Blockchain for Suppliers
Not just for nerds? Appearances are deceiving. Blockchain has the potential to fundamentally revolutionize our procurement process.
It’s a bit like in the 1980s with the Commodore 64. Only a few nerds messed about with the first home computers. Just a few years later, there was a computer in almost every home. ‘Yes, I have heard about it, but have no idea what it is exactly’, is the standard reply, if you ask fellow colleagues about blockchain. One thing is clear: Blockchain is the next big thing. And: It will change our lives. Not only our private lives.
Revolutionize procurement using blockchain
Within automobile production, global supply chains are getting more and more complex. The transfer of contractual obligations to each member of the supply chain is nonetheless necessary. Specifically, in terms of sustainability and ethical conduct. To make the supply chains more transparent, Mercedes-Benz Cars is developing a blockchain prototype. ‘Blockchain technology has the potential to fundamentally revolutionize our procurement processes,’ explains Wilko Stark, Member of the Divisional Board of Management Mercedes-Benz Cars, Procurement & Supplier Quality. ‘With our blockchain prototype, we are in the first step testing one of diverse possible applications with the aim of increasing transparency beyond our direct suppliers.’
This is how it works
A blockchain is a list of data records. A decentralized database, distributed on multiple networked computers. All participants in the blockchain see the same contents. The individual data records are linked to one another by an encrypted procedure. Blockchain is being used mainly to develop financial transactions. But even the conclusion of contracts can be made transparent using blockchain. The new blockchain prototype used at Mercedes-Benz Cars makes it possible to transfer the sustainability standards of Daimler AG across the entire supply chain. In particular, the contractual obligations relating to working conditions, human rights, environmental protection, security, business ethics and compliance. If one of the sub-suppliers does not comply with these, this can be seen in the blockchain. ‘The transmission of contracts to each member of the supply chain is the prerequisite of cooperation with our suppliers, especially in terms of sustainability and ethical conduct. The blockchain prototype opens up completely new ways to make procurement processes simpler and safer,’ says Sabine Angermann, Head of Procurement & Supplier Quality for Raw Materials and Strategy at Mercedes-Benz Cars.
For the blockchain Project, Mercedes-Benz Cars has entered into a strategic partnership with Icertis. Icertis is a leading supplier of Enterprise Contract Management solutions. In cooperation with Icertis experts, Mercedes-Benz Cars has successfully developed and programmed the blockchain prototype. This pilot project is now testing how the application can be implemented by the suppliers. A crucial aspect of the success of this project: Intuitive and user-friendly operation of the blockchain platform. It should be possible for every supplier to get started easily. The project can only be successful when blockchain is integrated into the supply chain. The first steps with the new technology still need to be taken; blockchain is still something just for nerds. It is possible though that in the next decade, blockchain will be a central component of the procurement process.