When we talk about ‘performance monitoring’, we are referring to measuring, analysing and managing a supplier’s ability to comply with, and preferably exceed their contractual obligations.
Generally, monitoring the performance of suppliers can easily be programmed with the help of a smart contract based on:
a) an aspect of supplier appraisal when the incumbent supplier is competing for the renewal of an existing contract
b) an aspect of the management of approved supplier lists
c) an integral part of the contract management function
To understand how smart contracts relate to supplier qualification, we need to look at what the concept of fungibility entails. If something is fungible it can easily be replaced by something that fulfils an identical function. You can exchange and interchange it with ease. Money is a good example of fungibility. You can use a different $10 note to repay someone who lent you $10 in the past and it doesn’t matter if you pay them back with a different ten-dollar note – any ten-dollar note will do.
What is fungibility and why it matters for supplier qualifications?
It’s important to understand the concept of fungibility because it plays a vital role in the way blockchains work.
Cryptocurrencies are the most prominent uses of blockchain technology, and they’re examples of fungible tokens. But you can also store non-fungible tokens on the blockchain. Much of the value in such non-fungible tokens derives from the ability to include rich metadata about an asset, such as historical ownership details that incontrovertibly show provenance.
This standard is now driving further innovation to create a framework of rules, libraries and conventions for digital certificates on the blockchain. This will make it easier for businesses to harness its tamper-proof and transparent qualities and create new kinds of distributed applications (dapps). And as the standard is on the Ethereum public blockchain, it’s easy for businesses to create their own experimental dapps and/or custom smart contracts to govern supplier qualification criteria.
So, what can companies accomplish with these new tools and standards?
Because non-fungible tokens are unique and store information rather than value, you can build proofs of identity or unique digital certificates on the blockchain, with the option to store sensitive data on-or off-chain. This has the potential to hold secure and tamperproof records of births, property deeds, academic and supplier qualifications and more, with no central authority needed to control or mediate access.
This creates an environment of continuous improvement which is ideal for a solid business in today’s growing economy.
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