Blockchain Theory in Procurement
As a technology, Blockchain is a form of digital information registration and distribution that provides a secure ledger of transactions. Digital signatures are used to validate the authenticity of each transaction, thereby removing the need for a central intermediary. Crypto-currencies like Bitcoin brought this technology to the fore by demonstrating that secure and auditable transactions can be conducted outside of traditional banking systems.
As a theory, Blockchain can be seen as a technology-driven approach aimed at decentralising markets, simplifying complex transactional relationships and achieving greater levels of organisational efficiency. The proven and potential applications are numerous and will have an impact across every sector, but it is of particular relevance to organisations with high payment frequencies and extended supply chains.
What impact will it have on public procurement?
Supply chain management is highly complex for any organisation and especially so for public sector buyers. With stringent procurement regulations and transparency requirements layered on top of other responsibilities such as data security, ensuring efficient payment processes and managing a disparate group of suppliers compliantly and effectively is a major challenge.
Blockchain has the power to alter the nature of supplier management by changing the day-to-day mechanisms of processes including Accounts Payable (AP) and Procure-to-Pay (P2P), but in a broader sense it represents an opportunity for buyers to reconsider many of their internal functions and processes and ultimately achieve greater efficiency and decreased risk within their supply chains.