Blockchain is a complex technology that facilitates aggregation of records as a ledger for processes involving multiple parties. It is internet and user-driven database that automatically adds a new record as a digital fingerprint for every new transaction and updates occurring in the supply chain. The use of blockchain in procurement can help boost the efficiency and security of transactional and logistical data that is usually exchanged between trading partners in a B2B or B2C environment.
With such benefits, the role of blockchain in procurement cannot be downplayed, especially for companies trying to move forward. It establishes digital trust among the partners by linking every transaction and creating a trustworthy string of information. As there is no single authority owning the data, the chances of data manipulation reduces to almost zero. However, before you read more about the impact and benefits of blockchain in procurement, it is crucial to know what blockchain in procurement exactly means.
What is blockchain in procurement?
The security-focused and peer-to-peer nature of blockchain technology represents tremendous value for procurement. But the two most important features of blockchain that have massive implications for procurement, especially to supply chains and source-to-pay processes, are trust and transparency. The decentralized system allows stakeholders to take part in the transaction and mitigate instances of frauds. Also, the use of blockchain in procurement helps companies to achieve significant savings on bulk transactions and data recording methods. Moreover, linking of transactions inhibits alteration of data and increases transparency.
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Benefits of blockchain in procurement
Better visibility and savings
Often, companies negotiate procurement discounts based on the number of purchases they drive. Sometimes, they even ask other people on their behalf to do the purchasing, but this makes it difficult for companies to track the volume they drive across.
The use of blockchain in procurement helps companies to incorporate data from their relevant partners regardless of the person who directed the purchase activity. Without blockchain, companies would need to hire human resources to audit their orders. By implementing blockchain in procurement, companies can do this work without any added staff; thus, reducing the extra price-verification process.
Getting paid after completing a task or delivering a product in the real world is a sluggish process for companies. Blockchain and smart contracts can put an end to this process by integrating delivery and payment in digital contracts that flows across enterprises. Furthermore, integrating with logistics partners and banks immediately initiates automatic digital invoicing and payments through the banking system; thus, enhancing the customer-supplier relationship. Blockchain in procurement radically simplifies finance operations and improves the bottom line.
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Surviving without intermediaries
Employing blockchain in procurement facilitates a single source of information for all the partners in the network. It allows easy sharing of key information without appointing any intermediary. Blockchain also synchronizes all data and transactions across the network and lets participants verify the work and calculations of others. This reduces the probability of any discrepancy in the data and makes the system secure and reliable.
Blockchain in procurement creates a distributed system of data and process that companies can trust. It makes automation possible without exposing to typical risks arising due to lack of data, interferences by intermediaries and unreliable execution. Blockchain provides an ideal infrastructure for the execution of machine-based activities that were earlier not possible with the Internet of Things (IoT). Moreover, blockchain applications such as supply chain management will allow activities such as inventory tracking, ordering, requisitioning and replenishing.
The experts at SpendEdge, can help you understand the relevance of blockchain for the future of your business and suggest appropriate measures to leverage all such emerging technologies. They can also help youo analyze the impact of implementing blockchain in procurement and the benefits it would offer to your supply chain.