In the procurement end of a business, trust always stands as an essential component. No transaction can be completed if you are uncertain that you will receive the product as promised. Vice versa, no seller can release product without knowing payment is imminent. In a sense, it becomes a question of whether the buyer pays first or the seller delivers first.
When businesses first began to boom with trade they depended on reputation. Credibility was established based on track records. Where no track record could be established, deposits or upfront payments were required. Contracts and other paper-intensive instruments were needed when business partners felt uncomfortable trading on a “handshake deal.”
Flash forward to today, the digital era means that trading occurs between businesses across the country and across the world. Handshake deals have already become a relic of bygones. With modern global business, paper-intensive procurement and purchasing through intermediaries is also fast becoming obsolete. It can be difficult to enforce contracts overseas, and intermediaries, if available, create an extra step and an extra expense. What if you could make purchases anywhere in the world without fear of losing your money by just clicking a mouse? Blockchain technology is already making that happen.
As Bertrand Maltaverne, a procurement digitalist, explains in a Procurement Tidbits article, blockchains are more than a digital ledger. Unlike the digital ledgers that existed before blockchain, blockchains create a record of transactions that is stored on a network of computers. Each transaction links to the last.
This makes every transaction traceable and prevents data alteration. Blockchains work on a peer-to-peer basis with no central authority setting the rules, which prevents manipulation by powerful, interested parties. These features make blockchains impartial. They also make their data reliable.
Because blockchains create reliability and trust, they offer incredible opportunities for streamlined procurement. With blockchain, all aspects of payment are digital. There is no need for banks or other intermediaries. There is no fear of the other party absconding with the money or the goods without fulfilling their end of the bargain.
As further benefit to procurement, blockchain technology offers the CLAUSE, WAVE, and freight tracking processes. CLAUSE creates contracts, which extend into the real world. WAVE connects all members of a supply chain to a central network. They are then able to exchange documents. Freight can be tracked in real time, allowing for not just monitoring but also opportunities to increase efficiencies.
In the brave new world of blockchain procurement, reams of paper and laborious processes involving intermediaries will be outmoded. All aspects of procurement can efficiently and seamlessly flow through blockchain.