August 2, 2017

Is Blockchain the Future of Procurement?

Blockchain

It’s been well advertised that a number of procurement software providers are looking into Blockchain as something to work into their offerings in the near future.

With the security and transparency that Blockchain ledger offers, this is a logical move. Yet there are also a number of issues to contend with.

One example of this is SAP Ariba, who are working with start-up, Everledger, who in turn track the lifecycle of diamonds, their history and in short, look to remove a significant amount of corruption and fraud from the diamond industry. They do this by measuring and registering over 40 features for each diamond on the Blockchain, reasoning that the security and transparency that comes with this technology mean it is far harder for a diamond to end up in the wrong place. So far they’ve made a healthy start, with one million diamonds having been processed and wine being earmarked as the next frontier.

Luxury goods are about to become far harder to fence. (Not that I’d know anything about fencing.)

I should probably pause here and provide a few basic facts about the Blockchain before we continue:

  • It is a ledger
  • This ledger is not editable
  • This ledger is ‘unhackable’ (the inverted commas are because there is clearly no such thing, in the long run anyway )
  • It exists on a distributed database, on millions of computers worldwide (no corruption of data)
  • It is public

Having noted just how impressive this technology can be, the real question is whether or not we can take advantage of it and  specifically, use it in procurement technology. After all, it is far easier to track diamonds than it would be to track a car or a television, even software. These are mass produced, designed to be identical. They don’t have the unique qualities that many luxury goods can have and their lifecycles will be hugely varied.

Not only that, but what happens if we decide to upload documentation into the chain, using its security. Surely the documentation can already be fraudulent before it’s uploaded. Isn’t that where the criminality/mistakes would occur anyway? From that point, how do we make a change?

Then there are regulatory concerns, for example, with the GDPR or a number of financial regulations there is an expectation that data is redactable. The Blockchain wouldn’t allow this.

The other point to be made is it’s all very well having even better visibility of your suppliers and vice versa. But, if you can’t see the suppliers of your suppliers and don’t have that complete supply chain visibility, you’re in the same situation as you were before. Yes, you could be leading from the front but if nobody else follows, is there any point?

So what is the Blockchain really changing?

In time we may see complete supply chain transparency which would be hugely beneficial but in its current iteration, Blockchain is a little too perfect for a world that is a little too imperfect.

Still, it’s something I’m sure we will all be watching with interest. All whilst wondering if Bitcoins are overvalued or not. That though, is a completely different discussion.

 

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