How Blockchain improves procurement agreements

Blockchain technology is becoming more prevalent in an ever-growing variety of applications.  When it comes to Supply Chain, most people immediately think about Blockchain.

How Blockchain improves procurement agreements
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It is especially true when Blockchain is used to help manufacturers enforce Directed Buy Agreement (DBA) price compliance, resulting in millions of dollars in savings.

DBAs and the Visibility challenge

A DBA is an agreement in which a company requires an explicit supplier to purchase from a specific sub-supplier, typical raw materials, parts, or components in a manufactured article at a competitively agreed price.

DBA helps reduce direct costs for sub-component parts and brings better prospects and purchasing volumes.

However, to be effective, DBAs demand data visibility to make compulsory contract costs with suppliers. A buyer can construct a complete 'supply’ scheme that provides price and part data visibility amid every part supplier’s ecosystem and identifies the non-price-compliant DBA suppliers in real-time.

This kind of visibility insists on an extraordinary collaboration and trust among a manufacturer and its suppliers; it requires a procedure that grants data to be firmly saved and shared, supervises peer-to-peer privacy, and eliminates the need for time-consuming, unproductive manual price discrepancies.

Blockchain to the rescue

A Blockchain-based multi-party system (MPS), besides automating the processes related to contract price implementation, also pinpoint volume deductions and potential supply risks throughout the value chain in a case where multiple suppliers are shared with changing Tier x-1 suppliers.

It eliminates non-value-adding manual work correlated to contracting price enforcement, making it possible for category managers to re-allocate efforts to more strategic initiatives such as identifying category strategies and promoting long-term supplier relationships.

A Blockchain-based MPS can facilitate manufacturers more efficiently accomplish DBAs and depict lost value in two key ways:

Granting real-time value chain transparency

A Blockchain-based MPS can extent the whole supply composition and securely stores contracts and DBA terms. To make available complete supply visibility, each organisation’s sales, Procurement dealings, and contracting data are provided into the Blockchain through API calls, which stores contract and DBA pricing terms as a reference point. The Blockchain, therefore, determines DBA price criteria among all contracting parties to detect DBA price variations.

Ten best Blockchain applications 

·       A Blockchain solution can facilitate manufacturer——and tier suppliers to implement DBA price compliance.

·       It aids DBA price compliance enforcement by allowing automated reporting and price compliance warnings.

·       Once the data pipelines for all parties feed into the Blockchain, DBA price discrepancy reports and alerts can be set up to be automatically activated to support the manufacturer’s price compliance enforcement process.

·       Blockchain can help a manufacturer get around significant profit loss on each PCBA purchased by automatically detecting and reporting price variances.

·       It even does away with these variances thoroughly when acquisition order issuance, invoicing, and payment are all based on the DBA price documented in the program.

·       Blockchain solutions can perform a decisive role.  In SC, DBAs can assist manufacturers in applying much better regulation over their Bill of Materials (BOM) and increase their raw materials and parts cost.

·       It can effectively remove confidentiality worries, automate and regulate manual and inconsistent activities within organisations, and significantly lift management productivity—while warranting compliance with DBAs pricing stipulations.

·       A Blockchain solution can help manufacturers recuperate millions of dollars in value for a straight and meaningful result.

·       Blockchain can also support SKU or software license traceability, mineral tracking inconsistency, supplier’s quality register, delivery, and ESG reporting.

·       The appliances are almost unlimited for SC accomplishments.

Conclusions:  A Blockchain-based MPS can facilitate manufacturers more efficiently, accomplish DBAs and depict lost value.

Why not apply a Blockchain-based Directed Buy Agreement and a multi-party system to extend collaboration and build trust among a manufacturer and its suppliers?

Dave Food

M: +44 7775 861863


Photo by Terry on Unsplash

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