Smart Contracts

Trend Definition 

What is the essence of this trend? What is its impact? 

• Essence: Blockchain-based smart contracts automatically execute tasks (e.g., customs clearance and payment) after predefined conditions have been met, thus minimising the need for manual intervention and drastically reducing process times
• Impact: Besides increasing efficiency and decreasing operating costs; smart contracts foster data transparency and visibility through reports that can be created by AI based on transaction data

Trend Drivers 

Why is this trend emerging now? What’s changing? 

• Global Supply Chain Complexities: Growing need for reliable, efficient, and transparent processes in globalised supply chains that securely manage the increased complexity
• Regulatory Compliance Pressure: Stricter regulations and compliance requirements in international trade necessitate more transparent and auditable processes that can be accessed in a secure manner
• Cost Pressure: Companies face serious cost pressure to remain globally competitive, hence, cutting costs for services and intermediaries is an important lever for a company

Use Cases 

How to apply this trend? 

• Secure Supply Chain Transactions: Enable procurement and product insights
  Example: Home Depot, in collaboration with IBM Blockchain, established smart contracts to automatically verify transactions, detect anomalies, and have real-time access to records of shipments and receipts
• Supply Chain Transparency Enhancement: Access product information and automate supplier payments
  Example: Unilever, in partnership with Provenance, uses blockchain smart contracts for transparent tea Supply Chain Management, facilitating product tracking and automating supplier payments, enabling insights into the tea’s origin and quality

Procurement Relevance & Response Strategies 

How should Procurement adapt its Processes, Organisation, and Strategy?

• Strategic Rollout: Develop a phased plan rollout to integrate smart contracts, firstly with low-risk procurement categories to monitor performance, scalability and efficiency gains, followed by systematically monitoring the progress
• Supplier Onboarding: Ensure supplier onboarding by incorporating smart contract protocols within digital contract management systems