White Star Capital Digital Assets Fund - Newsletter #142
Microsoft Reveals its Blockchain-Based Supply Chain Management
Microsoft Reveals its Blockchain-Based Supply Chain Management
White Star Capital Digital Asset Fund - newsletter #142
A recent report released by Microsoft delves into how the company leveraged blockchain technology to transform its supply chain management and improve its operational efficiency.
The Covid-19 pandemic laid bare the vulnerabilities in global supply chains. Even tech giant Microsoft, with its cloud supply chain comprising millions of servers in over 200 data centres worldwide, was not immune to these challenges. While the company had developed sophisticated risk management practices over the years, it still faced difficulties, particularly in gaining visibility into transactions between its direct suppliers and their vendors.
As Mohamad Masri, senior program manager for blockchain at Microsoft, pointed out, traditional supply chain methods were no longer sufficient for the company’s rapidly growing cloud business. The scale of Microsoft’s operations necessitated a new approach to supply chain risk management. The company was managing its own data on orders, deliveries, payments, and other aspects of supplier relationships, but this led to a lot of manual reconciliation and inefficiencies.
To address these challenges, Microsoft initiated a project that aimed to create an ecosystem of common data using blockchain technology. The blockchain would serve as an integration layer where data could be shared responsibly among all parties involved in the supply chain. This would not only simplify access to data but also make it more reliable as blockchain data is immutable- once written, it cannot be changed.
Microsoft formed a cross-functional team from across sourcing management, supplier resilience and risk, corporate finance, and supply-chain groups. This team set out to identify the necessary data fields for creating a transaction-by-transaction view of inventory for Microsoft’s cloud business.
The initiative was centered on three key goals:
Stronger systemic controls: to enable growth without generating more risk as the cloud business scales
Scalable process: to create a contiguous, scalable process from capital sourcing through procurement
Data granularity: to utilise blockchain technologies to capture adequate granularity in the data without requiring external partners to expend effort.
This report reveals that the benefits were immediate and fell into two broad categories.
Firstly, more rapid dispute resolution: the blockchain solution improved Microsoft’s rapid dispute resolution processes, making them more efficient.
Financial controls were integrated into the model, allowing accounts payable to more precisely time cash disbursements to suppliers. The team built dashboards within the PowerBI data visualisation tool to give a variety of end users access to the information in the blockchain. These custom dashboards connect with the blockchain solution via API, which means they were updated in nearly real time. In making decisions such as whether to change payment terms with a particular partner, staff can easily access the information they need.
“Treasury teams can make these decisions in a matter of minutes now, versus trying to go back and investigate the relationship with that partner,” Masri says. “The customer service they can provide to that partner, and the ease with which they can access the data they need to make decisions confidently, are a result of this blockchain initiative.”
Secondly, real-time visibility: the system provided real-time visibility into transactions, enabling more precise and faster funding decisions.
On the cash management side, the shared ledger enables accounts payable (A/P) to more precisely time cash disbursements to suppliers. “There’s a natural timing to accounting,” Masri says. “The A/P desk typically does a lot of reconciliation, and all that double-checking slows down payments. With the data we now have in the blockchain, we can see the order, the shipment, the receipt, and the invoice. That doesn’t change the nature of what the accountants are doing, but the shared-data experience reduces the amount of work they have to do before they can disburse or apply cash confidently.”
Moreover, having better real-time visibility into supply-chain data enables Microsoft to improve the precision of timing for funding decisions and reduce the excess capital it maintains. “When you don’t have detailed visibility into the movement of goods and the transactions, the way you lend money has to be much more coarse,” Rhodes points out. “Now, we are privy to data around the transactions among our partners in the supply chain. Getting this detailed data in real time allows us to make funding decisions that are faster and more granular.”
In conclusion, Microsoft's case study serves as a compelling example of how blockchain technology can be leveraged to revolutionize supply chain management. It shows that with the right approach and technology, companies can not only mitigate risks but also improve operational efficiency, thereby turning challenges into opportunities for innovation and growth
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💰 Funding & Exits
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🔥 Other Bits We're Excited About
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