Blockchain Technology & The Reformation of Procurement as We Know It

Spend Matters welcomes this guest post from Thomas Cherian of GEP.

The reality of blockchains becoming the basic building blocks of tomorrow’s connected world is fast approaching. According to some, that day has already arrived. A lot has happened over the past year regarding the revolutionary concept of blockchains, which are expected to store an estimated 10% of global GDP in its network over the next decade.

Blockchain-backed innovations have grown by leaps and bounds, spanning a multitude of real-world applications. Think mining giants such as BHP Billiton using a blockchain solution to refine their supply chain processes by obtaining access to concurrent intelligence, or a global tech powerhouse like IBM using the concept to combat climate change for its clients. Or consider central banks like China’s turning to blockchains to aid interbank payments and wipe out cash. Blockchains can be used in facilitating fair sharing of royalties in the music industry, easing storage of health records… the list is endless!

So, after all this clamor, the question remains: What’s in it for procurement? How can the boundless potential of this simple but profound innovation be used to unleash advancements in smart contracts, anti-counterfeiting, supply chain tracking, real-time intelligence, predictive analytics, and last but not least, cheap and safe payment solutions? How can blind spots be removed, and how can the existing system be made leaner and safer? Are we eyeing the next Big Bang, the real transformation of supply chain as we know it?

Let’s look at some areas where blockchain technology is creating ripples. We can begin with the area of supply chain tracking. According to Provenance, a torch-bearer in making supply chain tracking efficient and transparent, creation and exchange of material things are the basic building blocks of our lives. However, this has been hampered by inefficient supply chains, forgery, traceability issues and vast amounts of wasted material.

Provenance seeks to use these new digital technologies to enable every physical product to come with them a seamless digital passport that empowers authenticity and traceability, thereby dodging exploitation through the product lifecycle. Provenance believes that in our hyper-connected and ever-evolving world, transparency is paramount. It offers products supply chain stories and item-level traceability, which in turn enhances the consumer experience. Provenance is focusing on an array of sectors and uses, ranging from tracking tuna caught in the Indonesian sea to upcycled designer bags.

The good news is that they are not alone in the fight against counterfeiting using blockchain platforms. For example, “BlockVerify,” a blockchain-based anti-counterfeit solution, aims to improve transparency in the pharma and luxury segments’ supply chains. “Everledger” allows stakeholders to trace the authenticity, ownership and identity of luxury items such as diamonds by creating digital footprints of items on blockchain networks, thereby enabling companies and governments to regulate ethical supply chain routes.

“Etherparty” and “Applied Blockchain” provides effective platforms for smart contracts that track every stage of the procurement lifecycle, facilitate audits, track predefined budgets, evade malpractice and ensure invoice mapping. With the release of “Etherplatform,” a contract library expected to be an open source platform, supply chain professionals can salvage enough ammo to ensure smart contracts are in place. These types of smart contracts open a wide range of possibilities. Small-scale vendors can gain equal footing and have access to lending. There are other visible benefits, such as reduction in overhead costs.

Some, like “Outlier Ventures,” wish to seize the opportunity to bring buyers together to facilitate a consortium mode of collective buying using blockchains to enable bulk transactions, using tamper-proof ledgers. Currently, one quarter of the cost of factoring and supply chain financing programs is related to risk of fraudulent and multi-financed invoices. “Fluent” pioneers in creating a unique digital asset out of each invoice after it has been approved and cryptographically signed by the buyer. Settlement of this invoice on the payment date is programmatic and happens instantly to whoever owns the invoice. Their focus includes real-time B2B payments, supply chain financing and providing a peer-to-peer working capital marketplace.

It doesn’t stop there. The fact that blockchains can potentially be used to predict future market movements based on past events is the icing on the cake. Having a decentralized predictions market is what “Augur” is working towards. What if this could be used to predict events and release dates on the supply side? What if payments can be automated based on the probability of an event’s occurrence? What if hedging can be mastered based on probabilities of an incident? The options are tangible and plenty!  In short, blockchains have the capacity to disrupt the way supply chain and procurement presently function. We're coming into an exciting future indeed.

Share on Procurious

First Voice

  1. Beena Eapen:

    Exciting future indeed!

    A thought provoking article, well written too.

Discuss this:

Your email address will not be published. Required fields are marked *