The Potential of Blockchain to Transform Procurement
By Sanjay Puri, CEO, C1 India
In our last blog, we learned about Machine Learning and its integration with the procurement process. To further explore the upcoming advancements in procurement, our today’s topic is Blockchain. Let’s begin with understanding what is blockchain before we dive into how it can revolutionize procurement.
In layman's language, blockchain is a time-stamped digital ledger(s)/database distributed across a network of computers but isn’t owned by any single entity. The decentralized data (i.e information sets or blocks of data) is interconnected and secured in a form of series/chain via cryptography. Participants connected to the blockchain network can inspect, audit, and update the record but can not delete or tamper with the data as multiple copies are stored across multiple computers. In order to falsify the database, every stored copy (which no single user is aware of) would require manipulation at the same time. This makes it a strenuous task to penetrate and it also protects the database from external tampering, therefore, blockchain improves security and transparency.
Future game-changer technology in procurement has to be blockchain as it has the potential to transform and incredibly enhance the visibility and security of the whole process. Every industry will reap its benefit but certain data-intensive industries such as healthcare, finance, retail, energy, oil, etc. will likely have an undisputed positive effect. The technology is still considered to be at a nascent stage but the future seems brighter than ever. Let’s look at some supreme benefits blockchain will bring to the procurement process and they are as followed:
- Increased reliability and trust: Blockchain improves transparency and visibility as altering, corrupting, and deleting databases (which includes historical transactions, agreement deals, partnered suppliers/buyers, and other important documents) is extremely difficult and the data can we viewed by involved parties as it is supposed to be. With the help of blockchain, trust becomes embedded and unquestionable, the buyer and supplier can act, collaborate, and build relationships entirely based on analyzing databases. It will also help in savings from hiring personnel for due diligence, agents, or bankers to assist in mitigating procurement-related risks.
- Improved automation of systems: Traditional methods of record-keeping is deemed to be daunting and time-consuming. Blockchain provides you even with the minute details to tally or analyze databases. It further provides ease in access and creating the database with top-notch data security. Blockchain holds the capabilities to improve payment processing drastically.
- Higher security: All the data-driven and data-intensive industries such as healthcare, finance, retail, energy, oil, etc. incorporate extremely sensitive data, which demands the highest level of data security. This is where the blockchain steps in and raises the bar in terms of cyber-security. The above-mentioned industries deal heavily in procurement hence, blockchain can help massively in minimizing cyber-security related risks through the application of cryptographic principles.
- Smart contracts: A set of code executed to identify, examine, negotiate, and deliver contract agreements based on pre-determined conditions without the need of involving any third-party. The defined rules enforce involved parties to meet their obligations and track the performance during the contract execution. The added benefit being, they are tamper-proof and blockchain helps in maintaining the utmost security, transparency, and traceability throughout the deal.
- Other features: Blockchain will enhance end-to-end visibility, productivity, accuracy through automated processes, and increase efficiency. It will also improve purchase order management and will introduce real-time settlement.
Blockchain will cater to all the procurement needs of an enterprise aiming to increase its operational efficiency, productivity, and minimizing costs wherever possible. The integration of blockchain will revolutionize procurement and would be deemed as one of the biggest breakthroughs in terms of technological developments in procurement history. The challenges and complexities of blockchain are far greater than it seems hence the scope is humongous and opportunities are in abundance.