The ABC of future procurement: B is for...Blockchain
In this blog series, WorkFutures founders Eleanor Matthews and Rosalyn Olney take a look at the ABC of technologies that will have the most profound effect on the face of procurement in the rest of 2018 and beyond. In this instalment, Eleanor puts her Blockchain Diploma (yep) to good use, breaking down the key benefits of this hot topic tech.
Blockchain has the potential to have a huge impact on procurement and sourcing, but its main challenge is that it’s still early days in terms of adoption. More folks are talking the talk than walking the walk, and blockchain pioneers have to battle techno-weary cynicism about whether it can live up to the hype. Add to that, it is still seen by many as a cryptocurrency rather than an underlying technology.
So, with limited proven use-cases, how does Blockchain compete with AI, RPA, Big Data, virtual assistants and all the other trends that are driving the digital transformation of procurement?
Firstly, it will unlock the next wave of efficiencies by getting rid of waste and duplication across customers and their supplier ecosystems. The status quo, where customers and suppliers maintain private, local records of every transaction in various systems by applying their own local processes, means that there is significant duplication in the processing, validation and storing of information about the same event.
A move to distributed ledger technology such as blockchain allows for a single, immutable, secure record of every transaction, eliminating disparate systems and excessive local work within the four walls of an enterprise. For example, Maersk and IBM are predicting that their new blockchain platform will save the global shipping industry billions of dollars a year.
Secondly, blockchain will enable greater trust, despite confusingly being called a ‘Trustless’ technology. What trustless means here is that the record of a transaction is recorded by all the "nodes" in the network that operate the blockchain, as opposed to being verified by a single party. In addition, once a transaction is added to the blockchain it can never be changed, so this allows for superior auditability and greater confidence. For certain types of product where provenance is important (food, luxury goods and similar) this allows companies to make a better consumer offer. For example, Everledger’s Diamond Time-Lapse product can validate the provenance of diamonds, ensuring that they are real, not stolen and don’t come from mines with a poor human rights record.
Finally, it will automate fulfilment of certain types of contractual obligation without the need for separate automation technology. So-called ‘smart contracts’ can be set up so that when conditions are met, payments or other value transfer can happen automatically. For example, discounting structures can be automatically applied without the need for extra administrative work or specialist billing systems.
Quicker, more reliable, safe from attack. From a business point of view, it’s hard to see a downside. I see the rush for blockchain adoption soon gathering some serious pace.