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Blockchain epitomizes network-centric business, and procurement departments must take the lead exploring its possibilities for supply chain disruption. This was the gist of a discussion I heard during an exclusive roundtable at the SAP Ariba Live 2017 event in Las Vegas entitled, “What Value Can Blockchain Bring To The Supply Chain?”

“Blockchain will radically change how we drive transactions and what procurement does as a profession,” said Robert Kain, Principal Consultant at Nitor Partners (above). “Being able to create and connect the networks that allow things like digital and mobile payments, bitcoin, data analysis, financial platforms and crowdfunding will create a much faster and secure world where who you are and who you’re dealing with are completely visible.”

Besides every day digital transactions, the distributed ledger can help support an organization’s higher purpose. When purchasers know the details about how materials are sourced, manufactured and shipped, they can do business with companies better aligned to the corporate mission.

The business value of once and done

Blockchain’s promise of faster, better and cheaper fundamentally disrupts traditional supply chain models. Readily available information can make activities like getting a mortgage, buying a car (think: Carfax), signing contracts, or onboarding new suppliers much more streamlined.

“Fast and good has always been expensive, while slow and not so good has been cheaper,” said Kain. “Blockchain says I can do this faster, cheaper, better and more securely at a lower cost. To an extent, SAP Ariba has already established how that can start to look in terms of sending a document back and forth, having that transparency, taking a contract to terms, validation of what’s happening ─ those are activities that blockchain can do.”

Act now to avoid ceding control to IT

Cautioning that blockchain is immensely complex, Kain encouraged procurement departments to get educated so they can take advantage of its unique opportunity. Now is the time to understand what blockchain is, how it works, and which company transactions might be applicable to its usage.

“Because of where procurement sits in the organization – our interaction with financials, transactions, contracts, sourcing and all of the associated data – we can change the way this conversation happens within our organization before IT takes over. We can help drive procurement’s ability to influence the business.”

Opening windows to instant trust

Using blockchain, procurement would be able to evaluate supplier value and risk in real-time, profoundly changing relationship management, while reducing costs and accelerating business.

“You can see what is actually going on with your supplier the moment it happens,” said Kain. “You can understand how suppliers are performing with you and others. You can see what they’re charging other people because you can see costs across the network. Having that information immediately available can be extremely powerful, not only in driving costs down, but understanding where your costs are actually at in any part of the chain.”

Conduct your blockchain stress test

Kain recommended evaluating procurement process candidates for blockchain against four main criteria:

  • The information is on a network
  • The process requires a digital handshake to gather, receive and distribute information
  • Transaction history is extremely valuable. “If transaction history is of little value to a process, then blockchain solves a problem you didn’t have,” said Kain.
  • Security and cost reduction are extremely important

Of course, not everyone is enamored with transparency. Some businesses may not necessarily want to bare the innermost details of their interactions across their networks. “Not everybody thinks transparency is a great idea, especially applied to supply chains. This is a hurdle to overcome as blockchain evolves,” said Kain.

Ready or not, supply chain participants can look forward to a world where there’s nowhere to hide.

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  1. Nicholas Banks

    It would be very interesting to see how shared ledgers are implemented with B2B transactions. Could eliminate much overhead in terms of staffing and auditing. Nicely written blog. I find this to be a very interesting topic. I find myself researching it more and more even though my current role has nothing to do with managing accounts.

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