An article interprets how Canadian Wal-Mart uses blockchain technology to meet supply chain challenges

Wal-Mart has long been known as a leader in supply chain management. However, its strength is not enough to avoid a problem that has plagued the transportation industry for decades: there are huge differences between the invoices received by freight carriers and the data in the payment process, and this requires costly reconciliation. , Will cause long payment delays.

Canadian Wal-Mart pioneered a solution: It uses blockchain technology, a distributed ledger technology, to create an automated system for managing invoices and payments from its 70 third-party freight companies.

An article interprets how Canadian Wal-Mart uses blockchain technology to meet supply chain challenges

When John Bayliss and his Canadian Wal-Mart team began to think about new ways to solve these problems, the initial actions began. The data is massive. Canadian Wal-Mart uses its own freight fleet and third-party carriers to deliver more than 500,000 pieces of goods to distribution centers and stores across Canada each year.

The basic service of transporting large quantities of goods (many of which are perishable) across national borders, time zones and different climates is a huge operational challenge. Every shipment of goods requires tracking data, such as freight stops, fuel and temperature data, etc. These data need to be calculated independently and merged into each invoice.

Since more than 200 data needs to be included in the invoice, there are often data discrepancies between the invoice and the payment process. Since 70% of the invoices need to be reconciled, it will increase transaction costs and the carrier will have bad emotions while waiting for payment.

An analysis determined the root cause of the problem: Wal-Mart Canada and its operators used multiple information systems that could not communicate with each other. Therefore, manual reconciliation must be carried out, which is an inherently contradictory, labor-intensive and time-consuming process.

A technical leader at Walmart in Canada suggested to automate the process by creating a blockchain network, which will enable companies to overcome system incompatibility and establish a single source of truth for all parties.

But some people were skeptical about this, because at the time, blockchain technology had not been used for substantive key business. In addition, there are many forms of blockchain. Can establishing a public chain or consortium chain for Crypto effectively solve the problem?

To help solve this problem, Wal-Mart Canada turned to DLT Labs, a leader company that uses distributed ledger technology to develop and deploy innovative enterprise solutions.

An article interprets how Canadian Wal-Mart uses blockchain technology to meet supply chain challenges

Soon after, Bison Transport, one of the operators of Wal-Mart in Canada, joined the team responsible for developing the network. The pilot version that initially only involved Canadian Wal-Mart and Bison Transport was officially launched in January 2019 after detailed testing.

The pilot was successful, and it launched a network called DL Freight to 69 other operators in March 2021.

The system continuously collects information on every step of the shipment, from the carrier’s bill of lading to the delivery certificate and payment permission. This information is automatically captured in real time and synchronized to the system, and is only visible to all parties involved in the transaction.

In all respects, the system has achieved great success. Before using DL Freight, more than 70% of invoices were disputed. Today, less than 1% of invoices have discrepancies, and these disputes are easily flagged and resolved quickly.

Gone are the days that took weeks or months to pay, and operators can now get paid on time.

The following is the experience that Walmart Canada has learned from other companies interested in creating a blockchain network:

1. Involve key stakeholders The participation of Bison Transport, one of the largest truck fleets in North America, enabled the design team to understand the issues to be resolved from the operator’s perspective and ensure that the solutions not only apply to Wal-Mart, but also to Wal-Mart’s logistics partners.

2. Weigh the pros and cons of using alliance chains and public chains A public chain that anyone can join without permission, allows users to view the information stored on the blockchain without restrictions, eliminates intermediaries, and any ruling party can operate independently.

It is very suitable for digital consumer products (such as NFT), Crypto, and certification information such as personal degree certificates or skills certification.

But those alliance chains that require permission to join are usually more suitable for enterprises, because their access is limited to verified members, and only directly cooperating parties can see the specific information they exchange. This better meets the industrial-grade safety requirements.

For these reasons, Walmart decided to adopt a consortium chain based on the open source platform Hyperledger Fabric.

3. Recognition of business rules and calculations Any complex business has fixed and variable processes and costs, and it is the same for any two companies. A basic prerequisite for creating a blockchain-enabled system is for all parties to agree on all the calculations and business rules that the network will adopt.

An article interprets how Canadian Wal-Mart uses blockchain technology to meet supply chain challenges

For Walmart and its operators, this means using each operator’s unique data (supplier name, payment terms, contract duration, and general terms and conditions) combined with management information such as fuel rates and tax rates . Then all parties should agree on the formula that the blockchain will use to calculate each invoice.

The DL Freight blockchain synthesizes all data points in real time during each unique delivery process, taking into account information such as fuel cost, mileage, and delivery point delay. The system creates a running invoice, which will change in real time as the cost increases.

4. Establish a mechanism of checks and balances. Automatic checking and balancing mechanisms can and should be built into the blockchain system-it can both prevent errors and identify opportunities to improve performance.

For example, the carrier’s information about mileage and fuel consumption is automatically compared with Internet of Things (IoT) data reported by a separate device on the truck, and any discrepancies are immediately highlighted.

These checks and balances form a self-check system. Over time, when multiple carriers transport goods between the same starting point and destination, the carrier’s performance history will be summarized and automatically compared with each subsequent itinerary, thereby helping Walmart and the carrier optimize their operations .

The financial value of the automatic check and balance mechanism exceeds the payment amount. For example, since the system automatically performs all financial calculations and continuously updates them throughout the process, any financial services such as invoices due to the carrier for payment can also be automated.

Because the blockchain system eliminates the need to confirm whether the invoice is accurate and valid. This makes efficient management of working capital possible and creates a market for financial institutions that can now provide financing at any stage of the supply chain.

5. Don’t try to replace the old IT system. Although legacy systems may be old and rigid, they always have unique advantages, and the data they hold is very valuable.

Therefore, instead of insisting on replacing the legacy system, all blockchain systems should be built on the legacy systems of all parties. It is also a big advantage that the legacy system can be left to the present.

One of the biggest benefits of the blockchain platform is that its port-to-port supply chain transparency has established an unprecedented level of trust between Walmart Canada and its operators. The original purpose of the initiative was to eliminate disputes and avoid wasting resources. But the blockchain solution also provides Walmart and its supply chain partners with insights into major operational improvements.

For example, it is now possible to determine which specific routes are the safest or the best in terms of time and fuel consumption when shipping goods, and optimize efficiency according to the vehicle, route, load weight, and even the best travel time (that is, day or night).

Blockchain systems can also help deal with the huge challenge of handling the arrival of large quantities of goods: by constantly updating and automatically sharing the expected arrival time of the truck with the distribution center or store, the delivery process can be better coordinated.

The success of the Canadian Wal-Mart system proves the potential of blockchain. It shows that the technology can generate significant operational and financial benefits and improve supplier relationships.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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