IBM and blockchain consultancy Chainyard has announced a new permissioned blockchain-based network designed to improve supplier validation, onboarding and life cycle information management.
Along with IBM, Anheuser-Busch InBev, GlaxoSmithKline, Lenovo, Nokia, Schneider Electric and Vodafone are founding participants in the Trust Your Supplier (TYS) network.
“This blockchain initiative represents a great opportunity for Nokia to further enhance our suppliers’ experience and optimise the onboarding process,” Sanjay Mehta, vice president of procurement, Nokia, said in a statement. “Using the latest technology to address a classical challenge will be of benefit for everyone, and further increase the speed of using innovative solutions.”
Unlike IBM’s other blockchain-based networks, which can track everything from produce to jewellery from origin to destination, there is no product tracking on the new distributed ledger.
“TYS plans to add additional functionality over time as the network scales,” said David Post, managing director of Blockchain Ventures at IBM.
Onboarding and validation
TYS was built to act as a cross-industry blockchain network for procurement functions. The network’s first use case relates only to supplier onboarding and validation, according to Post.
Traditional methods of managing suppliers often involve cumbersome manual processes, which make it difficult to verify identities and track documents like ISO certifications, bank account information, tax certifications, and certificates of insurance throughout the lifecycle of a supplier, IBM said. By using a decentralised approach and an immutable audit trail based on blockchain, TYS is designed to eliminate those time-consuming processes and help reduce the risk of fraud and errors.
The ultimate goal is frictionless connectivity across supply chains.
“By shifting… supplier onboarding and validation to a process that occurs in the context of a business network, TYS will drive efficiencies for buyers and suppliers alike,” Post said. “Buyers will join the network as participants and be able to use [it] as a way to improve core procurement business processes as the network adds functionality.”
Limited availability
The Trust Your Supplier network, built on IBM’s Hyperledger Blockchain Platform and hosted on its cloud service, is currently in limited availability with existing participants. IBM said it plans to make it more generally availability later the third quarter.
IBM has more than 18,500 suppliers around the world; it will begin using the Trust Your Supplier network over the next few months to initially onboard 4,000 of its own North American suppliers. IBM Procurement anticipates a 70% to 80% reduction in the cycle time to onboard new suppliers, with a potential 50% reduction in administrative costs within its own business, it said in a statement.
James Wester, IDC’s research director for Worldwide Blockchain Strategies, said supply chains have become the model use case for distributed ledger technology and using it for onboarding a network of partners means their information becomes visible to every member.
“That information can be bank and payment information or compliance with regulations or anything else a company may need for a trading relationship. So having it all available to each node means inefficient and expensive processes to onboard and manage vendors that would normally be repeated by each individual company are no longer necessary,” Wester said. “Again, the members are leveraging the network to make the processes more efficient.”
Some industries may have higher requirements for onboarding suppliers based on regulations and compliance requirements, Wester noted, allowing blockchain to deliver a cheaper, more efficient way to eliminate redundancies.
Code contribution
IBM’s said its Fortune 500 company business partners who are onboarding suppliers will act as the private blockchain’s governance board, guiding future capabilities. Chainyard contributed “a lot of code to Hyperledger,” Post said and the company has been involved in building a number of applications for IBM’s networks.
As with all private blockchains, only permissioned suppliers can access the Trust Your Supplier network. It is designed to interoperate with buyers’ existing procurement systems and business networks to exchange relevant information with suppliers. Instead of being validated annually, data and information about suppliers is updated on the network continuously, which increases the real-time accuracy of the data, Post said.
Existing networks
The blockchain network can connect existing procurement networks by relaying necessary supplier data required for exchanging purchase orders and invoices, without the need for suppliers to enter it in multiple different networks and automating the on-boarding process. IBM’s own Supply Chain Business Network can connect to TYS using open industry programming interfaces for access to existing verified supplier information.
A buyer on the network can request information access to a supplier. Once a supplier approves the request and provides permission, the buyer can access the supplier’s data, validate it against data provided by third party verifiers directly onto the suppliers’ network profiles and then onboard them, according to Post.
“At this stage, relevant APIs transfer the supplier master data to respective ERP [and electronic] procurement tools,” Post said. “TYS will be the corporate identity layer that serves as an input into other blockchain networks and use cases. For example, trusted supplier information data could serve as an input to IoT use cases and networks where goods are inspected as they move along the supply chain.”
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