Procurement is heavy work

So when something new appears with the promise of facilitating your role as a procurement professional, it's normal to have questions.

At this point, we are all familiar with AI and its applications for procurement operations, but have you heard about blockchain?

What's it?

What benefits can it bring to your company?

That and more is going to be covered right away.

‍

What's Blockchain?

Okay, the critical question 

Blockchain can be defined as a technology that allows data to be recorded in a secure and transparent way 

More often than not, it's associated with cryptocurrency, but with its ability to record and communicate transactions, it makes sense to see it as yet another useful digital tool for procurement.

‍

Key things to know

• Since Bitcoin launched in 2009, blockchain has gone beyond working with cryptocurrencies.
• Nowadays, it powers DeFi, NFTs, and smart contracts.
• Blockchain records transactions securely so they cannot be manipulated.
• A third-party verification system confirms the transaction. 
• Every participant or node in the network gets an updated version of the ledger in real-time.
• Once a transaction is added, no one can alter it. 
• Thus, it makes fraud almost impossible.

Blockchain in Procurement and Supply Chain

Let's move to the good part What can you do with blockchain in procurement?Well, to starters you can strengthen the security of your transactions, remember that transparency and efficiency are key aspects of the technology that makes blockchain work. Besides that…

• You'll be able to track products from their source to delivery.
• Verify supplier's credentials and contract terms automatically.
• Reduce manual paperwork.
• Automate payments and contract execution.

Sounds great so far? Good, we can see it in more detail. 

Benefits of Blockchain in Procurement

Transparency

See? 

Transparency is really important here 

Blockchain’s decentralized nature builds an environment where all participants have access to the same data in real time. So, for example, if you want to know if there's any bottleneck across your supply chain or monitor supplier performance you can do it quickly and safely. 

Adopting this sort of approach will definitely foster trust among your stakeholders by providing a single source of truth that is visible and verifiable.

‍

Contract management but smart

Contracts are absolutely fundamental for procurement to work, sometimes however important factors can be overlooked. 

Well, not anymore. 

Smart contracts are self-executing contracts with terms directly written into code. In procurement, smart contracts can manage payments, enforce compliance, and handle disputes efficiently, saving you time and reducing administrative costs.

‍

Saves money

Yes,  you read that right.

Implementing blockchain can lead to significant cost savings. It's just the natural consequence of automating processes and reducing the need for manual verification. Additionally, blockchain minimizes fraud, errors, and delays, which can result in serious financial losses for your company. As you can imagine if you are more efficient in the way you handle your transactions and oversee your supply chain, you'll see an overall cost reduction.

‍

Accountability

‍

With blockchain, every transaction is recorded and immutable. This feature increases accountability as all actions are traceable to their source. You can track the journey of products, verify ethical sourcing practices, and ensure compliance with industry standards. Following these practices can do wonders for quality control and risk management.

‍

How to Successfully Integrate Blockchain into Procurement Processes

Assess your needs

First things first, you'll have to determine which areas in your procurement process  can benefit from blockchain.

What information do you need to save? What point of your supply chain needs to be supervised? 

Choose the right blockchain service.

You can find several options in the market like Ethereum or EOS. Regardless of your choice, at the end of the day you'll want to stick with a solution that offers you 

scalability, security, and functionality.

Develop a pilot project

This is how you prevent dealing with problems later on.  Start with a small-scale implementation to test the technology and gather insights from your team. 

Integrate with existing systems.

And speaking of preventing issues, one of the most common problems you can find when working with new technology is discovering that it doesn't work with the rest of your company's systems.

Ensure that blockchain solutions work seamlessly with your current procurement software.

Scale up

So you tested blockchain and found that everything works fine?

Great 

Based on the pilot’s success, gradually expand blockchain integration across your procurement processes.

‍

Best Practices for Implementation.

Build partnerships with your providers

Collaborating with technology providers is crucial for successful blockchain adoption. Choose partners with expertise in blockchain development and a deep understanding of procurement challenges. Strong partnerships can help you navigate technical complexities and implement customized solutions.

Training your team

Training is essential to ensure your team is ready for blockchain integration. Provide educational resources, workshops, and hands-on training sessions to familiarize employees with the technology. A well-informed team can maximize the benefits of blockchain and drive its successful adoption.

‍

Most Common Challenges of Blockchain Adoption.

It costs money 

Well, yes 

Blockchain implementation might seem a bit expensive at first glance, you won't only have to pay for the system but also hire experts in the area. However, remember that you'll still enjoy its benefits even in the long term.

Scalability 

Especially if you are a large business with a complex supply chain you could face some challenges if the blockchain solution you choose isn't designed to handle a higher volume of transactions.

Data privacy 

While blockchain is secure, data privacy must be managed carefully. Encrypting sensitive data and setting clear access controls can help protect confidential procurement information.

‍

The Future of Procurement: Trends Influenced by Blockchain. 

Blockchain and Sustainability: Blockchain supports responsible sourcing by providing verifiable tracking of materials. This way, you can be sure that you are meeting your sustainability standards.

Innovative Tools: New blockchain-based procurement tools are emerging, offering features like automated audits, predictive analytics, and AI-driven decision-making.

The Role of AI and IoT: Combining blockchain with artificial intelligence (AI) and the Internet of Things (IoT) creates a smarter, more efficient supply chain. AI can analyze blockchain data for insights, while IoT devices can track shipments in real-time.

‍