Does Procurement Need Blockchain?

Does Procurement Need Blockchain?

January 25, 2023
Procurement

Blockchain is fundamentally a database, but rather than a database where one item is allowed to replace another, each change to the data is added as new record that is then chained to other records using a complex algorithm.

These records are then distributed across multiple instances, so the records aren’t held in a central database but in multiple locations, making it much, much harder to tamper with records.

In our view, blockchain is complex, requires lots of power and won’t fix your procurement data problems. Below are our 8 reasons why blockchain isn’t needed in procurement:

  1. Databases do the job just fine → In procurement we need to understand transactions, who paid what to whom, who contracted with whom and what event breached which part of a contract. All of this can be recorded in a database, we don’t need to distribute these records to be able to make them work.
  2. Version control is enough → There’s a widely used technology called Git which is used in programming to manage different versions of documents. Version control can easily be used to track changes across databases, determining who changed what and to what end.
  3. Our data is dirty, blockchain won’t fix that → The big problem in procurement is getting good data in the first place. Supplier identifiers, categorisation, parts numbers, linking spending to contracts, all of these are all data integrity issues. Putting these problems on the blockchain just means you’re going to have the same problems and a more complex environment.
  4. Complexity shouldn’t be your goal → Blockchain adds huge amounts of complexity to your project, complexity infects everything in a project from the simplicity of logins, through to conducting analysis on the data. Seriously, running a procurement project is hard enough, don’t make it harder.
  5. Blockchain solutions are expensive → setting up a service based on the blockchain is expensive. Firms selling blockchain solutions are riding a wave of hype and charging a premium for it, with relatively few developers using blockchain in their day to day work, expect to keep paying that premium.
  6. The planet deserves better → distributed ledgers require exponentially more and more computing power to manage. As the database grows larger the distribution of records also grows, more records in more places means that adding data to the chain costs more in energy and has a higher carbon footprint.
  7. You can’t outsource trust to a database → Yes, blockchain is still just a database and although blockchain does more to secure information, in the end it comes down to trust. If your supplier wants to deliver stones instead of copper, there’s no amount of blockchain tech that is going to stop that happening.
  8. Show us the examples of blockchain working → If the technology had even a tenth of the potential that many seem to think it has, surely we’d have seen some influential projects using the technology for procurement? But we can’t find any smart contracts or smart GRN projects that have succeeded. After all this time, it might be safe to say that there isn’t a good reason to use this technology.

If you’d like to know how to run a good procurement data analytics project, we’re ready and able to help here.

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