Beyond the headlines: Is procurement blockchain a real thing?

Michael Cadieux

In 2016, Supply Chain 247 published an article about Walmart, IBM and Tsinghua University (in China) exploring the use of blockchain in the supply chain. There were several interesting elements to the initiative, including increased end-to-end transparency. But what became of the Walmart-IBM-Tsinghua initiative?

Quit talking about blockchain

There are any number of sayings that come to mind when you think of blockchain and the paucity of viable examples of how it has been utilized in the procurement world.

As Walt Disney said; “the way to get started is to quit talking and begin doing.”

Part of the doing is finding out why, for example, there wasn’t a meaningful follow-up on the part of Walmart and IBM regarding the Tsinghua University initiative? After all, there was talk about how blockchain would enable the retailer to “harness its power” to create greater “transparency and efficiency in supply chain record-keeping.” The ability to do this would, according to those driving the initiative “enhance the safety of food on the tables of Chinese consumers.”

Ultimately, and if successful, blockchain would provide critical “food authentication and supply chain tracking” on a global basis to identify and resolve issues with potential food contamination “around the world.”

Given the stories regarding issues with the food supply chain, ranging from the horse meat for beef scandal and the growing emphasis on socially responsible procurement practices, increased transparency is a worthy goal. But is it through blockchain that these goals are achievable?

Parking the car

Let’s hit the reset button for a moment.

Blockchain is simply a secure ledger system in which each point of transfer between different stakeholders is unalterably recorded, creating not only transparency but certainty regarding the facts of a transaction.

One of the better examples of how blockchain works in the supply chain regards the manufacturing and ultimate delivery of a car to a consumer.

In our example, a ledger is “created” when a car rolls off the assembly line, providing all of the information regarding the parts used to build it – including source origins.

When it is transferred or sold to a dealership, a new ledger is added that includes additional information regarding that leg of the transactional chain.

A consumer purchasing a car from the dealer triggers the creation of a third ledger recording the transfer of ownership.

Throughout the above chain, smart contracts support the process and add to the secure but visible transaction record.

The key to the value of blockchains is that once a ledger is created, it cannot be altered by anyone. What this means is that all information, down to the minutest nut or bolt, is “securely and unalterably embedded” in the process. Should an issue or a question arise at any stage regarding the manufacturing of the car, access to the who, what, when, where, and why is readily and reliably available. And so we return to our original question; what (if anything) is happening with blockchain regarding procurement and supply chain?