As the sourcing and procurement industry goes, one of its many challenges is to find the best quality product or service from the best supplier for the lowest acceptable price and the least amount of risk as possible. It’s a tall order, and often, Chief Procurement Officers (CPOs) and their teams have to compromise on one or more variables to source and procure the category to fulfill their business needs. But what if the best of all worlds is possible with a small supplier or manufacturer that’s been crowded out by the competition? And what if there are platforms available that can level the playing field for the little guy? Blockchain could be that platform.
Ardent Partners’ research analyst and CPO Rising editor, Matthew York, recently interviewed Jeremy Goodwin, founding CEO of SyncFab. Founded in 2013, SyncFab is a San Francisco-based supply chain management solutions provider that has been developing a Blockchain platform to connect small manufacturers and specialty machine shops with procurement teams trying to source custom or unique components. Its cloud-based supplier network features buyer and supplier portals, quote comparison and approval tools, and order tracking features to help buyers and suppliers navigate each step of the transactional process.
Goodwin and his team have been involved in some facet of Blockchain distributed digital ledgers since 2010. But it was only in the summer of 2017 that they realized that Blockchain could be the platform to further democratize the sourcing and procurement industry. They saw viable use cases for small, medium, and large manufacturers, as well as the procurement teams to which they sell:
With that, the SyncFab team began developing its Blockchain platform in earnest.
Three Tenets of SyncFab Blockchain: Accessibility, Usability, and Visibility
According to Goodwin, SyncFab looks to create better accessibility all around, especially for small, “mom and pop” machine shops and manufacturers, to get more responses to their bids. In order to facilitate this, Goodwin believes that a hybrid, public-private Blockchain model in which permission-less ledgers connect to permissioned ledgers will grant small manufacturing companies the true accessibility they need. It is also the key to unlocking the power of data-driven, smart manufacturing (what many industry analysts and media types refer to as Industry 4.0).
Contrary to popular belief, Blockchain may not be too advanced of a technology for procurement teams and manufacturers. If it’s anything like SyncFab’s existing platform, it won’t be, said Goodwin. For their existing product, SyncFab developers spent considerable time interviewing procurement practitioners and manufacturing workers. They found that the “mom and pops’” attention spans are greater than other manufacturers, probably because they are interested in any resource that will raise their market profile and increase their accessibility.
“It’s not an alien concept to them,” Goodwin said, because they’re used to using unique methods to find new customers and orders, like online job boards.
Goodwin noted that in procurement shops, users were already savvy enough with ERP systems and were using them to request quotes. As a result, he and his team felt confident enough that they could roll out a Blockchain-based trading platform to the buy and supplier side. And the addition of smart contracts ought to make using Blockchain even easier.
Adopting Blockchain distributed digital ledgers to drive end-to-end visibility into supply chains is a very popular use case, particularly as Blockchains become integrated with Industry 4.0 technologies, like connected devices, which can facilitate commodity and product track-and-trace. The ability to establish commodity provenance (point of origin), track it as it moves across the supply chain, and have Blockchain digital ledgers automatically record every change and transit event can do more than ensure product quality, quantity, and delivery. It can help CPOs and their teams monitor supply chains in real time, and help to ensure enterprise compliance to legal or regulatory mandates and adherence to enterprise CSR standards. And in the event of a product recall, Blockchain can help enterprises track and trace product lots down to the shipping container or pallet; it can help them isolate bad batches sooner and in a more circumspect manner, which can save enterprises time and from needless product disposal or returns.
For companies that have been operating in black or even gray areas, their time is coming to an end. “A lot of these major companies have grown comfortable [operating in the gray], and are used to the protection,” said Goodwin, adding that “some actually prefer the opacity of their supply chains.” But as more Blockchain developers go to market with these solutions, and as their adoption increases across industries, organizations may be compelled to adopt Blockchain – if not by government regulations, then by customer expectations that they gain greater visibility into their supply chains and push ethical, sustainable sourcing standards.
Using Blockchain-enabled Smart Contracts to Drive All Three
On SyncFab’s existing procurement platform, Goodwin notes that the team has already invested a significant amount of time “formatting the general needs and requirements for product program managers and general engineers.” Similarly for manufacturers, SyncFab has “cataloged the capabilities of different shops, their certifications, and the parameters that they usually work with.” As a result, SyncFab’s Blockchain will format smart contracts based on the parameters that are already in its database, which Goodwin states will speed up the matching process between buyers and suppliers.
When smart contracts go live on SyncFab’s Blockchain, they will record every step of the transaction as it occurs – “from when the order was submitted, what the original requirements were, and the turnover time, to the certifications that were requested and the technical requirements that go with it.” And as the platform crosses international borders, it will grant authorized users access to foreign documents in their original format and language to help users verify product authenticity, and enable trading partners to continue building trust among themselves.
Just Getting Started
According to Goodwin, Blockchain is currently in version 2.0, and it has the potential to lead procurement teams and manufacturers towards a grandeur notion of Industry 4.0, where smart, connected factories run autonomously, from soup to nuts. In the meantime, because Blockchain is an internet-based protocol with “built-in preventive structures,” trading partners can use it to share technical documentation and supplier certifications, like country-of-origin and fair-trade documents. As a result, Blockchain has serious potential to bolster the future of B2B commerce with its security, simplicity, and ubiquity, as well as its ability to bolster supply chain governance, risk management, and compliance.
Blockchain could also be a force multiplier for small procurement teams and “mom and pop” machine shops in their efforts to find each other in the vast sea of trading partners. “It’ll be an additional mobilization of limited resources and the collateralization of the data,” Goodwin said, “which is going to be required to multiply the application of the resources needed to get to where we need to be by the age of the connected factory.”
In the meantime, SyncFab and other Blockchain developers continue to work on version 3.0, and Goodwin concedes that there are “lots of interesting challenges presented.” Undeterred, SyncFab recently held a MFG token sale, and is integrating them into its existing platform. It plans to format buyer Blockchain smart contracts in the third quarter of 2018, followed by manufacturer smart contracts in the fourth quarter of 2018, and ultimately to integrate its Blockchain ledger into its existing platform in 2019.
As Goodwin concluded, there are “interesting times ahead, for sure.” Whether we’re talking about the technology or the business challenges they are looking to solve, we couldn’t agree more.
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