As originally published in ISM's Inside Supply Management
By: ProcurementIQ Analyst, Connor DiGregorio
As blockchain technology evolves, different sectors of the economy will operate differently. Blockchain capability introduces many potential benefits to businesses, including trustless peer-to-peer transactions, smart contracts, data security and privacy.
With these technological advantages, supply chains across the globe are poised to be revolutionized. As blockchain technology becomes an ever-larger part of their day-to-day operations, logistics operators and supply management practitioners must be ready to adapt.
The aspect of blockchain technology that could particularly benefit supply chains is its immutable distributed ledger. Through blockchain, transactions and the exchange of assets can be tracked in a secure, transparent manner by all parties involved. This serves to eliminate much of the paperwork and verification procedures of global trade, while bringing enhanced traceability. With an open ledger that tracks assets as they are traded at every stage of the supply chain, a sourcing professional can better understand a product’s history. Ultimately, blockchain technology has the potential to improve inventory management, reduce fraud and improve trust among consumers.
As when any new technology appears, however, some businesses risk being displaced. The rise of blockchain is setting the stage for what many call “the age of disintermediation” because of the many middlemen and third-party services that could be made obsolete by the technology. For instance, as much of the accounting processes in global trade are streamlined, services such as bookkeeping, document storage and inventory accounting would likely decrease in demand. According to ProcurementIQ, as demand for these services slows, vendors will be forced to lower prices to attract business.
Savvy sourcing professionals will be able to leverage this new technology to save money, by using new blockchain platforms or negotiating lower prices from existing vendors.
A Revolutionary Technology
As processes are made less expensive by blockchain technology, several other markets may also experience price drops. ProcurementIQ projects that vendors in such markets as customs brokerage services and freight forwarding could — as paperwork and data tracking are streamlined — pass cost savings on to buyers. Supply management practitioners should look for ways to make their processes more efficient by working with companies utilizing blockchain technology. While transitioning to new blockchain-based systems may increase costs for companies in the short-term, the efficiencies achieved will likely increase future profit margins and potentially decrease the number of necessary partners for global transactions.
It’s still extremely early in the lifetime of blockchain. Many blockchain products are still being developed and will not be available to the mass market until at least later this year. Despite its infancy, however, blockchain technology will undoubtedly revolutionize international trade. It will become ingrained in the processes of every business, much like the internet did.