How blockchain is revolutionising the procurement industry

Blockchain
Date Posted: 28/08/2018 Category:
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How blockchain is revolutionising the procurement industry

Date Posted: 28/08/2018 Category:

The radical new technology, Blockchain, is poised to transform procurement. It is already played a role in disrupting the finance industry through cryptocurrencies, but it has numerous innovative applications that can revolutionise procurement strategies and processes.

Blockchain basics

Blockchain is a distributed ledger in the digital realm. It facilitates transactions on a peer-to-peer basis without any centralised authority to govern it. As a secure, public and external record system it means that two parties coming to an arrangement can check, audit and update their deal at any time.

The distributed digital ledger makes a record of the transactions in a series of blocks, and there are multiple copies of the blockchain in numerous nodes, or computers. Each block connects to the one before and after it, updating the blockchain network as new actions are added.

While it is possible to access and add to the data, neither party can delete any information, meaning that every engagement between clients and suppliers have a permanent record, thus eliminating the possibility of any tampering. If a person tries to falsify data, they would have to alter the data across multiple copies simultaneously which is virtually impossible. This is what makes blockchain both secure and transparent, the perfect tool for procurement transactions.

Blockchain for procurement

While blockchain was primarily used for cryptocurrencies, it can be programmed to maintain records of financial transactions, and there are several opportunities for this to be applied in procurement.

Enhanced transparency: One of the main issues in procurement is transparency, especially when there are multiple stages and agents. Blockchain can help to record each step of the shipping process which cannot be altered in any way. If anything goes wrong during the shipping process, the blockchain records can be accessed to figure out where the mistake occurred.

This transparency encourages accountability throughout the supply chains and reduces the chances of criminal activities, like money laundering. All payments and transactions are available in the public domain for the parties to check, making it tough to hide suspicious transactions.

Smart contracts: A smart contract refers to software code that is powered by blockchain and can be programmed to find, negotiate and close contracts across the entire supply chain without requiring the intervention of a third party.

These smart contracts will be able to help identify parties when they fulfil the terms of the contract and automatically deliver the results. It can also be programmed to deliver a penalty if the terms of the contract are not met. This will do away the need to manually check terms and conditions, leading to cost reduction and working to boost accountability while protecting all stakeholders from fraud. It will also help to maintain the integrity of the supply chain to ensure that all deals are fairly met.

Blockchain has numerous applications in procurement, and the transparency that it will bring is set to ensure greater fairness and accountability at every stage.

Ed Cross

Ed founded Odesma in 2014 with the explicit intent of creating a new kind of procurement consultancy founded entirely on cloud principles. Deploying best-of-breed subject matter experts alongside the best on demand technology to deliver rapid and effective change for customers.

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