Blockchain and Bitcoin. The two are almost always said in the same breath. However, blockchain is the technology behind the whirlwind of cryptocurrencies like Bitcoin – it enables the secure exchange of Bitcoin and other cryptocurrencies. In fact, it allows for the direct, secure exchange of any digital asset, such as intellectual property, software and legal documents. Thus, the application of blockchain technology has the potential to reach farther and wider than the cryptocurrency realm. Discussions on how the technology can potentially combat a myriad of issues, such as global warming, corruption and even lower healthcare costs are all the rage.
Amid these discussions, the procurement sector often comes up as a potential benefactor of blockchain technology. And for good reason. The technology’s ability to create and manage an incorruptible ledger with every transaction and data point is an important feature for procurement because it supports increased transparency and greater trust – two very important features for any sourcing department. So, what are some of those applications?
Aside from streamlining payments, Blockchain can also apply to other areas of business that are still paper-based, such as contracts. While Smart Contracts are currently a hot topic, one of the companies harnessing the power of smart contracts for non-blockchain companies is Clause. According to its website, the company allows its client to “connect [their] contracts to the Internet of Things and APIs to self-manage commercial relationships and business processes.”
Meanwhile, companies like Wave boast “paperless trade.” The company uses blockchain technology to “connect all members of the supply chain to a decentralized network and allows them a direct exchange of documents,” according to its website. The company suggests that its service “eliminates disputes, forgeries and unnecessary risks.”
Another application for blockchain technology in procurement is increased transparency within the supply chain. When sourcing raw materials through to the customer, blockchain technology can be used to store and record all transactions and transfers of ownership along the supply chain. The beauty of this is that procurement would be able to track a good’s exact location within the supply chain, which offers greater control and visibility within the overall supply chain.
There are also applications for blockchain technology within the freight sector. In fact, IBM and Maersk have teamed up to create a new company aimed at commercializing blockchain technology for the shipping industry. The biggest benefit will be reducing paperwork costs, but the technology would also allow all parties to manage the shipping information while reducing the risk of data tampering. Additionally, the technology would also help locate empty containers and find shippers with the ability to take on extra capacity.
The future of blockchain technology within the procurement sector isn’t expected to slow anytime soon. In fact, there are whisperings of the technology’s ability to further Machine-to-Machine (M2M) and Human-to-Human (H2H) collaborations, something we’ll delve into later. In the meantime, procurement departments should not dismiss blockchain technology as a passing fad and should actively research how to implement it into their operations. It’s certainly the way forward.