Coca-Cola bottlers and SAP are scaling a major blockchain project poised to remake a $21 billion a year supply chain operation. It's one example of the still-nascent tech's promise.
- Blockchain has receive ample hype, but companies are still skeptical of whether it can significantly improve operations and are instead pursuing pilot projects before scaling enterprise-wide.
- Coca-Cola's bottlers, however, have found a use-case. The Coke One North America, the technology firm that manages the IT operations for the 70 bottlers that work with the soda brand, is using SAP's blockchain technology to improve the complex production process.
- The technology is making it easier for the franchises to know the inventory of other partners, as well as get paid faster.
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For many corporations, blockchain has largely been a technology in search of use case. Coca-Cola's bottlers found one.
Essentially, blockchain is a digital record of data that spans across enterprises. The promise is that the online ledger would allow for widespread sharing of information between companies that would result in significantly improved operations. But while cryptocurrency made blockchain famous, it has largely failed to find that blockbuster application.
To be sure, organizations are still testing out a number of various approaches. Target, for example, is exploring how to use blockchain to improve supply chain operations.
But now Coca-Cola's bottlers are trying to demonstrate just how impactful the technology can be in the appropriate setting. They are using German-software firm SAP's blockchain technology to shed light on the litany of transactions that occur each month between 70 different franchises, like when one company purchases products from another organization to fill an order.
"There are a number of transactions that are cross-companies and multi-party that are inefficient, they go through intermediaries, they are very slow. And we felt that we could improve this and save some money," Andrei Semenov, senior manager at Coke One North America, told Business Insider.
Corporations typically have great visibility into their own supply chains. But once those interactions extend beyond the walls of the company, it becomes more difficult to access that information, particularly since some of it may be proprietary to other organizations.
In the case of Coca-Cola, it handles, among other things, the marketing of its signature drinks and owns the proprietary recipes. But it partners with Coke One North America, or CONA, to manage the technology platform that oversees the franchises that manufacture, bottle, and ship nearly 160,000 orders a day. That set-up has made it difficult for CONA and other bottlers to have visibility into the complex network that generates over $21 billion in revenue each year.
Blockchain, however, is poised to allow bottlers to see into the inventory of other franchises in the event they don't have the supply on-hand to meet a certain order and assists CONA in processing the payments to ensure the organizations are being paid appropriately.
Using this tool, CONA is hoping that by increasing efficinecies for the bottlers it will spur greater productivity, lead to cost-savings, and speed up cash flow between the franchises.
"What we achieved here with blockchain is creating a document flow across the supply chain," said Torsten Zube, head of the SAP Innovation Center Network, a group tasked with finding out use cases for emerging technologies.
The pilot program initially started with just two bottlers - Coca-Cola United and C.C. Clark - and is now being scaled across all franchises. Success on this project has the potential to lead to new partnerships between Coca-Cola and major customers like Walmart and Target, according to Semenov.
Transparency into inventory, faster payment processing
The interactions between CONA and the bottlers can get complicated quickly.
Say one franchise - like Coca-Cola United, the nation's largest private bottler for the company - receives an order for 100 bottles. It might only have 80 on hand. Historically, Alabama-based Coca-Cola United could go to another franchise, like Kentucky-based C.C. Clark, and purchase the remaining 20 bottles from them to fulfill the order.
But say Coca-Cola Clarkand only has 15 bottles in its inventory or, due to human error, just 15 are shipped. Coca-Cola United won't realize that and, by the time the order arrives, it does not have enough time to source additional bottles and is unable to fulfill the entire order.
With blockchain, a franchise would immediately put in the shipment information so others could see in real-time whether it is unable to send the necessary quantity. That's because blockchain creates an online database that spans organizational boundaries, which wouldn't otherwise happen for fear of releasing private company information.
In the same instance, the subsequent invoice could be incorrect, leading to disputes between franchises. Since CONA is the one to manage the tech platform that informs those payments, it is difficult to resolve such disagreements because the entity doesn't have insight into the inventory and transactions of all the member franchises.
Now, CONA can view all those transactions on the online ledger, including what was ordered by franchise and what was shipped by another company. Using the technology, CONA has reduced the time from order to payment from 50 days to a few days.
"There's usually not that dispute anymore because the information that has been shared, it's clear and transparent everywhere," Zube said.
Overcoming data concerns
One of the biggest impediments to blockchain is the sharing of data. Companies can be hesitant to allow competitors access to some of the information necessary to support the online ledger.
For CONA and SAP, it was a step-by-step process of going to each member franchise and figuring out what data they were comfortable broadcasting.
"There was a negotiation and discussion, getting to a consensus of what data we wanted to share," Semenov said. "We started with a huge list of data attributes and we narrowed it down to the list that everybody agreed on."
Since all the franchises involved were ultimately overseen by the same entity, the discussions were much easier than they might be in the future with a company the size of Walmart or Target, which has its own vast network and would likely be more hesitant to publicize data, according to Semenov.
"Right now, there's tons of blockchain networks available, private networks and public networks," he said. "At some point, we're going to get to a stable and scalable network."
While there still remains significant hesitancy around blockchain, the partnership between CONA and SAP serves as a concrete example of the major benefit the technology can have.