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SAP and Blockchain: Scenarios

  • On 21 April 2021

Blockchain is a powerful 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 “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 singularity of the data and therefore its opposability to third parties. This is 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 Contract”. The latter were born with Ethereum, a particular type of cryptocurrency with the power to perform operations.

SAP interconnects with open source Blockchain with Business Technology Platform with two options:

– Leverage the Blockchain services made available with partners such as Azure, AWS, Google or other partners providing the 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, type of blockchain, implementation costs, implementation efforts and maintenance that need to be considered before finalizing the path.

Source: SAP

Business scenarios: examples of applicability areas

Industries that carry out processes such as manufacturing, 3D printing, spare parts management, sourcing, logistics, finance, etc. They can suffer from limited visibility and lack of trust among 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 multi-tiered supply network. Entering 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 check various compliance and risk requirements, such as ISO certification; fair business and business practices; use of minerals from conflict zones; certifications on the use of sustainable and renewable energy and many others.

In addition, corporate and financial information must be verified to conduct business with a supplier, and the information must be passed on to secondary and tertiary suppliers as needed. You need to involve multiple teams across the legal, audit, risk, finance, supply chain departments, and they all need access to various information. Likewise, suppliers will have the same needs in relation to their suppliers.

Given the huge network of suppliers available on SAP Ariba, SAP is exploring how to bring together suppliers, buyers, third party content providers, governments, standardization bodies and certifying bodies and enable SAP Ariba to Blockchain to share supplier information. Some information may be public and available to all network actors, while others may be kept private and can only be shared with certain actors 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 recipients, such as freight forwarders, logistics 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 clearances, bills of lading, etc. These documents are sent by fax, e-mail or even delivered by hand. Often these documents are paper-based and involve considerable manual handling.

Such a slow and error-prone process suffers from limited or even no visibility, which leads to shipping delays, fraud, high costs, and a huge amount of time, effort, money and resources spent reconciling disputes and discrepancies. The Blockchain can revolutionize the processes related to international trade, addressing all these shortcomings and providing complete visibility and digital transparency to all participants in the blockchain network.

Source: SAP

Working with its customers on a co-innovation project, SAP developed a Percentage Completion (POC) using Hyperledger Fabric on SAP Business Technology Platform to model the end-to-end process in four phases: trade start, trade start shipment, delivery of the shipment and commercial regulation. Smart contracts were used to specify which parties were to be involved at 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 later 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 use cases relevant to blockchain technologies in finance and SAP is enabling SAP S 4HANA Finance to connect with blockchain networks. An example of use is in the management of payment fraud, which represent a serious threat in international and national payments. To address the dangers of hacking sensitive vendor data, it can be stored as hashed on the blockchain and, at the time of payment execution, this data can be compared with data found in SAP S / 4HANA to ensure its accuracy.

Another use case for blockchain in finance is optimizing days of sale pending (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 at the time of payment of an invoice. For the service industry, considerable delays can occur due to invoice disputes. By sharing open elements on a blockchain, the parties will not have to wait for the payment terms in the contract, being able to more easily activate invoice advance processes.

Similarly, a buyer, who is likely a seller to another customer, can in turn leverage the blockchain in a similar way to reduce their DSO. Once cash movement is no longer the way revenue recognition is triggered, actual payment may not be necessary in regards to clearing the credit and debit accounts of multiple parties. In fact, the data on the blockchain can be used as a “clearing house” without going through the banking channel.

Source: SAP

 

Another variation of this use case is the use of blockchain for the management of 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 credits 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 quote request (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 long process of exchanges between multiple parties: the buyer, the seller, banks, customs, logistics service providers, freight forwarders, 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 on shipment status, inspection results and required documentation, under the terms of the purchase order, on the shared ledger, thereby automating the bank’s review and approval effort.

 

PL3 & Partners is the right company to identify the right solution for each specific case: as a System Integrator we aim to support our customers in the best way to seize the increasingly varied innovation opportunities offered by SAP.

 

For more information write to marketing@pl3group.com

 

Paolo Ponte

Sales & Marketing Manager