Blockchain Technology Promises Better Trust and Transparency to Procurement
Blockchain is a revolutionary technology that represents tremendous value for procurement. But what is it and how does it apply to the world of procurement?
First, let’s start with a definition. According to Don & Alex Tascott, authors of Blockchain Revolution:
“Blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions, but virtually everything of value.”
In simplistic terms, blockchain is like a spreadsheet that has been replicated across a vast network. The data within the spreadsheet is public and can be edited and contributed to by the network. Because there is no originating copy of the data, it is impenetrable by hackers because it is literally hosted by millions of computers simultaneously.
Granted, this is a very basic illustration of how blockchain works, but the two most important features of blockchain—trust and transparency—have tremendous implications for procurement, especially as it relates to the supply chain and source-to-pay processes.
Blockchain establishes digital trust—and this trust is universal and immediate. Think about what this could mean when it comes to supplier verification and purchasing. Because there is a network of computers storing the data, verification of information is more robust. In blockchain, every transaction is linked together, creating a more trustworthy string of information. Because there is no authority that ‘owns’ the data, there is zero chance of that data being manipulated in one way or another to benefit one particular party.
This is incredible to wrap your head around… think about the individuals, organizations and intermediaries (like bankers, brokers, lawyers, etc.) who make their living on validating, identifying, and verifying information. Blockchain has the potential to cause a major disruption to these industries.
Impact and Value of Blockchain for Procurement
More efficient business processes.
By design, blockchain is extremely secure. It extends perfectly into payment processes by removing the intermediaries and archaic processes that slow down productivity. According to industry reports, over 50% of organizations still write checks for their B2B transactions. Imagine if those companies moved to a blockchain system, and how it could revolutionize old school procure-to-pay transactions. Contracts and document exchange activities also have the potential to be impacted by blockchain. Imagine allowing all members of your supply chain to be connected to a decentralized network, allowing them to directly exchange documents via blockchain. This would essentially eliminate disputes, fraud and other risks.With blockchain, you could create your own smart contracts, complete with self-verification and automatic execution. Contracts could be disseminated to multiple parties across the supply chain with full transparency and record of the conditions.
For many companies supply chain management is still a manual process. And while cost management is a number one priority, what would it mean to your company if you were aware of the environmental, political or ethical implications of suppliers as it relates to the production of their products. Blockchain can help to increase transparency within the supply chain—from the extraction of raw materials to customer demographics.
How JAGGAER Can Help with Blockchain for Procurement
With how fast blockchain technology is moving and its implications, it’s important that you partner with eProcurement companies that are investing in blockchain research and applying it to its own systems. JAGGAER positions you to stay ahead of the curve by helping you understand what blockchain means to your procurement organization and how you can prepare to take advantage of this and other emerging technologies.