Description
What is the Blockchain? Blockchain (also known as Distributed Ledger Technology, ‘DLT’) is a tamper-proof database that is shared between multiple untrusted parties.
How does it work? A copy of the database (i.e. ledger) is maintained by all parties (i.e. nodes) and all amendments to the database are confirmed by each party (i.e. a consensus is reached). Furthermore, certain pre-agreed rules can be put in place about the types of changes that can be made to the database; these are known as smart contracts.
Blockchain vs. Traditional Databases. Traditionally, a trusted third party would hold a copy of the database and provide easy read access using APIs. However, any changes to the database would have to be authorized and confirmed by this third party.
Using Blockchain, multiple untrusted parties can share a database and coordinate write access using pre-agreed rules. Each party holds a copy of the ledger meaning that no trust is needed between the parties.
Business Value Proposition
The value of Blockchain is allowing multiple parties to work on a shared database without the need for trust or intermediaries. Those intermediaries can range from organizations (e.g. banks, aggregators etc.) to organizations (e.g. Document managers in Construction projects)
Example hypothetical Use Cases in the Construction Industry:
Securing BIM - Using the Blockchain to enhance BIM in terms of security, liability and integrity.
Producing a BIM model requires input from many parties. Stakeholders currently worry about sharing their models for the following reasons:
- Who owns an entity’s model?
- Who can change an entity’s model? What changes were made?
- Who is liable if someone else makes changes to my model? Can I prove it?
- How can an entity protect the IP in a model?
- Who can access the model?
All of these questions are at the heart of the largest problem when it comes to information exchange in the construction industry: a lack of trust. The Blockchain can be used to secure BIM models and overcome these challenges by providing the following:
- A proof of ownership and/or contribution mechanism - Each firm can prover ownership over a model or individual components within it.
- A tamper-proof audit trail - Model files can be transferred with a digital time stamp in such a way that parties can demonstrate that no change has been made, thereby increasing the level of transparency.
Supply Chain management
Using the Blockchain to onboard and manage participants (clients, consultants, contractors, suppliers, facility managers etc.) relationships and review the quality of the services they provide across the entire chain.
During the onboarding process, each participant can complete a pre-qualification questionnaire and enter relevant files (e.g. company registration certificate) that can be accessed by all parties. This would significantly reduce the time, cost and risk associated with engaging new parties in the supply chain.
This would allow participants to identify, verify and endorse any stakeholder it may wish to conduct or continue to do business with. All stakeholders can benefit from:
- Simplified participant onboarding
- Share information Repository (relationship history, associated certificates, and previous performance)
- Reporting capabilities
Smart contracts could be created to store and manage metadata and events associated with supplier on boarding and relationship maintenance such as:
- Supply Chain Details (i.e. Services provided, Product components)
- Quality certifications approved by official bodies (i.e. approving body, date, expiry data, date of last testing)
- Endorsements & Feedback given by other participants (i.e. contractor, developer, supplier based on their own experience and review of services rendered)
Procure-to-Pay
Procure-to-Pay would facilitate the full procurement process between a buyer and a seller. It allows for the identification and authentication of a seller, automatically sending requests for quotation, negotiation, budgeting, purchase orders, invoicing, and payment settlement.
This would apply to a range of things that can be procured (equipment, material, subcontract, etc.) depending on the relationship, much like the above. To demonstrate how the platform would work let us take the procurement of a window as an example:
- The buyer would create a material request (for a window in this instance) and attach all relevant documents thereby initiating a smart contract
- Request is broadcasted across the network & all (window) suppliers receive a notification that the buyer X is looking for a window
- Interested suppliers responds with an offer
- Platform automatically populates a comparison sheet for review by buyer
- Smart contact negotiates with suppliers for best term and conditions
- Buyer choses a supplier and purchase order is issued (electronically signed via Blockchain)
- (Assuming late material) - Supplier is automatically reminded of the need to dispatch the material. Material location is traceable at all times (assuming RFID).
- Seller dispatches material (buyer notified on platform)
- Once material is delivered, invoice is automatically created and payment is automatically made, thereby closing the smart contract.
Compare this to Status Quo:
- Buyer searches for relevant suppliers
- Buyer emails every single supplier separately
- Sellers respond with offers
- Buyer enters responses into an ERP system or spreadsheet (mostly spreadsheet)
- Buyer creates a comparison sheet
- Buyer sends comparison sheet manually to manager
- Manager selects and sends to Buyer
- Buyer sends a purchase order
- (Assuming late material) - Buyer checks an excel sheet which shows that material is late in delivery.
- (Assuming late material) - Buyer sends an email for expediting.
- Seller dispatches material and notifies buyer by email
- Once material is delivered, seller sends invoice
- Buyer makes payment 28 days later
Other Industries
Shipping
News and References
Topic SME
Mohammad Shana’a (mo@morta.io)
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