I’ve been delving into blockchain’s capabilities for quite some time, and talking with clients across many industries. I wanted to share the knowledge I’ve acquired as well as how IBM is advancing blockchain technology to help clients digitally reinvent their back-office finance processes. The challenge lies in concisely expressing the intricacies of blockchain, but I’ll do my best to articulate them in this post.
Why is digital reinvention so important, and how can blockchain facilitate it? In short, a digitally disruptive environment is leaving organizations to struggle with high operations costs, nonstandard processes and non-value-add activities, suboptimal working capital performance and lack of insight into business processes and performance.
Blockchain to the rescue
Blockchain’s inherent architecture is what gives it a key role in finance-process reinvention. As an immutable shared ledger technology that supports a new generation of transaction applications and streamlined processes, it establishes accountability and transparency across business networks. How?
Its peer-to-peer, consensus-based distributed ledger architecture makes it easier to create cost-efficient business networks where anything of value can be tracked and traded—without requiring a central point of control.
Blockchain helps enable smart contracts, which are critical to operating a digital business and supporting security-rich, decentralized business processes automation across boundaries.
Its permission-based structure helps further ensure that its transactions are security-rich, authenticated and verifiable.
Target use cases for finance blockchain implementations include accounts or invoice payable in procure to pay (P2P), dispute and order management, and trade promotions and cash apps in order-to-cash (O2C), as well as fixed-assets accounting and intercompany reconciliation in record to report (R2R).
Managing trade promotions comes with many challenges. Consumer package goods organizations often spend quite a bit of money on them, but may still end up with an insufficient return on investment (ROI). In addition, current trade promotion management (TPM) is often a high-friction process that can potentially be fraught with errors.
Based on what I have seen, one of the central contributors to these problems is manual processes, which often manifest as:
Lack of a single version of the “truth” due to siloed multiple-party ledger reporting
Trade promotion data that are fragmented in various subsystems and ledgers, as well as in other unstructured forms, which can make reconciliation laborious and potentially increases cycle times — I have seen them increase up to 90 days longer
Based on my experience with some clients, I estimate that approximately 20 percent of trade promotions aren’t approved in the system record before the event starts, which can cause about 30 percent of time available to be spent on manual follow ups
External party point-of-sale (POS) data providers also often gather data through time-intensive, spreadsheet-based manual processes
Promotion claim validations are often extremely manual, which has the potential to delay resolutions and raise costs
A new platform to help increase trade promotion efficiency and profitability
Remember that blockchain enables a single source of truth and end-to-end transparency, thus redefining benchmarks for cost and processing time. In my estimation, using a blockchain solution for trade promotions can help enhance margins by significantly improving productivity, enhancing controls, reducing write-offs and providing better insights on trade promotion spend effectiveness.
IBM has developed an innovative, three-component trade promotion management platform that can systematically address issues in the trade promotion process:
A trade promotion contract management and reconciliation module to help reconcile TPM contract versions between suppliers and retailers
A third-party data consolidation component that merges input POS and advertisement providers
A proof-of-performance solution that enables automatic reconciliation of claims against contracts and proof of performance, potentially bringing about significantly reduced manual labor
For many clients, I believe this solution can help optimize trade-promotion spend ROI in several ways:
Improve productivity across all organizations through a better and more timely source of data
Reduce claim cycle times, sometimes from 45 days to less than 10 days for claims on blockchain
Get started with blockchain
Ready to use blockchain to streamline finance processes, reduce operational costs and drive improvements in working capital?
Get educated on blockchain and think about where it can have the biggest impact on business process transformation (BPT).
Evaluate realistic business case opportunity areas for a pilot.
Start building blockchain platforms — with a proof-of-concept or pilot, you can hit pay dirt, integrating and scaling your solution within your business ecosystem.
Talk to credentialed, experienced blockchain trailblazers who can provide the collaboration, resources and expertise you need to succeed.
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