Blockchain and Beyond – Jason Busch on Trust and Transparency in the Supply Chain

At the recent ISM / Spend Matters Tech Summit in Baltimore, Jason Busch, Spend Matters founder, led a fascinating session titled "Blockchain and Beyond - The Future of Trust and Transparency in the Supply Chain". 

Now if you have heard of Blockchain, you may (like me) have thought it was just something around the technology that enables Bitcoin to work. But as Jason explained, it is much more than that. He started however by talking about systems and connectivity more generally.

Transactional flows between buyers and suppliers, he said, get very complicated in worlds of direct materials and retail business. Sharing production schedules, shipping, requirements, terms ...  tying this together is far from simple. The world of eInvoicing and networks is actually simpler but is still not trivial, and payments alone get very complicated.

A single ledger (system of record) is easy to maintain when it's just us – a single party. But as our business complexity grows, and expands with supply chain partners, then gathering data can take weeks before you can run analysis and do demand planning for instance. Keeping ledgers and master data in synch becomes a “log scale problem” as he put it.

Jason then moved on to talk about money – which is “a unit of account, a medium of exchange and a store of value”. But really, it is based on trust - only 8% of the world's currency exists outside of electronic records. (We “trust” that our pensions fund or savings will be there when we want it – there is no pile of money in a vault with your name on it!) But there are many issues – it can take time to settle transactions, huge fees are paid to banks, many payments require manual intervention.

So, back to Blockchain - how do we establish trust between otherwise unrelated parties over an untrusted network like the internet? “What the Internet has done for information and the way we communicate, Blockchain will do the same for trust”, Jason claimed. The financial institutions are both excited and terrified by Blockchain, because it could change dramatically huge elements of their business.

But what is Blockchain? Jason quoted this definition: “A peer to peer public ledger maintained by a decentralised network of computers that requires no central authority or trusted third parties”.  A Blockchain consists of three key components:

  • A transaction (public private key cryptography)
  • A transacting record
  • A system that verifies and stores the transaction

So Blockchain establishes that I have "ownership", and the shared system of record makes fraud virtually impossible. Bitcoin is just the first “financial App” for Blockchain technology, and Jason explains that payments, security, forex, clearing, trade financing, SCM and other financial services activities will probably follow.

But there is more of interest to procurement and supply chain, as we’re not just talking about the financial side of things. The principles can apply to item level supplier and product management, a “fractal bill of materials” as Jason put it. If you take one point away from his discussion, it should probably be this - the system of record inside a company would essentially take a back seat to new external autonomous systems of record between organisations.

Think about what that could mean in terms of spend data, supplier onboarding, risk management … Issues around conflict minerals would be solved as “all the underlying tin, gold etc. would have a stamp going back to the mine, that would travel with whatever that gram of material became - with all the information stored in publicly accessible systems”.

It is all a bit mind boggling, but you can be sure that there will be much more written about this in years to come, and we’ll do our best here to keep up with the developments that are relevant to our readers. Even if it does make my brain hurt. And well done to Jason for making such a complex topic sound genuinely exciting and being reasonably comprehensible at the same time!

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  1. leanne Kemp:

    Anyone know Jason Busch – twitter or linked in profile. I’m keen to connect with you Jason

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