Program takes Share of Freight Invoices with Data Discrepancies from 70% to 1%

Among the many reasons so-called blockchain technology has been slow to take off in the supply chain is the challenges proponents have had explaining in simple terms the use cases and benefits of blockchain.

Supply Chain Digest Says...   the authors note that “A fundamental prerequisite for creating a blockchain-enabled system is to get the parties to agree to all the calculations and business rules that the network will employ.” What do you say? Click here to send us your comments   Click here to see reader feedback

That’s not the case relative to the blockchain journey taken by Walmart Canada, as recently published on the Harvard Business Review on-line. That case study as written by four co-authors Kate Vitasek from the University of Tennessee Haslam College of Business; John Bayliss, executive vice president and the chief transformation officer at Walmart Canada; Loudon Owen is CEO of software DLT Labs; and Neeraj Srivastava, founder and the chief technology officer of DLT Labs.

Here’s the story, starting naturally enough with the problem. Walmart Canada was experiencing significant data discrepancies in the invoice and payment process with its freight carriers, which in turn required costly reconciliation efforts and caused long payment delays.

The initiative started when Bayliss and his Walmart Canada team began thinking about new ways to solve the problem. The sheer scope of the data involved was daunting. Walmart Canada delivers over 500,000 shipments annually to distribution centers and stores across Canada, using both its own trucking fleet and third-party carriers.

Each load shipped requires tracking data points such as stop locations, gallons of fuel, and temperature readings that need to be independently calculated and incorporated into each invoice.

With over 200 data points that needed to be factored into some invoice, the authors note, it is easy to see how the invoice and payment process could easily lead to data discrepancies. In fact, before the new program, 70% of invoices required reconciliation efforts, at high cost, and causing delayed payments to carriers.

An analysis was conducted to identify the root cause of the problem, and it was not hard to determine: the use of multiple information systems between Walmart Canada and its 70 carriers that could not talk to each other.

“Consequently, reconciliation had to be performed manually, a labor-intensive, time-consuming process riddled with inconsistencies,” the authors observe.

One of Walmart Canada’s IT team members suggested that this huge manual effort could be automated by creating a blockchain network.

How? Blockchain, it was believed, could create a shared, single source of truth for all Walmart Canada and its carriers.

However, in a period of great blockchain hype, there were skeptics at Walmart – and with good reason.

At the time blockchain technology had not been used in a substantial, business-critical function, the authors note. Another complicating factor: there were multiple flavors of blockchain. Walmart would it need to decide if it should adopt a public blockchain like those used for cryptocurrencies or a private network.

To help with the effort, Walmart Canada brought in to DLT Labs, a company with expertise in data management. It also recruited one of its carriers, Bison Transport, to join the team charged with developing a blockchain pilot.

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The authors say that the pilot went live in January 2019 and was deemed a success. So in March 2021, the network (known as DL Freight), was rolled out to the 69 other carriers. The system continuously gathers information at every step - from the tender offer from the carrier to the proof of delivery and the approval of payment. This information is automatically captured and synchronized in real-time and is visible only to the parties involved in the transaction.

The rollout went very well, and the program has delivered real value. The percent of freight invoices requiring manual reconciliation has gone from the 70% noted above to less than 1% of invoices today, and “these disputes are easily flagged and quickly resolved,” the authors say. That also means carriers are now commonly paid on time.
Walmart, by the way, decided to use a private network built on Hyperledger Fabric, an open-source blockchain platform.

It wasn’t easy to achieve that success. For example, the authors note that “A fundamental prerequisite for creating a blockchain-enabled system is to get the parties to agree to all the calculations and business rules that the network will employ.”

That meant that Walmart Canada and its carriers had to work with each carrier’s unique data (e.g., vendor name, payment terms, contract duration, and general terms and conditions). That data then had to be integrated with master tables of information such as fuel costs and tax rates. The parties then needed to jointly agree to the formulas that the blockchain will use to calculate each invoice.

Interestingly, the authors say the maintain a running invoice that evolves in real time as costs accrue during the delivery process.

There are also checks and balances. For example, carrier-provided information about miles traveled and fuel consumed is automatically compared by the system with data from independent devices on the trucks. Any discrepancy is immediately highlighted and resolved.

“The financial value of automated checks and balances goes beyond payments,” he authors note.

As an example, with the system automatically creating all financial calculations and updating them continuously throughout the process, any financial service (such as carrier financing of the invoices due for payment) can also be automated “because the blockchain system eliminates the need to determine if an invoice is accurate and valid.”

The article also notes that one of the greatest benefits of the blockchain platform
“is the unprecedented level of trust its end-to-end supply chain visibility has created between Walmart Canada and its carriers.”

While the original objective of the program was to eliminate reconciliation time disputes over invoices, the blockchain system has also provided Walmart and its supply chain partners with insights that have led to major operational improvements.

The authors cite the example of now being able to determine which specific routes are the safest or best in terms of time and fuel consumption and to optimize efficiency by vehicle, route, load weight, and even the optimal time to travel.

It also greatly helps with dock door scheduling, leveraging the real-time data on arrival times.

“The success of Walmart Canada’s system has demonstrated the potential of blockchain,” the authors conclude, adding “It has shown that the technology can generate significant operational and financial gains and improve supplier relations.”

The full article is available here: How Walmart Canada Uses Blockchain to Solve Supply-Chain Challenges

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