What you should know, what to consider and what’s next.
The “on time, in full + value for money” nirvana we, as procurement professionals seek, seems to be under constant threat from three issues found in businesses with transactions at its core. Namely security, data integrity and inefficiency. In short, that means uncertainty plus risk.
In our industry, we know that suppliers and stakeholders in general, still view value, clarity, ease of use and trust as the foundations of good business and best practice. So, the key question becomes, “in a shrinking, and increasingly connectible (if not connected) global marketplace, how do we continue to pursue efficiencies without compromising on due diligence, reliability and, again, trust – and can technology help?”
Even though our established methods (SAP Ariba et al for example) are tried and mostly true, we should constantly be searching for something better: more versatile, value-driven alternatives. Alternatives that perhaps combine what we know and trust with the power and potential of emerging technologies that can overcome those three leading issues.
Blockchain and the search for better
Many books have already been written about blockchain and its applications however, one featured a description that stayed with us because of its simplicity and linear definition:
“Blockchain provides a secure ledger of transactions, programmable smart contracts, and real-time trustworthy visibility and insight into the supply chain process.”
The applicable piece for procurement is that the growing list of records (of transaction data), or blocks, are linked and timestamped. Each block contains information from the previous block – and there’s your chain. A chain of blocks whose integrity is built on the foundation of previous “public records”. They are “secure by design” because modifying one block has a knock-on effect that would impact others, and the changes and their respective points of origin, can be tracked identified.
Right from its genesis, blockchain was seen as a solution, or at least the path to a solution that kept “trust” as its central them. In 1982, David Chaum coined the phrase, “trusted by mutually suspicious groups.” In 2008, centralisation of blockchains, removed the need for timestamps to be signed by a “trusted body.” The phrasing is somewhat unhelpful and can throw you off track but it means problems like double-spending are reduced because of the broad visibility afforded to all interested parties.
Development progresses at warp speed these days and we know that in a short space of time, blockchain and its principles have been successfully deployed in everything from infrastructure (hardware) through to verifications, proof of work and more. Supporters of blockchain having a broader role in procurement, supply chain and related services, label it a trust and integrity catalyst. Perhaps it can be but there are still questions as to whether it holds up as a standalone solution.
Some questions and “watch-outs” around blockchain and its place in procurement
The obvious knock on the blockchain concept is the fact that the open and ever-growing list of transaction data and records is well… open. The obvious solution is the implementation of a private blockchain. But the question has been asked (and it has been), “how would this differ from an ordinary, rather cumbersome database?” And the/our world is well and truly flooded with those.
Another issue is one of scalability. With an increasing number of parties inputting data, blockchain network capacity attracts scrutiny as everything slows down. While advances have been made to mitigate this to a degree, the speed remains an issue.
Predictably, privacy is also under the spotlight as, “once a record, always a record” applies here and those records are open to all on the network. For that reason, security and efficiency questions are still yet to be completely and satisfactorily addressed. Now, while you could apply the 80% rule, is that enough for businesses? Is it enough for yours?
So, what do we do now?
Well, seeking out more information and keeping abreast of where blockchain technology is taking us is the first step towards making an informed decision on its value to our businesses. Ask questions like:
– Will blockchain be integral to building progressive efficiencies into supplier management, transaction data storage and integrity, and stock fulfilment?
– By pursuing this line of enquiry, are any of our processed expedited in a way that also allays our concerns around integrity and security?
– If blockchain is not the complete solution, would it interface successfully with AI for example, to meet expectations?
Given that pursuit of excellence is written into the customer/client service handbook, the suggestion we’ll leave you with is to invest time into further exploring/monitoring the possibilities blockchain might afford us. Because there’s always a better way, the question is, is blockchain the answer?
 Waller, van Hoek, Davletshin, Fugate 2019, Integrating Blockchain into Supply Chain Management, GB, Kogan Page