Pre-blockchain procure-to-pay (P2P) process
The process begins with the procurement of goods or services and ends with the payment. It’s executed via the Enterprise Resource Planning (ERP) systems. The buyer uses the system to place a purchase order which then moves to the supplier. When the buyer receives the supply of goods/services, they create a receipt in the ERP. When the supplier raises the invoice, the reconciliation of all the transactions is done in the ERP, and payment instructions are issued to the bank.
Major challenges in the system
Prevalent challenges include:
- Inadequate data governance as manual operations is prone to accuracy concerns.
- Security and privacy as forgery are possible, and there’s no proper maintenance of the centralized transactional history. Forged invoicing and information gaps lead to errors and an increase in costs.
- Resources get wasted in the error resolutions, which again pushes up costs.
How blockchain resolves the issues
Blockchain brings an unprecedented change in the prevalent P2P process. Details of processes like purchase order releases and goods receipts are visible to all stakeholders on a real-time basis. All transactions become pre-approved, which drastically improves the efficacy and accuracy of the invoice process. Unnecessary delays in the transactions have become a relic in the organizations where blockchain-based systems have been introduced in the supply-chain processes. Thanks to the blockchain, the liquidity of the invoices improves drastically.
Thanks to blockchain, the global supply chain has a transparent network that registers transactions practically irreversible manner, promoting trust and ensuring end-to-end security. Regardless of the size, manufacturers benefit from the involvement of the blockchain as they get to view the performance details of the suppliers without any possibility of data tampering.