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How Smart contracts will affect Procurement

How Smart contracts will affect Procurement

on October 16, 2023

The role of procurement relies on making decisions quickly.
The quality of his decisions is based on the quality of his data and this is where Smart contracts can have a decisive effect on procurement.
A Smart contract is executable code in a transactional environment, such as a blockchain which allows the simple streamlining of business services.
The procurement functions can widely benefit by adopting Smart contracts based on blockchain technology. The inner characteristics of this technology, as speed, efficiency, transparency and immutability, offer exclusive benefits.

In this article we will examine how Smart contracts can affect procurement.

Ensuring trust and  transparency is one of the main issues for any procurement especially when multiple parties are involved at different stages in a process. Blockchain will embed trust between parties as transactions and agreements become absolutely verifiable.

Adopting Blockchain, data can be logged in a secure and public database. Any single transaction is recorded on its ledger to make any change apparent to every party involved.

The potential is huge also in the supply chain where data can be traced and monitored. If any mistake occurred along the chain, blockchain allows to spot straight the point at which the error happened.
If a business sells a product to a client, it requires this product to be manufactured at a given pace to keep up with the demand of sales. Sales of products based on Smart contracts would mean that users send their token to the business’s contract when requesting a certain product. This contract would automatically keep track of the sales and update the inventory. If inventory was ever running low, the sales contract could automatically contact the manufacturer contract to request more product to be produced based on a set of rules. If these rules are validated, send the required payment, automatically from the sales contract. 

This would save an enormous amount of money for a business, while making it run with unequalled  efficiency, relying on adequate and continuous controls.

The same for all payments and financial information that become available in the public domain. Any suspicious or malicious transactions can be flagged and sorted by a business, before any damage would affect its revenue and reputation.

Smart contracts run on a blockchain to carry any information related to contracts.

When certain conditions are met, Smart contracts execute the deal and activate in automatic a payment or trigger an event, exactly as they have been programmed.
Both sides can define the terms and conditions of a contract, ensuring trust in the legit of the contract, and in the identity of the counterparty.

Everyone can see the chain of ownership for each asset, and records cannot be erased, therefore there can’t be any dispute in the chain related to any transaction because all parties involved have the exact same version of the ledger. 

In the food industry, for example, blockchain is increasing food traceability, tracking products to their source to guarantee food authenticity and safety.

Blockchain Food Safety Alliance was established as a form of collaboration among IBM, Walmart, and Tsinghua University to improve food tracking in China.
The adoption of blockchain can provide real-time traceability throughout the supply chain, and also create a standards-based method for collecting data about the origin, safety, and authenticity of food.

The value of blockchain technology for supply chain management is enhanced within four specific areas:

  • Smart contracts between trading partners
  • Improved product data security
  • Supply chain disintermediation
  • Improved product visibility and traceability

From coffee to diamond, more and more brands like Moyee Coffee and De Beers, are implementing blockchain technology on their supply chain to reinforce trust with customers and improve user experience processes. 
Moyee Coffee, an Irish provider of speciality coffee, has been working with bext360, a SaaS business, to increase productivity and transparency in the coffee supply chain, to provide a fairer deal for growers in emerging economies.
Improving productivity and reducing costs are crucial priorities for every business. Smart contracts, based on blockchain, maintaining security and traceability, can reduce the need for intermediaries, remove manual work where human error could occur, and automate business processes. 

Smart contracts are also a valuable tool in the supplier’s onboarding process. You can use a multi-criteria vendor’s evaluation form to determine the best supplier based on price but also on a full spectrum of variables.

Trakti Smart contracts can help procurements to increase contract standardisation and visibility across the entire supply chain. How?

  • Tracking and monitoring cost, time, quality, and deliverables  
  • Improving team’s performance within a collaborative environment
  • Facilitating communication with suppliers and key stakeholders  
  • Automating the entire contract life-cycle, including payment and signature
  • Semplify vendor onboarding, including KYC and AML checks

Trakti helps to manage procurement operations effectively, and transparently.
Through our end-to-end platform, you can notarize, automate and approve contracts in real time on the blockchain.
The automation of contracts allows you to keep track of the key procurement processes, implement all the rules and adapt them to different needs, connect the rules to the signed contract in order to reconcile the supplier’s performance with the commitments made in the onboarding phase.

Trakti is the first contract negotiation and management platform integrated in the blockchain. We automate your templating, negotiation and obligation management processes supporting the entire life-cycle of your contract with a unique and compliant platform. 

Ready to discover more how Trakti Smart legal contracts can help procurement functions: click here!

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