It has been stated often in Ardent Partners research and webinars that “it is an exciting time to work in procurement.” [Sidebar: speaking of webinars… We have an exclusive event coming up later this month when our Andrew Bartolini will present findings from his annual CPO Rising 2017 study on 5/24/17 – details are here]. And this is no less true today than it was last year or the year before. Whether it is because of the fast pace of business, the increasing scope of procurement’s responsibilities, or because the quest to spend smarter and save more never truly ends, Chief Procurement Officers (CPOs) and their teams are always on point to drive enterprise performance and deliver more value.
Another reason why it is exciting to work in procurement today – and will be in the future – is the unprecedented innovation available in the business technology market today; and it grows daily. Innovative technologies, like Blockchain, crypto currencies, and digital sensor technologies, are fostering a more responsive, flexible, and effective procurement workforce that is better suited to adapt to the increasing uncertainty and evolving business needs of today and tomorrow. In short, business innovation is driving procurement agility, and will come to define the prototypical 21st century procurement team.
Today’s article, a bonus installment in a three-part series (click here, here, and here for parts one, two, and three), examines three business innovations and how they will combine to help CPOs and their teams drive procurement agility:
1. Blockchain: As we described in a previous article, Blockchain is a digital database that captures and aggregates records (or blocks) that can function as a ledger used to facilitate business processes that involve multiple parties. It is an open, internet-based, user-driven database that, for every new transaction or update that occurs, a new record or block is automatically added to the chain as a digital fingerprint. And each block becomes a living, breathing artifact for every widget at rest, in transit, or in use. As a result, Blockchains have the potential to increase the efficiency, fidelity, and security of transactional and logistical data exchanged between trading partners in a B2B or B2C environment. Although Blockchain is still in its infancy, it could have enormous implications for global business and commerce. And it could have wide-ranging uses for supply management teams up and down the source-to-settle process, from sourcing to procurement to legal to human capital management to accounts payable to the supplier base, all of which were also described in this article.
2. Crypto Currencies: Crypto currencies, like Bitcoin, are a subset of digital currencies that are secured via cryptographic means and exchanged on digital, distributed ledgers, like Blockchain – i.e., outside of centralized, traditional financial institutions, like banks. They are exchanged by trading partners in return for a digital commodity, like data and information, or a physical commodity, good, or service without the transfer of traditional, hard currencies, like the Dollar. The fidelity of the transaction is established and maintained via a process of time-stamping each transaction as it moves across the Blockchain (ironically, users maintain a useful level of mistrust throughout the transaction that forces them to continually time stamp and thus verify the transaction).
Crypto currencies, namely Blockchain, have been in circulation since 2009 and have been utilized as an alternative financing means that circumvent traditional financing methods and institutions. They can also be used to finance the illicit movement of goods and services on the Darknet and launder money. As a result, their legality varies from country to country. For example, in Russia, it is legal to own Bitcoin but illegal to use any currency other than the Ruble to conduct commerce. Conversely, in the U.S., it is legal to own and use Bitcoin as a digital currency, but the Internal Revenue Service considers it an asset – not a formal currency.
3. Digital Sensor Technologies: As was discussed in the article, Pumping The Brakes on Blockchain for Procurement, companies like SAP Ariba and Everledger are partnering to bring Blockchain technology to the procurement and supply management industry. They are attempting to create a digital business network (or in SAP Ariba’s case, place the Ariba Network on top of Blockchain) that will enable trading partners to digitize and record the movement of goods and services as well as their financing as they move across the supply chain.
Although questions remain about how the two companies intend to connect physical widgets to digital databases and ensure that they remain tamper proof – i.e., that they are at low or no risk for counterfeiting, fraud, or sabotage by human hands – Everledger’s CEO and Founder, Leanne Kemp, alluded to a verification mechanism in her presentation at SAP Ariba LIVE in March. She cited Everledger’s prior and current expertise with using sensorial data to effectively track and trace more than a million loose diamonds on the international diamond market.
Indeed, sensor technology exists today that would allow trading partners to embed sensors within shipping containers, packages, and pallets that could detect and transmit even the slightest movement and alert users to possible tampering. Anyone who has ever moved or picked up something in their hotel mini bar and then saw that item show up on their bill at check out – even if they did not open or consume the item – knows that these sensors exist and they are quite sensitive. Imagine the applications to supply chain track and trace!
Blockchain databases, crypto currencies, and digital sensors all exist in their current form today, and individually serve different industries and markets. But imagine the utility and value that supply management organizations could realize if they were to integrate all three and create a global business network that offers speed, flexibility, transparency, and trust. Procurement users could use Blockchain to purchase commodities and products from across the globe. Accounts Payable could use digital, crypto currencies like Bitcoin to widen their financing options beyond traditional financial institutions. And finally, supplier management teams could leverage digital sensors to bolster track and trace efforts that would allow them to continuously verify the origin, authenticity, and integrity of the shipment at any point as it traverses the supply chain.