Blockchain for Master Data Management

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Blockchain is essential for digital transformation. There is no other technology on the horizon that is decentralized, fault-tolerant, secure, and reliable for inter-Enterprise Master Data Management.

The popularity of Blockchain – decentralized ledger technology underlying cryptocurrencies – is becoming a de-facto solution for many peer-to-peer applications. Its growth is impressive, and the prediction is a 67.3% CAGR from 2020-2025, for a total of USD 39.7 Billion by 2025.

Blockchain is very much a revolution. It is the engine that empowers the emergence of the Internet of Value. The speed of the exchange of value has tremendous implications in many applications: for consumers, industries, and governments. It is not just monetary value. It is also valuable in the exchange of data and information between enterprises. Through peer-to-peer transactions without intermediaries, Blockchain technology is allowing individuals, as well as organizations easily exchange digital money and execute business contracts between trading partners. As we shall see, Blockchain’s distributed asset information and transactional ledgers provide a compelling cross-organizational master data. Blockchain will revolutionize many industries – especially those sharing inter-enterprise information or tracing supply chains.

On July 10, I did a podcast with RT Insight’s Joe McKendrick on this very topic.

The interview (you can check the audio and transcript) highlighted the importance of Master Data Management for enterprises, provided an overview of Blockchain, and then highlighted the potential of Blockchain for MDM. We barely touched the surface.

This article delves deeper into Blockchain for MDM and illustrates several practical examples as well as technologies to enable inter-enterprise MDM.

Master Data Management

The core value proposition of Master Data Management is to make sure there is a single version of the truth of the data for any of the entities that pertain to the enterprise: The customers, products, services, suppliers, employees, partners or any entity that is either in the enterprise applications or databases.

Let us illustrate the importance of MDM through an example. Has this happened to you? You contact an organization through a call center, they transfer you and ask for your credentials again – and then transfer you to other departments, sometimes back to the original department! As you get passed around, you realize some operators have your old address and other conflicting “data” about you. Often, your customer experience depends on what channel you use. Sadly, this happens too frequently in many industries: the same customer, product, or service has multiple and often inconsistent representations within the enterprise. Sometimes you might even get the same product cheaper depending on which channel you use!

Master Data Management (MDM) attempts to alleviate this. The MDM Institute defines Master Data as “the authoritative, reliable foundation for data used across many applications and constituencies to provide a single view of the truth no matter where it lies.”

Enterprises suffer from application and data silos. A single view of the truth – for customers, employees, partners, suppliers, or any other entity type for enterprise operations – is the critical value proposition for MDM technologies and solutions.  

Master Data addresses several business pain-points due to data source inconsistencies and poor data quality, as highlighted in “Process + Master Data & Digital Transformation.”

 Master Data can be Analytical or Operational.  

Process and Digital transformation

Master Data Warehousing solutions implement Analytical MDM: for revenue generation strategic decisions. Operational MDM is more challenging and addresses Operational Efficiencies for cost reduction as well as risk mitigations. As highlighted in the article, there two complementary approaches for Operational MDM: the traditional bottom-up MDM approach and the more recent top-down Value Stream MDM approach. Data Warehouses are ubiquitous and provide a top-down strategic view of the enterprise for Analytic MDM. Enterprises prioritizing Digital Transformation and balancing Data and Process approaches are starting to realize the advantages of the more efficient Value Stream MDM approach.

Blockchain for inter-Enterprise MDM

The examples above highlighted the challenges and approaches for intra-enterprise MDM. What is the relevance of Blockchain for MDM? Blockchain is a type of a database – through quite different from traditional relational or emerging NoSQL databases. As highlighted in the podcast, Blockchain is a linked list of blocks that contain cryptographically secured blocks of transactions that are immutable. Participants who do not know or trust each other can rely on and trust the Blockchain. Unlike traditional databases that support CRUD (Create, Read, Update, and Delete), with Blockchain, you can only Create and Read: transactions are validated and added to the blocks in the chain. They can be read but never deleted or updated. All transactions and activities on the Blockchain are timestamped.

So, what is the relevance of Blockchain for MDM when we cross organizational boundaries?

Conducting business transactions across organizational boundaries has all the challenges of intra-enterprise silos and adds several others. Inter-Enterprise exchanges and data sharing are marred with multiple inefficiencies: manual forms and paperwork, error-prone replications, delays due to organizational or bureaucratic inefficiencies, errors in language translations, especially cross-country exchanges, difficulties, and challenges in reconciling governance policies – to name a few.

Inter-Enterprise Single Version of the Truth

The objective of MDM is to have a single version of the truth. The truth could pertain to an asset such as a Customer or Product or Service or any other enterprise entity. Assets could be physical or digital. A physical asset can also have a digital twin with a unique identifier that represents the physical asset.

Different enterprises could be partners, collaborators, competitors, or coopetitors. They need to share information. Often the sharing of information is marred by delays, errors, waste, potential fraud, difficulties in tracking, and overall inefficiencies.  Blockchain is no panacea, but it can address many of these inter-enterprise challenges through becoming a master data of information about either an asset or a transaction involving multiple parties. The beauty of Blockchain is the fact that no one enterprise or party owns the Blockchain. In this sense, it is similar to the Internet: no one centralized organization owns it.

Blockchain for Master KYC

Let us illustrate this through an example. Know Your Customer (KYC) is a process by the government regulators that banks and financial institutions must follow to verify the identity of the customers. They must be verified before the account becomes effective. It can take from several hours to several days, and the customer needs to provide official identification and other documentation for validation. Now here is the exciting part. If a customer opens an account in, say, one bank and then wants to open another in a different financial organization that also requires KYC, they must go through the process again. Blockchain alleviates this need by allowing even potentially competing financial institutions to share KYC information for their customers.

For example, Samsung’s Nexleger Blockchain platform has been used by a consortium of Korean Banks to share customer identity. Once the customer is validated through one bank, they can easily be validated by other participating banks, using the Customer identity on the Blockchain. Traditional third-party KYC approaches are inefficient and wasteful: they require the entire identity verification process for each new bank account. The Blockchain approach is a much more efficient and decentralized solution. So, through a mobile application, the customer can have access to all the banks in the participating Korean Federation of Banks.

Another huge potential area for Blockchain is recording Vehicle Identification, processing the Registration, and the history of a vehicle on the Blockchain. The Blockchain entries can identify assets. They also contain the ownership history as well as entries for recalls, issues, or accidents. If these records are all on a Blockchain, it can potentially make it much easier to, for instance, register an out-of-state vehicle in a new state. Furthermore, instead of relying on third-party centralized, all interested and authorized parties can quickly gain access to the history of the vehicle. If combined with connected vehicle tracking, the possibilities are endless. The Blockchain can store the entire history not only of the ownership of the vehicle, significant events such as accidents, reports, or problems, but also the driving and maintenance history.

Blockchain for Master Vehicle Identification, Registration, and History

One company that is doing this is VINchain. Here is a 2011 Honda example from their website. The Blockchain stores the master information and transaction about the vehicle with the given VIN. All interested parties share the master Blockchain: OEM manufacturers, distributors, dealers, owners, mechanics, DMVs, and so on.

Blockchain for The Extended Enterprise

To appreciate the relevance of Blockchain, we need to expand upon extended enterprises as well as value streams that cross organizational boundaries.

According to Wikipedia, “Extended Enterprise” is a “loosely coupled, self-organizing network of firms that combine their economic output to provide products and services offerings to the market.” Cooperating and (even sometimes competing) extended enterprises can benefit from a single view of the truth for the various assets (such as Customers or Products) and transactions that cross organizational boundaries. Blockchain, as a decentralized and distributed database, can provide the foundation of robust Extended Enterprise Master Data.

As highlighted in “3 Technologies Powering the Autonomic Enterprise,”  the extended enterprise can potentially self-optimize and self-heal at a much faster speed by carrying out autonomous enterprise decisions with Blockchain smart contracts executing autonomic policies. Autonomy is achieved through end-to-end Value Streams, empowered through blockchains as needed. Blockchain enables robust peer-to-peer infrastructure for secure and reliable master data. Furthermore, the single version of the truth can include policies, business rules, or contracts that execute in the Blockchain and are shared by all participants.

Blockchain for Supply Chain MDM

Supply Chain is the quintessential Extended Enterprise application domain. Interestingly Supply Chain is also touted as an ideal use-case for Blockchain technologies.  Blockchain can be a promising backbone for Supply Chain through several essential categories of exchanges or flows: contractual flow, logistics (movement of goods and material) flow, proper documentation flow, and of course, is the foundation of cryptocurrency, the financial transaction flow. The Covid-19 pandemic highlighted the vulnerabilities in supply chains, as warehouses and retail stores ran out of popular items in high demand.

Blockchain allows visibility and traceability of the inventories of the needed supplies. Enterprises can trace and track the documentation and financial transaction. Compared to traditional manual and error-prone approaches, the shared masted information becomes much more accessible. The digitally extended enterprise can use all parts, products, suppliers, warehouses, inventory, documentation, tracing, and financial transaction masters stored on the Blockchain to function as an efficient and optimized pipeline. Supply Chains leveraging Blockchain master data and information are applicable in all industries, and there are various innovative initiatives, projects, and solutions that have demonstrated the compelling value proposition for Blockchain for Supply Chain.

For instance, the MediLedger project started in 2017 to leverage Blockchain specifically for the Drug Supply Chain Security Act (DSCSA). Tracking and tracing pharmaceutical drugs is critical in the Covid-19 era. Leveraging the Blockchain as a master for drug verification is one of the essential areas addressed by MediLedger. The following illustrates the interaction of the participating companies in the FDA pilot request DSCSA project. The Private Nodes of the participants can communicate with each other (peer-to-peer) and share data with their Consensus Node. These Consensus Nodes contain the shared Blockchain master data shared by all the participants. As the MediLedger DSCSA Pilot Final Report indicates: “With such a network, we can create the capability of storing records of transactions on the Blockchain while allowing the exchange of electronic data, just as companies are

expected to do today with the implementation of EPCIS messages.”

It gets even more exciting and compelling when the supply chain crosses international borders and involves various country-specific logistical regulatory and financial documents that need to be processed. The IBM-Maersk cross-border shipping Blockchain solution is a compelling text-book example of Blockchain for Supply Chain master data. Maersk had done a study in 2014 tracing roses and avocadoes from Kenya to the Netherlands. The study identified several inefficiencies. As noted in the BloombergQuint article: “The company found that almost 30 people and organizations were involved in processing the box on its journey to Europe. The shipment took about 34 days to get from the farm to the retailers, including ten days waiting for documents to be processed. One of the critical documents went missing, only to be found later amid a pile of paper.” The Blockchain solution can digitize the documents and track the shipments, resulting in substantial savings. Maersk and IBM have launched the TradeLens Blockchain-enabled platform that is addressing precisely the inefficiencies of legacy and manual container logistics. Here are some recent stats of the TradeLens platform.

Master Data Management is critical. Enterprises need a single view of their customers, suppliers, employees, partners, or any other entity for their data warehouses and operations. While there are bottom-up as well as top-down solutions for intra-Enterprise MDM, the inter-Enterprise single view is much more challenging.

Conclusions

It gets even more compelling for extended enterprises involving trading partners in different countries. There is the added consideration of government agency requirements, international regulations, and tracking across borders. However, still, Blockchain is relatively immature, and its acceptance in end-to-end applications such as master data for Supply Chains will take a while. There are many exciting POCs and Pilots. A recent study by Gartner predicts 80% of Supply Chain Blockchain initiatives will be pilot projects through 2022. Despite the immaturity and challenges of Blockchain, we are starting to see deployments in production.

The move from legacy systems, manual paper-based documentation, and entrenched peer-to-peer protocols to a modern decentralized Blockchain will not be smooth. But it is essential, and there is no other technology on the horizon that is decentralized, fault-tolerant, secure, and reliable for inter-Enterprise Master Data Management.

The potential of Blockchain for MDM is vast.

Dr. Setrag Khoshafian

About Dr. Setrag Khoshafian

Dr. Setrag Khoshafian is Principal and Chief Scientist at Khosh Consulting. He is a pioneer and recognized expert in the transformation of innovative and agile enterprises. He has invented pragmatic approaches for innovation and cultural transformation through a holistic approach leveraging Intelligent Business Process Management, Intelligent Database Management, Internet of Things (IoT), Blockchain, AI, Low Code/No Code, Service-Oriented Architectures and Automation. Previously he was the Chief Evangelist & VP of BPM at Pegasystems Inc., the Senior VP of Technology at Savvion, and Chief Scientist & VP of Development at Portfolio Technologies. Dr. Khoshafian is an author, thought leader, keynote speaker, and educator who has helped the cultural transformation journeys of entrepreneurial enterprises leveraging digital technologies. He has been a senior executive in the software industry for the past 30 years, where he has invented, architected, and steered the production of several enterprise software products and solutions.  He is well recognized and quoted frequently for his contributions in Intelligent BPMS, Intelligent DBMS, Blockchain, IoT, AI, and Service-Oriented Enterprises.  Dr. Khoshafian is a frequent speaker and presenter at international workshops and conferences. He is the lead author of more than 10 books and hundreds of publications in various industry and academic journals.  He has also been full-time as well as adjunct professor in several universities across the globe. Dr. Khoshafian holds a PhD in Computer Science from the University of Wisconsin-Madison. He also holds MSc in Mathematics from AUB. Twitter: @setrag Linked In: https://www.linkedin.com/in/setrag 

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