Iain Steel, chief procurement services officer at UK law firm TLT, explores the practical application of blockchain in procurement
Beyond the hype, the procurement industry could be set to benefit from blockchain technology: the use cases are aplenty.
Any conversation about blockchain usually starts and ends with someone muttering vaguely about bitcoin and then moving swiftly away. However, behind the boom and bust headlines of cryptocurrency, the underlying blockchain technology is increasingly seen as a potential market disruptor in the world of procurement and supply chain.
So, what is a blockchain? Even the most basic description tends to quickly dissolve into a long list of buzzwords. A blockchain is essentially a database (or ledger) that is distributed across a network of computers at the same time. When a new record (or block) is added, it contains a timestamp and a unique fingerprint of the previous block in the chain (a hash), creating a linkage between the new block and the previous block — thus, a chain of blocks. Old entries are never deleted so the blockchain continually grows. Each time a new entry is made, this is authenticated across the distributed network of computers where a majority need to agree to its validity before the transaction is recorded as a new ‘block’. Simple(ish).
The answer to why this technology is so newsworthy is more complex.
BLOCKCHAIN USE CASES ARTICLE TO GO HERE
Once a record is validated on the blockchain, it is generally considered to be locked to unauthorised changes. While no system is completely secure (see ‘Managing myths’ below), transactions are transparent, locked and secured through encryption, making any attempt to fraudulently amend a block extremely difficult.
Due diligence in procurement, whilst necessary, is also labour intensive and expensive so any improvement to the process of establishing trust is a significant win. The…