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IBM’s approach to using blockchain for supplier information management

Alex Johnston

Supplier information management can be a tedious, time consuming process for both suppliers and procurement organisations.

Image: JHVEPhoto / Shutterstock.com

Challenge


Supplier information management can be a tedious, time consuming process for both suppliers and procurement organisations. Depending on information available and internal processes, the traditional supplier onboarding process can be slow, inefficient, repetitive and manually intensive for both procurement organisations and suppliers alike.

Suppliers usually end up providing the same information to each procurement organisation they work with individually. This inefficient dissemination of information means individual supplier information that procurement organisations have access to can quickly become outdated. Anything from contact details, physical addresses, or something as critical as banking information can change and go unnoticed.

Information gaps posed by outdated supplier information exposes these organisations to unnecessary risk and create the need for revalidation of supplier information and expensive monitoring efforts. To address this problem, many organisations have turned to technology to better manage supplier information strategically.

Whether working with a third-party solution or creating an in-house solution, typical supplier management systems consist of databases that collect supplier information companies need directly from suppliers via self-service.

However, individually maintained databases increase the possibility of human error or fraud, and shared databases can be ineffective at preventing malicious activity. Hackers can corrupt or destroy data in the shared database, making it invalid for everyone involved.

International technology company IBM concluded managing supplier information more efficiently was not only as a chance to alleviate a pain point IBM was experiencing, but to address an industry-wide challenge.

Recognising the application potential of blockchain technology to the industry challenge of supplier information management, the procurement team at IBM assembled a working group to begin working on a solution.

Approach


Establishing and developing the solution


In August 2019, and in partnership with blockchain consultancy Chainyard, the project team at IBM launched a new blockchain-based network, specifically designed to improve supplier information management by identifying, onboarding and managing qualified suppliers simpler and faster. The project was coined the Trust Your Supplier (TYS) network and was built on IBM Blockchain platform leveraging Hyperledger Blockchain Protocol and hosted on IBM’s cloud service. The team has continued to grow the number of partner organisations participating in the network’s development throughout 2020.

The project was developed with oversight and guidance from leadership within the IBM working group, with Chainyard being largely responsible for the technical development of the network. The development process required collaboration and openness from both the IBM and Chainyard teams.

The blockchain working group also collaborated with and reported to a governing board, which consisted of business leaders from 16 companies across ten industries. The governing board, through various sub committees, proved invaluable to the development of the TYS platform and helped the team prioritize capabilities and features of the platform.

How the blockchain-based platform works


The blockchain-based platform eliminates manual processes and helps reduce the risk of fraud and errors within supply chains through its decentralised approach and an unchangeable audit trail inherent to blockchain.

The Trust Your Supplier network creates a digital ‘passport’ for suppliers on the TYS blockchain network, and enables suppliers to grant permission-based access to buyers. The digital supplier ID contains vital supplier-specific information ranging from data points like primary contact information and physical address to banking and tax information.

Instead of being verified periodically and manually solely by procurement teams, data and supplier information is updated on the TYS network constantly by suppliers themselves, which increases the real-time accuracy of individual supplier information.

Meanwhile, the TYS platform also features a TYS marketplace for external data providers such as Dun & Bradstreet (D&B), Ecovadis and RapidRatings, among others, that can be integrated into the core supplier onboarding process. Third-party external data adds an additional level of confidence to the data by corroborating supplier information across multiple sources.

Outcome


Impact of the platform for IBM


Live and verifiably accurate supplier information could mean a reduction in risk across the supply base at an aggregate level, which is a priority area many organisations are giving increased attention to with recent supply chain disruptions. Additionally, easily verifiable supplier information and reduced manual processes also means shorter lead times during supplier onboarding, which can have positive upstream business outcomes, especially for time sensitive projects.

In addition to reducing manual and repetitive processes and reducing risk in the supply base, TYS is designed to integrate with existing procurement systems and business networks to exchange relevant information. Increased transparency and greater exchange of information can lead to greater levels of supplier enabled innovation and stronger supplier partnerships.

Other strategic focus areas that “Trust your Supplier” is aimed at improving include:

  • Speeding the onboarding process and reduce manual processes through an immutable record of new vendor details. IBM expects as much as a 70% reduction in onboarding cycle time.
  • Confirming supplier qualifications with access to current data through the supplier ‘passport,’ including ISO certification, diversity indexes, sustainability ratings, etc.
  • Validating supplier records through third parties like D&B, EcoVadis and others to help fill in missing supplier information and validate banking account information and financial health.

The Trust Your Supplier platform is now available as a commercial offering from IBM and provides information on thousands of suppliers to multinational companies around the globe. The solution was piloted and tested by IBM’s own corporate procurement team and its project partners, and IBM has now made it available as a technology solution on a commercial basis. This means that procurement organisations across industries now have the ability to gain access to the Trust Your Supplier platform and begin leveraging the potential of blockchain within its supplier information management capabilities.

As more organisations turn to this type of technology, suppliers will find it easier for organisations to do business with them as they will not have to share and verify the same information repeatedly. As for procurement organisations themselves, they could expect to see a reduction in manual processes, more accurate supplier information, reduced risk exposure, and smaller lead times during supplier onboarding.

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