Almost every organization, from healthcare to financial services, can gain several benefits from the digital ledger technology (or Blockchain). It not only maximizes efficiency and security of financial transactions, but also anything of value, including contracts, records, and other important business-sensitive information. Essentially, it empowers information exchange online with security, transparency, and immutability that results in creating operational efficiency. It enables applications to execute transactions and exchange information on a peer-to-peer basis, without requiring any centralized authority. While participants in the network can avail permissions to access and analyze information, they cannot alter or delete it once added. It establishes a permanent and public audit trail of information and transactions with immutability.
Blockchain technology, with its security-focused and peer-to-peer nature, offers several unique benefits to the procurement process.
No matter which industry it is, a procurement department deals with hordes of sensitive data that can cost a company millions upon falling into the wrong hands. While cloud storage provides a safer solution, it is not as efficient and secure as digital ledgers. Also, they are getting expensive as data continues to rule.
However, blockchain provides a more effective alternative to these solutions. On a stored on the blockchain ledger, records become tamper-proof. No one can edit or alter them. With secure cryptography or private blockchain solutions, critical information, contracts, and other documents or transactions of the procurement process eliminate any duplication or chances of fraud.
Either private or public, intrinsic end-to-end visibility of blockchain promotes fair and compliant practices. It prevents money laundering, fraud, and other illicit activities and detects way before they cause any damage to the business.
One of the primary reasons for blockchain adoption across diverse industries is it hugely reduces costs when applied appropriately. It boosts productivity and growth by shifting most of the functions on autopilot through smart contracts while ensuring data security. With no intermediaries’ dependence in operations and automation of repetitive actions with security, it does reduce costs. Besides, automated processes increase accuracy by minimizing the chances of human injected errors.
Applications of Blockchain in Procurement
Single Source of Truth
Blockchain enables a single, consistent source of information for all participants in the network. In industries struggling with inefficiencies around the storage, reconciliation, transfer, and transparency of data across multiple independent entities, this feature could be highly beneficial.
Immutability, Traceability, and Audiatbility
From contract execution to fulfillment across the supply chain, blockchain can create a chronological and immutable audit trail of all transactions. As a result, procurement gains a systemic view of the full supply chain involved in fulfilling the contractual obligations. Any issues are more easily resolved with a clear view of which party is responsible for which aspects of the supply chain activities and movement. Perhaps even more importantly, this insight into all transactions makes it easy for procurement to understand how well a vendor has met contractual obligations. In other words, it provides a mechanism for whether or not procurement should do business with a relatively unknown entity.
Improved Cost Assessment
The transparency facilitated by blockchain could reduce the information asymmetry and network disadvantages that some companies, especially smaller ones, currently face in supply chains. In turn, procurement could more astutely and confidently determine market rates and negotiate accordingly.
Minimized Inventory Challenges
In a blockchain, a company and manufacturer can set up their smart contracts to exchange information. Should inventory start running low, the company’s contract would automatically request more inventory from the manufacturing contract based on preset rules. Once the terms were validated, the blockchain could automatically send payment to the manufacturer. Automating both upstream and downstream supply chain activities in this way could save the company tremendous time and money.
So, are blockchain-based smart contracts right for your organization? They are if you handle a significant number of transactions involving many parties and use interrelated complex contracts. That said, even if you feel they’re not a fit for you now, every procurement group needs to prepare for blockchain-based contracts—because those that don’t use them will be at a disadvantage.
Bio:Oodles, a blockchain development company in India, provides innovative custom blockchain development services for various industries. We have a team of developers that is determined to deliver result-oriented development of blockchain applications and solutions, including smart contracts, cryptocurrency exchange development, and crypto-wallets.