Archive: May, 2017

The promise of blockchain

Introduction

On 24 May, bitcoin hit an all-time high of $2.791. But by 28 May nearly $4 billion or almost 20% was wiped off the value.

Bitcoin is an example of a technology called blockchain. Although the idea of blockchain has been around since 1991 it was only in 2008 when Satoshi Nakamoto published a paper called “Bitcoin: A Peer-to-Peer Electronic Cash System” that blockchain found a commercial application.

Blockchain started in the software industry but its notoriety has spread to other industries with almost $1bn invested in it in 2016. Procurement is no exception: blockchain was one of the main topics of discussion at SAP Ariba LIVE in Las Vegas in March 2017.

So what is blockchain? The most accurate description is that of a secure digital ledger on which transactions can be made and recorded. Digital ledgers are not a new concept, but the difference with blockchain technology is that it is not based on a single or central ledger but decentralised ones in which stakeholders on all sides of a transaction can make and record transactions.

If you want a more detailed explanation of blockchain then it’s worth watching Shai Rubin’s video called What is blockchain.

How could blockchain be used in procurement?

Although blockchain is still in its infancy, it could have an enormous impact. And it could have wide-ranging uses for procurement teams up and down the source-to-settle process.

  • For sourcing teams, it could be a new due diligence and “track-and-trace” tool that allows them to quickly determine a commodity’s or good’s point of origin, which would help drive visibility, control, and risk management into the supply chain and achieve enterprise or regulatory compliance;
  • For legal and procurement teams, it could be a “smart contract” between two trading partners – a digital, automated record of what goods were bought, sold, and delivered, that is updated in real-time by end users across the line-of-business;
  • For human resources and procurement teams, blockchain would allow an organisation to perfectly map business requirements to external workers and create an untouchable system of record that captures payment, project, and contract
  • For accounts payable (AP) departments, blockchain could be an all-in-one purchase order (PO), requisition, and invoice that links upstream sourcing and procurement processes with downstream payment remittance; and it can create an auditable report;
  • For suppliers, it could be a work order and a track-and-trace tool, in addition to a contract and invoice, and allow suppliers to conduct their own due diligence further down the supply chain.

Conclusion

Blockchain is one of the most exciting and potentially disrupting technologies to emerge recently. It has significant potential for procurement. Up and down the source-to-settle process, blockchain could increase efficiencies, visibility and agility for end users and deliver greater fidelity, value and performance. However, as bitcoin’s value demonstrates, there is still a long way to go.