remko Van Hoek: In some cases, RFID is good, but in some cases RFID doesn't work very well. If you have products like bottled water RFID is terrible, because water is polar and it messes up the read rates. If you have bottles of oil, that's fine, 'cause oil is non-polar and it doesn't affect the read rate. But there's all kinds of things that mess up... But now we're realizing, "Well, it's not about RFID, it's not about visual sensors. No, it's about sound, it's about weight, it's about pressure, it's about... " You could use RFID to measure some of these things, placement for example, but what seems to be happening is that you have this proliferation of new types of sensors. There's an amazing number of new patents on sensors that are coming out. And, as we know from a research perspective, if you want to really understand something, a research phenomena, we use triangulation. Triangulation is powerful for understanding phenomena.
35:52 Brian Fugate: And the same thing is true with information about where things are, how many there are, what condition they're in, etcetera, etcetera. How long they stay there. So now we're gonna have so many different types of sensors that... And this is happening currently, actually, right? You notice it when you move around and people are tracking you, or when you talk about a particular product, and then you get an ad in your social media. Sensors are out there in a big way, but they're gonna proliferate, obviously, because they're becoming cheaper.
36:30 Brian Fugate: I've been involved with Plug and Play, periodically, which is an accelerator. It's like a innovation platform for start-ups, but it includes an accelerator piece and venture capital and other things. It's out in Sunnyvale. Huge facility. But one of the things they have, that's unique is, unlike most accelerators, they have verticals. So they've got a retail vertical, a food and beverage vertical, a healthcare vertical, supply chain vertical, etcetera, etcetera. They've got a whole supply chain vertical. And I've gone out a few times and participated as an advisor for some of these start-ups. And the first time I went out there, again in the supply chain vertical, I met with probably 20 different companies, over half of them had to do with sensors of some type. And they were so innovative. I saw a company that had sensors that communicated with one another via bluetooth and Wi-Fi and the cellular system. This ability already, right? People are coming up with new types of sensors specifically for supply chain applications that can be corroborated with informational transactions that are occurring online or through email or through the Internet. And that is going to make for information that is pretty irrefutable.
38:14 Brian Fugate: The other aspect to the comparison with RFID is that if you go back to the hype that is surrounding blockchain today, it's like RFID 15 years ago. 15 years ago, we would have sat here and said, "Oh, RFID, people are saying it's gonna solve world hunger overnight, and we're gonna have replenishment into our fridge like tomorrow, and it's gonna solve all of our supply chain problems." Some of the hype around the theoretical potential of blockchain, driven by the consultants and the vendors, mirrors the hype we had about RFID 15 years ago. We're still trying to figure out where RFID is the right solution for the right problem and how to best deploy it in different operating environments. There's been a ton of progress in apparel, actually, having been with Nike. Actually, it turned out to be a solution that actually could help towards some problems in that industry, and it continues to progress. So it wasn't overnight, 15 years in, and we're still working on it. And I think that's part of where our approach has been, "Okay, let's demystify a little bit." Let's dig into what is it really, and how can we evaluate?" If I'm an executive that has heard there's something exciting around blockchain, what are you doing in your supply chain because some of the best companies in the world are getting more and more excited about what blockchain can help them do and the progress that they're making. And there's more and more examples out there.
39:47 Brian Fugate: If you're an executive and wondering "Well, how am I gonna get in on some of that action?" Right? That's where we're trying to be helpful because there are a set of screens you can use to evaluate, is this a good use case? Is this a mindful consideration of the new technology? Do I need a new technology? And if I do, how can I deploy it? How can I get started? How can I think big but start small? How can I, beyond that, stop to learn? And how can I scale beyond an experiment? If it works experimentally, it doesn't mean that it's throughout the supply chain yet, so how am I gonna think through that? I think that's where we are trying to be of some modest assistance to executives, to offer lessons learned from those that are a few steps ahead of most and to get practical around how can you get started and what are some the questions you should ask and how could you structure an approach that's actionable, realistic, that can get you going down the journey of innovation and exploration.
40:50 Brian Fugate: And all the sessions we've done so far have triggered new insights and new learnings and new sharing, and then we continue to go out with the commitment to there's more we're learning each day. So any company that's interested to take us up on a conversation where we can share what we've learned and what we've seen so far and explore how it might relate to their supply chain, always happy to do it, always happy to do a work session on that. It's an exciting space and we have a lot more to learn and we're learning fast.
41:23 Matt Waller: Was there anything in here you'd like to talk about?
41:27 Remko Van Hoek: Enter the learning loop. That chapter was... We can't name their name, but it's a European fast-moving consumer goods company that we worked with, who said, "We started one pilot, it was easy to start, it wasn't expensive, took a few engaged executives. Fortunately, there is a ton of engaged executives these days, so we were able to develop some proof of concept pretty quickly. And when we were able to declare that it works, there's something here. It was... The phone didn't stop ringing for, 'We wanna do a pilot also. Try it here, this might be a good use case, too.' And the insight was, 'Yes, we should consider doing that but can we pause to just make sure we capture all the lessons learned from this first pilot before we move on to the next? Because otherwise we run the risk of reinventing the wheel in the next one, and actually not making any progress other than doing another pilot.'" So I think that's the insight around the learning op: Do; pause; take stock; and benefit from lessons learned before you look at moving into the next thing; and racing from one thing to another without making any real progress.
42:45 Matt Waller: Brian, is there any particular part of the book you'd like to talk about?
42:49 Brian Fugate: I was gonna add to your comment about the sensors. And it's really the idea of blockchain and its conversions with all the other innovations and technological advances that we're having and how they're going to complement each other. The more advanced that we get with blockchain, it's going to help the use of sensors, it's going to help the use of, and the advancement of analytics. One of my favorite examples is McDonald's and Tyson. We can talk about all of these if they're in the book, I assume, right? So McDonald's and Tyson, and IBM is helping them do a pilot test on when the meat is packaged, there's an RFID that's put on the cases, a sensor that's put on the cases that is measuring, tracking the data, the temperature data of the truck and the case. And so if the temperature drops below a certain level, that is connected to a blockchain. And so that's a major improvement in and of itself because used to, the shipper could tamper with that, could change that information, and so it gets to the McDonald's store and the born on date, if you will, the expiration date is inaccurate. And so potential food safety issues are just freshness.
44:19 Brian Fugate: Whereas, now with this pilot test that they seem to be having success with, when that is transferred to the cloud, that data is tracked along every step of the supply chain all the way to the distribution center and then to the store. And whenever the temperature drops between certain levels, the analytics changes the expiration date, moves that earlier, if you will, so where it's gonna go out a day sooner. And then what they're testing is sending signals to those who pull a product out of the refrigerator, out of the DCs, to be able to pull the ones that are gonna go outta date faster. And so it's changing, not only helping the convergence of analytics and sensors and blockchain, it's not only helping just efficiencies in the supply chain, but also food safety and other areas as well. And so I think we're gonna see that convergence, though. They're going to help each other get better over time.
45:24 Remko Van Hoek: It's really a good point. One very technical thing that is interesting is, from an inventory management perspective, obviously, visibility helps you manage better. But if you think about some of the inputs to inventory management systems and the calculations that are done in the systems, they're gonna be able to change. For example, when we try to calculate the optimal amount of safety stuff, we always calculate the uncertainty in demand during the lead time, or during the lead time plus the review intervals, depending on what system it is. And the way we do it is not accurate. What we typically do, these systems will calculate the standard deviation of the forecast errors and the standard deviation of the lead time and use a convolution. And it ignores correlations between days, the demanded during days. It ignores correlations between demand and the lead time. There's all kinds of nuances that it ignores. We use these shortcut heuristics to try to come up with these estimates of... What we really wanna know is what is the uncertainty in demand over the lead time... Over the protection period, the time that we can stock out?
46:49 Remko Van Hoek: But instead, we estimate the uncertainty in the forecast error over that protection period. But with blockchain and sensors combined, we won't need to use any of those complicated mathematical equations anymore. We're not gonna be teaching that anymore because you're gonna be able to just look at how much demand was there during the production period and you'll see it and then every time it happens, you can calculate the standard deviation and the mean. It'll be very simple and it'll be way more accurate. So the whole supply chain is gonna need less inventory.
47:34 Matt Waller: Wow, I'll leave the curriculum implications with Brian. But... [chuckle]
47:36 Brian Fugate: I was getting ready to say, curriculum's just got a lot simpler.
47:41 Remko Van Hoek: I'll leave that in your capable hands, Brian, But maybe one point to build on the reference to hype. What gives me great hope is the amount of managerial consideration that's going into blockchain and its impact on supply chain management today because that's gonna help us move beyond consultant and vendor-infused hype. The fact that so many people show up for our work sessions, and so many people engage in our research to share early lessons gives me great hope that we are on a positive trajectory towards figuring out where the actionable nuggets are and where there's some progress to be had. And I think that's... I find it very encouraging, very exciting. It also obviously means that there's a lot more to learn. Back to the start of the conversation, supply chain management, it is a field, it's a science, it's a discipline. It's also a young field, and a science and a discipline. So we have so much more to learn and we have so much more to discover. And blockchain is yet another installment in that learning journey. So a lot of more to come, a lot more to learn, a lot more to achieve. But what's great is that a lot of companies are asking some really good questions and we hope that our research can help them answer some of those, as well as come up with some more questions to figure out how to best integrate blockchain into their supply chain.
49:04 Brian Fugate: I think you're right in that. We're all supply chain scholars. We're in this, we've dedicated our life to it. And we've mentioned this earlier, but one of the most exciting things about this is it's helping supply chains get better, and that's what we are passionate about. It is an enabler. There's estimates that 75% of the Fortune 500 companies have tested... Pilot... Done pilot tests with blockchain. And that alone tells you that, to your point, people are putting time trying to understand this. And even if this is hype, what that's forcing them to do is to look at their supply chains. To be able to figure out if this is gonna work, they're gonna have to look at their supply chains and do the basic things, the blocking and tackling, if you will, that they should have done 10, 20 years ago, updating their databases and those kinds of things. And so as a supply chain scholar, that's what's fun about this, is watching that advance.
50:08 Matt Waller: That's good. Well, Remko and Brian, it has been a real pleasure, writing this book with you two, and Marat. And I wanna give a special call out to Steven Coldwell, he has just done a fantastic job in terms of editing, writing, project management for this book, he has been invaluable. This would not be complete without him by any means. The book, Integrating Blockchain Into Supply Chain Management, subtitle, A Toolkit for Practical Implementation, will come out soon. Thank you both for joining me.
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50:58 Matt Waller: Thanks for listening to today's episode of The Be Epic podcast from the Walton College. You can find us on Google, SoundCloud, iTunes, or look for us wherever you find your podcasts. Be sure to subscribe and rate us. You can find current and past episodes by searching, Be Epic Podcast, one word, that's Be Epic Podcast. And now, be epic.
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