Payments to Smart Contracts. 8 ways that Blockchain will disrupt the world of Procurement as we know it.
This week I’m giving a talk at Local Government Procurement Expo on this very subject. I thought it would be interesting to write up my thoughts as a blog post (it’ll also help me get my thoughts straight in preparation for the presentation).
Blockchain can be a difficult subject to get your head around, at its heart it’s quite simple, a distributed ledger with trust built in but delve into the technology that underpins it and you can quickly get lost.
Here’s a short video that will get you started
However, we don’t need to know the technical workings of HTTP or be conversant with HTML to use the internet or build a business there. The same is true for Blockchain. Non-technical people can quite easily buy, store and spend Bitcoin on the Blockchain now and more applications will get easier and easier to use.
I believe that blockchain technology will have a big impact on procurement in the next few years. here are my top eight applications:
- Payments
- Traceability
- Asset Registers
- Smart Contracts
- Collaboration
- Transparency
- Procurement Systems
- Spend Data
Let’s delve a bit deeper into each one and identify where there are already applications being developed.
Payments
The most obvious and mature of the applications built on blockchain is crypto-currencies such as Bitcoin.
The use of crypto-currency in payments enables cheap, quick and convenient international payments without the need for banks, fees and exchange rate fluctuations.
There are already hundreds of thousands of Bitcoin transactions daily and applications being built for the business world.
All areas of financial services are being disrupted by blockchain.
Why is this important to procurement?: Improving the payment process will lead to more efficient trade.
Traceability
Blockchain is already being deployed to provide traceability of diamonds and is being trialled in food supply chain.
Imagine being able to scan an item and see it’s full history all the way down the supply chain. This is the sort of transparency that consumers and businesses have been crying out for and blockchain will bring it within reach.
Maersk are trialling blockchain to manage traceability across their shipping routes, enabling tracking of cargo around the world.
Why is this important to procurement?: We will be able to see much further down our supply chains and assure ourselves of compliance.
Asset Registers
Due to blockchain’s attributes of transparency and immutability, they are an ideal medium to hold asset records. Already this is in place in terms of cash (crypto-currencies) but is also being trialled by governments for public records such as land registry.
Russia’s government has already started a trial for their land registry and there are plans in the UK.
Why is this important to procurement?: Assets that we buy will be stored on the blockchain.
Smart Contracts
The notion of smart contracts means that contracts can be stored on the blockchain such that, if certain criteria are met, the contract can be enacted automatically.
This will be a big efficiency win for procurement in the future removing some of the inefficiency in ensuring that contracts are applied appropriately.
Start-ups are already launching in this space.
Why is this important to procurement?: We will be creating contracts that automatically transact on certain inputs.
Collaboration
The fact that the blockchain has trust built in means that collaborative buying is very easier to enable. We will see consumers and business coming together to buy in a far more effective and efficient manner.
For example WAVE enables collaboration across your supply chain and buyco.io are enabling collaborative buying.
Why is this important to procurement?: We will find it easier to find partners that we can trust to work with both in our supply chain and to buy together.
Transparency
The blockchain both increases privacy and enables transparency. All Bitcoin transactions are publicly viewable but cannot be tied to an individual. This transparency will help public bodies provide transparency data and compare and contrast across the sector.
Combined with the traceability benefits described above, this will lead to applications that provide accountability.
Why is this important to procurement?: It will be easier to hold buying departments accountable for how and with who they spend money.
Procurement Systems
If payments are being disrupted by blockchain technology then P2P systems will follow. Decentralised procurement systems built on the blockchain will enable large disparate organisations to control and view spend whilst providing a new level of configured experience to the end users.
On top of this we will see similar improvements in sourcing, collaboration, spend analytics and accounts payable systems.
The US Govt is testing a prototype blockchain enabled procurement system for managing the procurement of IT.
This paper from Accenture is an interesting guide to how blockchain will bring value to P2P systems.
Why is this important to procurement?: There will be huge changes in the systems that we use.
Spend Data
With improved payment process, transparency, traceability and procurement systems, we will see a big step forward in the accessibility and reliability of spend data. Particularly when combined with advances in artificial intelligence. We will see new insights from spend data tools.
Why is this important to procurement?: We will find that we have data we can trust and insights that were previously hidden to us.
Undoubtedly, Procurement is only a small slice of where blockchain will have an impact but there are already emerging multiple areas where the technology will have a fundamental impact on how we work day to day.
There are still a number of technical obstacles to be overcome before blockchain becomes a mainstream technology, I am in no doubt that it is not a case of ‘if’ rather than ‘when’ that blockchain will start to have a massive day to day impact on procurement.
You can see my slides on Slideshare…
https://www.slideshare.net/PaulSmith228/8-ways-that-blockchain-will-disrupt-the-world-of-procurement
