Blockchain tech is the term poised to define our generation. As opposed to Brexit or Trump — which is definitely not a bad thing! But what are blockchains? How do they work, in plain English and zero jargon?
What is it?
A Blockchain is essentially a data record. It is a shared, secure record of an exchange with a historical imprint that is very difficult to change/manipulate. Blockchain uses digital signatures and encryption to record identity, authenticity and access level. So it’s pretty much a whole new level of transparency.
If we think that anything from the mouthwatering burger we eat to the flip flops we wear and the hotel we are staying at is a receiving end of a supply chain, we understand that tracking the component parts and the money that made that product or service possible is pretty vital to the way our world works and the money flows.
Blockchain is like Lego
Now, for procurement, the inability to manipulate historical records is an obvious key but the technology itself has much greater functionality. “I see “blockchain technology” as a collection of technologies, a bit like a bag of Lego. From the bag, you can take out different bricks and put them together in different ways to create different results” says Antony Lewis of in his very comprehensive “Gentle Introduction to Blockchain Technology”.
But can this amazing bag of Lego tech change and simplify the way buyer-supplier relationships actually work? Let’s look at a future with smart contracts via Blockchain. A contractual agreement between a buyer and supplier is essentially a set of instructions and commitments. Blockchain wise, it’s a set of data instructions (those lengthy terms & conditions) — which are fulfilled in an automatic way and in compliance with what the two parties expect of each other. The instructions are clearly visible for all to see and this transparency could help suppliers forecast their revenue for the year and ensure they get paid quicker. If we look at the prompt supplier payment initiatives backed by both the UK and the US governments, Blockchain tech would be of great help in making sure suppliers stay afloat.
Work smarter, grow faster
Smart contracts built on blockchains could even open up new trading avenues for suppliers and enable buyers to name their own price and setup automatic recurring orders at certain times. And since identity on blockchain can be anonymous, buyers can get lower prices sent to a bitcoin address without revealing any pricing or business information to competitors. Blockchains could also enable a more trustworthy and efficient supply chain as you could track the identity and reputation of buyers and suppliers and therefore take the very popular “sharing economy” to a whole new level. Your decision to enter a trading relationship will finally be made based on actual data.
The main takeaway for B2B procurement then is that Blockchains can help assign identity to organisations as well as goods. The transparent tracking of a purchase from one organisation to another and the subsequent exchange of payment between those two organisations will have a huge impact, worth billions of dollars, to be felt across the world’s supply chains.
*This post does include personal opinions and interpretations by the author, Simona Pop.