The term blockchain is often associated with words such as financial technology and cryptocurrencies. However, most people do not realize that this is just the tip of the iceberg and that blockchain has more to offer than just bitcoin transactions! One of its game-changing capabilities is the use of blockchain in procurement, which can dramatically increase a company’s strategic planning and operational performance.
So, what is Blockchain?
As the name suggests, the concept can be put up as a - chain of blocks, which are considered blocks of data. Further, this data is decentralized as it holds within itself immutable records. That means a massive amount of information is being held in large clusters and distributed among them. This part is called the chain. Every time a transaction takes place or a product is altered, a new block is added to this chain. This entire process takes place cryptographically, and no participants in the chain can get access to it.
From payment transactions and audits to stock levels and asset tracking, blockchain technology in the supply chain provides a new degree of trust and accountability while allowing the procure-to-pay process to realize significant operational perks. Hence, blockchain is witnessed as a revolutionary technology and is predicted to become a major connecting thread for B2B transactions in the future.
What makes Blockchain so important?
Blockchain is frequently referred to as a public ledger or a database that records all transactions. Although factually correct, this does not help build the case for blockchain or make its potential tangible.
What makes blockchain so beneficial is the method by which files are added to the database:
- Any record is stored and verified by a computer network, making the blockchain more reliable than a single instance (like in most conventional databases)
- Every purchase is linked to the one before it, ensuring complete monitoring and avoiding data manipulation
- It is decentralized (peer-to-peer), with no power deciding rules or with a vested interest in manipulating data in some way
Because of the above-mentioned points, the history of blockchain has always remained immutable, where the data is observed to be shared between parties and cannot be altered by anyone. __Furthermore, because you can trust the data, you can build on top of it without the risks associated with less secure database systems. It paves the way to plenty of new applications for streamlining business functions. __
What is Procurement?
The word procurement generally refers to the literal meaning of making a purchase and includes the final act of the procurement process, which happens to be a vital part of any company that intends to make its final purchasing decision.
The entire working procedure of a procurement process requires a portion of a company’s resources to manage a budget specified by project managers. This budget includes the amount to be spent on procuring services for an organization. Further, when the organization virtually provides a set of tools to support the acquisition of those services, it is known as procurement software. This platform enables its employees to virtually request a purchase from anywhere in the world. This procurement often involves issuing purchase orders as a form of structure and control.
Blockchain in Procurement
The mid-nineteenth-century invention of the internet had a seismic impact on communication technology. Since then, nothing has been as disruptive as blockchain in influencing procurement and shaping industrial presence.
If your interest has been intrigued, here are a few more things to tell you about blockchain and its impact on procurement management at a high level without delving into its anatomical details. The concepts mentioned will help you comprehend the definition easily. It will also provide you with the clarity to see how leveraging blockchain will be a significant discovery in meeting your approach to planning.
Blockchain has always been considered a secure method to track product transactions from acquisition to payment. Every time a product reaches finished goods by completing a transaction in the chain, a new block of data is built with encrypted information to prevent it from any form of tampering. The main advantage of this process is zero involvement of a third party, hence simplifying the entire procedure of the chain.
Impact of Blockchain on Procurement Industry
Blockchain is a great asset to the procurement industry, and here are three key advantages:
The blockchain is a secure method that does not require trust, and the procurement industry can use it to conduct transactions with ease. Blockchain technology relies on cryptography to confirm that the digital identities of all concerned parties are accurately established. Procurement functions that use blockchain can be confident that their transfers will never expire and that records will accumulate indefinitely for easy reference.
Borderless & Quick
Blockchain transactions are borderless, broadening the reach of one’s business. Paper-based invoicing, which is tiresome and time-consuming, has become largely redundant due to the digital ledgers distributed by blockchain across a permitted network. As the blockchain data is verified by interested parties, it creates an effortless supply chain point, which is one of the most commendable features of the procurement industry today.
Blockchain provides end-to-end accessibility for any classification in spend analysis. And because the records are unbreakable and not susceptible to data manipulation, all forms of fraud are prevented. Indeed, if there is one human benefit that blockchain as a technology ensures in procurement, it is its ability to prevent child labour, slave labour, money laundering, and so on. So, if you work in the procurement industry, you can use blockchain to create an audit trail to protect your company from fraud.