Procurement professionals spend a good deal of their time poring over spend analytics to achieve improved outcomes in areas such as tail spend management and overall company cost reduction. But could the digital ledger technology blockchain make their efforts easier and more effective? Technology-in-business magazine CIO Review certainly seems to think so.
In an article that appeared in the publication this week, a new trend was identified. Whereas many organisations have been using analytics and big data to inform their procurement processes, growing numbers are turning toward blockchain as they believe it offers better solutions, including in the areas of trust, visibility, data consistency and time sensitivity – all familiar issues for procurement professionals.
Blockchain, the article suggests, enhances procurement standards by delivering on a range of different fronts, including secure collaboration for contracts, standardising the multi-party supply chain through digitisation, and synchronising information management.
“Smart” contracts become available. Programmed to manage logical operations in blockchain, they are processed by computers capable of delivering much higher levels of trustworthiness than error-prone humans. Moreover, since blockchain networks offer reliable distributed storage, these smart contracts with their highly accurate, computerised calculations render intermediaries unnecessary. This results in a major increase in transparency and therefore trust – they’re visible to all involved on the blockchain.
Blockchain is able to register and archive all transactions in a cryptographically authenticated database, enhancing trust and transparency among the multiple parties involved. And since it permits digitisation and standardisation of supply chains, organisations using blockchain achieve improved tech-enabled capabilities that make for higher growth targets.
Yet, while it appears to be on course for becoming a game changer for procurement organisations, blockchain isn’t without its challenges – challenges which must be resolved. Principal amongst these is the issue of trust itself: many organisation remain resistant to sharing knowledge with unknown network partners. When it comes to the international dimension, it faces the fact that there aren’t standardised regulatory frameworks, laws and contract structures shared by different jurisdictions.
Nick has over 30 years procurement experience in consulting, outsourcing and line roles within industry with international experience across many sectors and industries and led many procurement programs with blue chip organisations.