Note: This article has been translated by myself from the original German article here. There may be unintended translation mistakes.
Today, I want to finally introduce you to a project that I have followed closely over the last few months and which I visited on site: AZHOS. AZHOS is establishing a new standard for the chemical supply chains through the synchronisation of the monetary and commodity flow using blockchain technology.
To fully understand the business model of AZHOS, you first have to understand what a VMI (Vendor Management Inventor) is and you need a quick overview about the digitalisation standards in the chemical supply chain.
The latter can be given through the following example: Let’s assume that player A runs a production plant where chemical goods are required. These chemical goods are stored in a tank (until they are used), which is owned by A. However, the chemical goods that are stored in the tank still belong to player B, who manufactured them (this is called a consignment stock). Every few weeks, the tank is checked for its content and A pays B according to what he needed to produce his goods. This means that B is not instantly paid for the usage of his chemical goods, which results in huge amounts of bound capital for B (the supplier). This problem will be solved by AZHOS.
Excursion: Orbit Logistics
Orbit Logistics is a VMI service provider specialised in chemical goods. Modern sensor-systems (radar, ultrasonic, etc.), which are used in silos and warehouses of chemical suppliers, constantly scan their filling levels. The resulting data is then used to automate the entire replacement shipments (CPFR – Collaborative Planning, Forecasting & Replenishment). Orbit has sites in Europa, North- and South America making it, together with their thousands of data points, market leader.
Pictures from my visit in Leverkusen (Germany), summer 2018.
The idea behind AZHOS resulted from the automation of supply chains by Orbit Logistics. Adding to this business model, AZHOS will automate the according monetary flow.
Following the example from above: Let’s assume now that a sensor was built into the tank out of which A takes the chemical goods B owns. Whenever the level of the tank decreases, the sensor notices and saves the new data on the blockchain. The signal, which usually would have resulted in a re-order of the chemical good, now initiates an automated payment to B using a smart contract. The entire financial infrastructure which is needed for this process will be provided by AZHOS and AZHOS is currently in the process of developing programmable, on the blockchain transferable, E-money (Tokenized E-money, not to mistake with stablecoins) with several banks. This means as a result: B does not longer have to wait several weeks until he gets paid – the bound capital is released.
But why is the blockchain technology required? Following the regulations of Basel III and IV, which define the rules for equity and risk assessment for banks, chemical goods cannot be financed in advance (for example through Factoring) if they are not exactly quantifiable. By saving the current filling levels on the blockchain, the chemical goods suddenly become quantifiable! Using smart contracts and the conjunction of IBAN accounts and wallet addresses, AZHOS is the first industrial blockchain use case with easy integration.
AZHOS is currently working with big chemical companies (e.g Evonik) on the realisation of this project. To eliminate sensitive data on a public blockchain, Quorum, an enterprise grade and Ethereum alike private blockchain will be used for all processes. Besides, every transaction will generate fees which are then divided by AZHOS and the token holders of the announced STO.
Due to legal reasons I sadly cannot go into further detail here. For all missing information, I would like to refer to the Whitepaper as well as the Telegram Channel of AZHOS. Additionally I would like to point out that I am an Advisor of AZHOS.
Concluding, I see AZHOS as a very interesting and promising real world use case on the blockchain and look forward to the results of the implementation with Evonik.
Disclaimer: The author is invested in the crypto currencies named above or may be invested in the future.