Blockchain In Procurement

24 Apr, 2020

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Blockchain In Procurement

Blockchain In Procurement

Whenever the word blockchain comes up, most people think of financial technology and cryptocurrencies. That's only the tip of this revolutionary iceberg, which is capable of much more than just bitcoin transactions.

Whenever the word blockchain comes up, most people think of financial technology and cryptocurrencies. That's only the tip of this revolutionary iceberg, which is capable of much more than just bitcoin transactions. One of its potential ground-breaking functions is to use blockchain in procurement, which could significantly improve a company's strategic planning and operational performance.

What Is Blockchain?

Firstly, yes, it's a chain of blocks. In this instance, a block is a block of data. This data is a time-stamped ledger entry containing immutable records, but it's decentralised. That means that the information is held on a cluster of computers and distributed amongst them. This is the chain. Every time something happens to a product or a transaction takes place, a new block is added to the chain. The information is secured cryptographically, and each participant has access to it, but there is no single central controller. It is a heavily encrypted, distributed ledger.

Blockchain In Procurement

As far as procurement is concerned, blockchain is a secure method for tracking a product or transaction from source to acquisition and payment. A new block of data is built for each transaction down the supply chain, or during the process of turning a component product into finished goods. Since the information is encrypted, the procedures are immune to tampering. Also, as there is no third party controlling the process, blockchain enables B2B or business-to-business transactions, which simplifies the whole supply chain.

Many innovations in procurement processes and supply chain management could be instituted using blockchain technology. Some of the applications and potential benefits of the distributed ledger system may include the following.


Blockchain in procurement could benefit substantially from using smart contracts. These tamper-proof agreements can be concluded between two or more parties, and can execute themselves automatically when pre-set terms and conditions are met. Smart contracts are capable of self-verification, checking the performance of their own conditions and ensuring the terms of the given contracts are carried out. They can also automatically release payment to the relevant party or parties when the contract is completed.

Smart contracts can cover an end-to-end transaction between multiple parties throughout the whole supply chain. The value and terms of the entire transaction are fully integrated and visible to all parties, with each stage of the process being recorded on the ledger when its conditions are executed.


Blockchain technology can enable purchasers to ensure the authenticity of goods at source, and to track their passage throughout the supply chain process. Suppliers will have to establish verifiable audit trails of all goods, which can also be tracked from source to delivery. The transparency of distributed ledger technology means that such critical credentials as authorisations, certificates and qualifications of status cannot be forged or otherwise compromised.


This transparency also helps to build trust and develop good business relationships. Due diligence is necessary for the mitigation of risk between unknown parties, but some companies are reluctant to put in the necessary time and effort for it. Blockchain technology offers open access to the ledger for all participating parties, making due diligence a much faster and simpler process. The quality of goods and services supplied can be visibly rated, together with the performance of the supplier.


Blockchain could be extremely useful in enhancing purchase order management, with the transactions fully visible to both sides rather than as files of paperwork for each participant. Placing, validating and approving orders is still a manual process in many companies, as well as invoice and payment processing and multi-way matching. The whole request-to-receipt procedure could be radically streamlined, from a multi-step operation documenting every individual piece of information, to a streamlined blockchain ledger.


Using blockchain smart contracts and purchase orders, transaction conditions could be set that would automatically trigger the agreed settlement monies when the process is complete. All confidential information and payments are secured by the encrypted technology on the distributed ledger, which is cheaper and more secure than cloud storage.

Blockchain has a great many benefits and opportunities for procurement professionals. From audits and payments to tracking assets and inventory, blockchain technology in procurement could significantly enhance transparency and trust. It may be integrated into current procure-to-pay processes, to provide security and a greater degree of efficiency. Blockchain in procurement has the potential to improve both business relationships and operational performance, and make procurement processes far more robust.

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We formed Rowse in 2004, and have enjoyed many years of rewarding engagement with our customers. Our aim is always to supply quality products and a quality service, at the most competitive market prices. We currently work with clients in the domestic, industrial and military sectors, with a product ...

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