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What is Blockchain for Procurement?

Blockchain, along with artificial intelligence, machine learning, and cognitive technology, is one of the hottest buzzwords in the software and technology industry today, and its notoriety has spread to the procurement and supply management industry. Blockchain was one of the main topics of discussion at SAP Ariba LIVE in Las Vegas last month, particularly since SAP Ariba has joined the Blockchain gang and are hard at work bringing it to procurement.

Indeed, Ariba is partnering with Everledger, a London-based Fintech digital ledger company that tracks and protects diamonds and other valuable items as they are shipped, on its Blockchain endeavor. Together, they have begun the long and hard work of understanding how to incorporate Blockchain onto the Ariba Network and make it work for its customers (click here to read our round-up of Ariba’s announcement from last month). A subsequent article will further detail this developmental work and the potential that they see in Blockchain for procurement.

But for now, given all of the buzz that Blockchain has generated, it is worthwhile to explore what the technology is and what it means for sourcing and procurement teams now and moving forward.

What is Blockchain?

Blockchain is a digital database that captures and aggregates records (or blocks) that can function as a ledger used to facilitate business processes that involve multiple parties. It is an open, internet-based, user-driven database that, for every new transaction or update that occurs, a new record or block is automatically added to the chain as a digital fingerprint. And each block becomes a living, breathing artifact for every widget at rest, in transit, or in use. As a result, Blockchains have the potential to increase the efficiency, fidelity, and security of transactional and logistical data exchanged between trading partners in a B2B or B2C environment.

What is Blockchain for Procurement?

Although Blockchain is still in its infancy, it could have enormous implications for global business and commerce. And it could have wide-ranging uses for supply management teams up and down the source-to-settle process.

  • 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 organization to perfectly map business requirements to external workers and create an untouchable system of record that captures payment, project, and contract information (click to learn more about Blockchain and the “Future of Work”).
  • For sourcing and procurement 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 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 (stay tuned for more insight on what Blockchain means for AP);
  • 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 farther down the supply chain.

Final Thoughts

Blockchain is certainly one of the most exciting and potentially disrupting technologies to emerge in the last couple of years, and it could “come of age” in the next couple of years. It has significant potential for B2B commerce, and AP, procurement, and supply chain management teams, in particular. 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 to the enterprise by way of the supply chain. But as the next article on Blockchain will illustrate, technology developers have to further build out Blockchain’s proof of concept to “human proof” it, which will be a tall order.

Post Script: Are you free this Thursday, April 27 at 2 PM EST? Ardent Partners’ Chief Research Officer, Andrew Bartolini, will deliver a free, half-hour webinar previewing the results from his annual benchmark research report, CPO Rising 2017: The Tools of the Trade. It’s free to attend. Simply click this link to register!

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