Blockchain can completely overhaul the processes of supplier onboarding and compliance.
Companies that buy or sell goods and services know the task of validating and onboarding new suppliers is challenging. In many companies, supplier onboarding is fraught with administrative burden and can take upwards of 30 days, costing thousands of dollars.
That’s why IBM and Chainyard, a boutique technology firm specializing in blockchain, partnered to develop a blockchain solution known as Trust Your Supplier to streamline onboarding with digital supplier identities.
The Pain Point: Onboarding And Managing The Lifecycle Of Supplier Information
Supplier onboarding, the process of collecting the information and data required to set up an organization as an approved supplier, is often depicted as a love-hate relationship: It’s essential to do, but no one likes to do it.
Today’s onboarding processes are highly manual and drive significant administrative burdens for companies and suppliers. However, the work is foundational to ensure new suppliers comply with relevant laws, regulations and corporate standards.
An Institute for Supply Management article states, “Even under ideal business conditions, onboarding a new supplier can become a tangled web of time-consuming risk assessments involving several organizational functions. The process can take up to six months at many large companies.”
Supplier data quality is crucial in evaluating a supplier during onboarding and poses another expensive challenge for enterprises. IBM estimates the U.S. economy experiences staggering annual losses of over $3.1 trillion due to poor data.
Jerry Cuomo, IBM Fellow and CTO for IBM Blockchain, noted the transformative power of blockchain in streamlining business collaborations. He stated, “With blockchain, businesses can achieve an unprecedented level of trust and efficiency. A shared ledger becomes a unified source of truth, eliminating repetitive tasks and resolving long-standing supply chain challenges.”
Sai Nidamarty, CEO of Chainyard, began brainstorming solutions with IBM. “Back in 2018, we started brainstorming solutions. Supplier information was mainly managed using legacy tools like spreadsheets. It was tedious and haphazard.”
Certainly, there had to be a better way.
That “better way” was a blockchain solution now known as Trust Your Supplier (TYS), the brainchild of Nidamarty and progressive business leaders at IBM such as Cuomo and Bob Murphy, IBM’s recently retired chief procurement officer.
I had an opportunity to sit down with Chainyard’s Nidamarty and IBM’s Cuomo to unpack how the collaboration between Chainyard and IBM evolved from a concept to the fully operational Trust Your Supplier blockchain platform it is today.
Using Blockchain To Reimagine Supplier Onboarding And Compliance
Chainyard’s Nidamarty reflected on the collaborative discussions, stating, “Theoretically, we envisioned a blockchain solution that could verify various aspects of a supplier’s information and solve for streamlining for both the buyer and the supplier. But the challenge was how to do it.”
An idea emerged: What if suppliers had a single digital identity, a “corporate wallet” or “digital passport” of sorts, to share with their customers that they could use over and over again without having to enter the data every time for a new customer or when an existing client was doing compliance checks? It could drive enormous savings and other benefits.
An essential part of the vision was to create a true blockchain network, not just a private blockchain that would serve only one large enterprise and its suppliers, but a worldwide network of buyers and suppliers sharing trusted and standardized data.
Nidamarty explained, “A supplier could show trusted credentials, a ‘proxy’ or ‘sovereign identity’ which is cryptographically signed, and immediately engage with entities inside and outside the blockchain consortium without risking any information.”
As the companies continued to hash through the art of the possible, Cuomo began to feel more optimistic about the art of the possible with a blockchain solution. “It was clear the time and administrative strain of supplier onboarding were being felt by all, and blockchain might just be the solution the industry needs.”
The idea was game-changing, but how do you pull it off?
As the idea evolved, Nidamarty and the IBM team became increasingly excited about the potential. “Once the lightbulb went off, we got started on a proof of concept. The result was a formal collaboration known as TYS.”
From Idea To Innovation
Chainyard began collaborating with IBM to bring TYS to life in 2018. The partnership quickly moved from idea to innovation, creating a working prototype and establishing a patent, which they both share.
The TYS collaboration evolved into an unparalleled achievement, creating the first (and currently the only) blockchain-based, decentralized platform designed to manage supplier information. The TYS platform is a permissioned blockchain, meaning it leverages privacy and security without limiting the supplier’s ability to share information that’s in their interest to share.
A key feature of the platform is that suppliers are enabled to manage their data in a single, secure location. TYS then provides a mechanism for suppliers to selectively share information with other large enterprises whenever and wherever they choose. This simplifies onboarding and provides ongoing validation of supplier information throughout the supplier’s lifecycle.
Nidamarty explained the concept in layperson’s terms:
“The TYS blockchain platform enables buyers and their suppliers to opt into the network. Suppliers create their digital identity, input their information once and then share it with all their customers simultaneously. But the great thing is that as other buyers opt into the platform, they simply use the supplier’s digital identity that has already been created.”
The TYS team went on a mission to recruit large companies to opt into the TYS platform. Soon, other large enterprises became interested and joined TYS, enabling the network effect and driving greater value to its participants.
On August 5, 2019, the TYS network was formally launched. Today the network continues to expand with companies like Lenovo, GSK, Nokia, BT, Thermo Fisher and Pearson opting into the network.
The Benefits Are Real For Both The Supplier And Their Customers
The Trust Your Supplier collaboration illustrates the power of what can happen when big companies partner with smaller entrepreneurial firms. The TYS platform is delivering real benefits with average onboarding times for companies on the platform reaching less than a business week – an impressive 67% reduction.
Efficiencies equate to hard-dollar savings for purchasing organizations. Nidamarty confirmed purchasing organizations that have used TYS have reported cost savings of nearly $500 per supplier. For an enterprise with tens of thousands of suppliers, this can result in savings of eight figures in the overall management of their supplier base.
But purchasing companies are not the only ones winning by being on the TYS blockchain network. Once suppliers are on the network, they can be onboarded with additional companies almost instantly.
Quicker supplier onboarding means not having to wait to start work after a deal is sold. And because suppliers manage and control their data only on the network, it eliminates the administrative burden of managing the same or similar data across multiple customers.
Alan Amling, an Assistant Professor of Practice at the University of Tennessee, has been tracking the development of blockchain solutions in the supply chain sector for almost a decade and sees TYS as a success story.
Said Amling, “All too often, organizations get excited about new technologies like blockchain and apply them to challenges better solved by existing technologies. IBM and Chainyard started with a perennial challenge faced by most businesses and applied the unique properties of blockchain to enable a breakthrough solution.”
Amling believes the success of TYS is due to the unique collaboration between IBM and Chainyard. “When you step back and think about it, Chainyard and IBM were able to do something together that no one before had been able to do.”
The Future Of Digital Identity Is Rapidly Approaching
Groundbreaking efforts of companies like TYS signal the dawn of a new era in data ownership. As this revolutionary innovation unfolds, suppliers will hold unprecedented control over their data, leading to enhanced regulatory compliance, security and data quality. The journey to this data-centric future has begun, and its potential impact is nothing short of transformative.