In a world where transparency is of utmost importance, trust is the most valuable currency, and middlemen are becoming obsolete. It may seem utopian, but it’s happening now, and all sector and industry leaders are quickly adopting it. Blockchain is here.
According to a 2022 study conducted by Fortune Insights, a leading technology think-tank, the global blockchain market size was valued at $11.14 billion in 2022. It is projected to reach $17.57 billion by 2023, and by 2023 it is expected to be around $470 billion- equivalent to the GDP of Austria or almost twice the GDP of Qatar.
However, first, we must understand the context to get a flavour of the future.
Blockchain: The future’s ‘future’
A blockchain is a growing list of records, called blocks, which are interconnected using cryptography. It can store records of transactions across multiple computers in a peer-to-peer network (a type of network where every computer can exchange data without the need for separate servers). The data is linked on a chain and cannot be deleted once it is recorded. Therefore, blockchain technology offers a unique capability of delivering and sharing transparent information, only accessible by permission networking members, with immediate effect.
Why do we need it?
Cisco Systems develops, manufactures, and sells networking hardware, software, telecommunications equipment, and other high-technology services and products. However, what’s fascinating about Cisco is its complex supply chain strategy. They manufacture their products in 17 countries, including 5 in Asia.
The impact of globalization on Supply Chain Management (SCM), as highlighted by Cisco, has brought a whole new set of difficulties to overcome. Supply chain leaders are faced with everlasting macro-economic and societal issues, cultural differences, transportation logistics and more recently multiple wars. Their key objectives are to produce the required positive bottom-line impact and more importantly, ensure customer satisfaction.
Brexit and the pandemic have made SCM more problematic than ever before, with delays, tariffs, and inspections causing further complications. Identifying and tracking every component of a product from raw material to final goods is no longer a simple process. For example, variables within the food industry, such as food safety standards, bad weather, and supplier issues, increase the risk of challenges to public health and product recalls. With no uniform way of recording and exchanging data, this will continue to present issues for supply chain leaders.
Is it possible that a negatively connotated buzzword could be the solution to this issue?
Diamonds and data
Everledger, a London-based start-up, is using blockchain to bring transparency and trust to the business of buying and selling diamonds. Each diamond’s unique ‘fingerprint’ is recorded on the blockchain, making it nearly impossible to counterfeit or sell conflict diamonds. This not only benefits consumers but also the companies involved in the supply chain, which can now confidently source ethically mined gems.
Food for thought
Speaking of ethical sourcing, the food industry is also enjoying a blockchain-inspired feast. Walmart and IBM are leading the charge with their Food Trust platform. This technology tracks food items from farm to fork, reducing the risk of contamination and fraud. In 2018, a salmonella outbreak led to a massive lettuce recall. Thanks to blockchain, Walmart managed to trace the tainted lettuce back to its source in just 2.2 seconds. It’s not just faster – it’s potentially lifesaving.
Fashioning a sustainable future
Fast fashion is infamous for its opaque supply chains and environmental toll. However, Provenance, a blockchain-based company, is rewriting the script. They’ve partnered with the renowned fashion brand Martine Jarlgaard to create ‘Provenance-enabled’ garments. Consumers can scan a QR code and see the entire journey of the clothing, from the cotton fields to the factory. This transparency empowers buyers to make informed choices, creating a demand for sustainable fashion.
Blockchain has other applications and benefits for procurement:
- Smart contracts: These are self-executing agreements that are triggered by predefined conditions. For example, a smart contract can automatically release payment to a supplier once the goods are delivered and verified. This can reduce transaction costs, errors, delays, and disputes.
- Trust and security: Blockchain can create a network of trusted partners that can exchange data and transactions without intermediaries or third parties. This can enhance collaboration, efficiency, and security.
- Transparency and tracking: Blockchain can enable buyers to verify the authenticity and quality of goods at the source, and to track their movement throughout the supply chain. This can improve visibility, traceability, accountability, and compliance.
Now, we know what you are thinking, this is all great but as a procurement or supply chain leader, how will blockchain impact by bottom line?
- Procurement processes can be made more efficient and cost-effective with the help of blockchain technology. Smart contracts eliminate the need for intermediaries, such as legal and administrative staff, which helps in automating and streamlining procurement processes. This, in turn, reduces labour costs and the time required to process and track procurement transactions.
- By analysing blockchain data, procurement leaders can gain insights into supplier performance, market trends, and historical purchasing patterns. These insights can be used to inform negotiations, helping to secure better terms, pricing, and conditions with suppliers.
- Smart contracts on the blockchain can automatically track supplier performance and apply penalties or discounts when service level agreements (SLAs) are not met. This reduces the cost of manual performance monitoring and incentivizes suppliers to perform better, leading to enhanced supplier management.
As we navigate the winding roads of procurement’s blockchain revolution, one thing is clear: the era of opacity and inefficiency is coming to an end. If blockchain is as good as it claims to be, then procurement leaders must act quickly to incorporate it into their business processes.
At 4C, we have technical capability in multi-faceted technology implementation. We provide bespoke digital services to our client’s requirements, ensuring that we present the best possible solution to their situation. If you are interested in having a discussion, then please get in touch with one of our team via Mark Ellis (Partner) or Joe Gibson (Head of Digital Innovation) and we’ll be happy to help.