McKinsey & Company has underlined that procurement is “no longer a back-office function focused solely on cost reduction; instead, it has become a critical component of business strategy, helping organisations manage risk, drive innovation and build resilience.” The drivers of such a transformation are sustainability requirements, digitalisation, and shifts in geopolitical relations. By digitalization, experts mean blockchain and AI advancements. Blockchain improves the security of the transactions, which saves costs and reduces risks. McKinsey partners highlight that more and more leading companies are investing in the digital procurement ecosystem.
PixelPlex has over a decade of experience in blockchain development. Our team has launched more than 450 successful projects. We’ve decided to gather the insights of our experts regarding blockchain in the procurement domain and prepare this detailed overview for business leaders, CIOs, and other decision makers. Learn more about the ways of solving age-old procurement problems.
How is blockchain used in procurement?
In simple words, a blockchain is a distributed digital ledger. This ledger is duplicated across many computers (called nodes). Transactions are grouped into blocks. Each new block is cryptographically linked to the previous one, forming a chain. This, along with the fact that all nodes have a copy, makes it extremely difficult to tamper with. If a hacker tries to alter a record, it would be immediately obvious to the rest of the network, and their version would be rejected.
Immutable record-keeping
Blockchain provides a permanent and unchangeable audit trail. Every step of the procurement process, such as Request for Quotation (RFQ), Purchase Order (PO), delivery, and invoice, is recorded. This creates a single source of truth for all participants. A regulator, auditor, or supplier can trace the entire history of a purchase from the initial need to the final payment with absolute certainty that the record has not been manipulated. This builds a foundational layer of trust and accountability that is missing in traditional systems.
Tokenization
Tokenization is the process of creating a unique digital representation (a “token”) of a physical or digital item on the blockchain. For example, a batch of cocoa beans can be represented by a token that contains or is linked to all its key information (origin, expiry date, etc.). This provides a convenient and secure way to manage and track assets digitally.
Smart contracts
These are digital agreements that regulate processes. A buyer and a supplier write the terms of the agreement directly into code. This code is stored on the blockchain, making it transparent and immutable. Once deployed, it runs without requiring human intervention or a middleman to enforce it.
Smart contracts self-verify certain conditions and perform particular actions related to those conditions. For example, they may release payments upon confirmed delivery, analyze real-time tracking data to calculate penalties for delays, or trigger insurance claims in case of damage during transportation.
Read the case of the hazardous materials management platform designed for storing, analyzing, and transferring radioactive materials. Blockchain allows for easy access, compliance maintenance, and third-parties elimination. Discover the details
Supply chain integration and provenance
Blockchain contains unchangeable records of products’ life journeys. It allows for tracking goods from raw material to the end-user. Every time a product is resold or somehow transformed, a new record is added. For example, when a farmer harvests the coffee beans, a record of this appears on the blockchain. The next record is added when a cooperative buys and washes them. Another record is created when an exporter ships them. This continues through roasting, packaging, and finally to the retail shelf. Each step is a permanent, timestamped entry. This detailed logbook verifies the authenticity of products (which is especially relevant for luxury goods), ensures ethical sourcing (without child labor or animal testing), and compliance with special domain regulations (e.g., FDA for pharmaceuticals).
Below are the summarized use cases of blockchain technologies application.
| Application area | Key function | Specific use case example |
| Immutable record-keeping | A permanent tamper-proof audit trail for the entire procurement process | An auditor traces the history of a purchase, verifying that no records have been altered |
| Tokenization | A unique digital representation of a physical asset for secure tracking | A batch of cocoa beans is represented by a token that moves and is updated through the supply chain |
| Smart contracts | Automated procurement agreements based on pre-defined conditions | A supplier receives payment automatically upon the digital confirmation of delivery, without manual processing |
| Provenance & traceability | A complete lifecycle and origin of a product from source to end-user | Tracking coffee beans from the farmer to the retail shelf, verifying authenticity and ethical sourcing at each step |
Key problems blockchain solves in procurement
At PixelPlex, we’ve been dealing with various types of businesses. From our experience, there are some typical questions our clients ask about the potential of blockchain solutions for their business. These questions (with our answers) demonstrate the key problems businesses face and ways of addressing them with blockchain solutions.
- How can I make sure the parts we’re buying are genuine and not counterfeits?
- If there’s a dispute with a supplier, can we use the blockchain record to resolve it quickly?
- Which of the manual tasks can be fully automated with smart contracts?
- Can blockchain automatically check supplier certifications (like ISO standards) and alert us if they expire?
While answering the first two questions, it is important to say that supply chain software development services allow for creating an auditable trail that deters corruption and counterfeit goods. Each step of the supply chain is visible and can be accessed and checked. In the same way, it is possible to check the origin of the product and make sure it is genuine. Thus, blockchain enhances transparency and combats fraud.
Turning to the second two questions, they focus on the clients’ desire to optimize document workflow and reduce bureaucracy. Smart contracts automate manual processes, such as invoice reconciliation or compliance checks, and therefore reduce paper-based workload and administrative overhead.
Advantages of blockchain in procurement
Before deciding on the digital transformation in the supply chain, it is critical to assess the pros and cons. Here is a detailed breakdown of the benefits of blockchain in procurement.
Transparency and trust
There’s always the requirement to have more information about the good provenance and tracking. With blockchain, users see every step of the delivery and the confirmation of every transaction. This eliminates information asymmetry and builds trust between buyers, suppliers, and regulators.
Improved efficiency
Smart contracts automate manual, repetitive tasks like invoice processing, payment approvals, and compliance checks, which reduces processing times from days to minutes. They ensure that pre-agreed terms are carried out immediately, for instance, by triggering a payment as soon as a delivery is confirmed.
Reduced costs
By removing intermediaries (e.g., for letters of credit) and automating administrative processes, organizations can significantly lower operational and transaction costs.
Security and fraud prevention
The cryptographic and decentralized nature of blockchain makes it extremely difficult to alter records or commit fraud, securing sensitive procurement data.
Traceability and provenance
Provides an unbroken audit trail for goods from origin to delivery, which is critical for verifying authenticity, ethical sourcing, and compliance with regulations (e.g., ESG standards). Consumers may check their product with QR codes.
Learn about the blockchain supply chain management solution with an embedded tool of counterfeit goods verification
Key disadvantages and challenges
Implementation complexity and cost
Initial setup of the blockchain requires significant investment, integration with existing systems (like ERP), and specialized expertise. These are substantial cost items. Besides, it is often difficult to estimate the ROI. It is beneficial to conduct a cost-benefit analysis to understand the potential for payoff.
Scalability and performance issues
Scalability remains a critical issue when it comes to blockchain implementation. Public blockchains like Ethereum and Bitcoin struggle with huge transaction volumes and the demands of real-time performance. It might be a hurdle for high-frequency procurement activities. Another issue is the challenging compatibility of blockchain with legacy systems. However, interoperability might be improved with the help of standardised APIs and tools like cross-chain atomic swaps.
Regulatory and legal uncertainty
The legal status of smart contracts and digital signatures is still evolving in many jurisdictions, creating potential compliance risks. It is important to collaborate with regulating authorities and demonstrate the potential of blockchain.
Immutability as a double-edged sword
While it prevents tampering, it also makes it difficult to correct legitimate human errors entered into the ledger. Mitigating this requires robust data validation at the point of entry and a clear governance model for handling exceptions.
Cultural and organizational resistance
Shifting from established processes to a decentralized, transparent model requires significant change management and can face internal resistance. Some business leaders remain sceptical about the benefits of blockchain. Fintech software development companies might address this issue by showcasing pilot projects, explaining best practices, and providing educational resources. Another issue is the lack of skilled workers in the blockchain industry. The solution also lies in software development firms partnering with universities and supporting educational initiatives.
Traditional vs. blockchain-based procurement
The traditional procurement model is inherently centralized and siloed, relying heavily on intermediaries like banks and notaries to facilitate trust and transactions. This structure often leads to data discrepancies between parties and significant processing delays. In contrast, a blockchain-based model is decentralized and unified, enabling peer-to-peer interactions through a single, shared ledger. This provides all permissioned participants with real-time visibility into the entire process, eliminating data conflicts and accelerating workflows.
| Aspect | Traditional procurement | Blockchain-based procurement |
| Transparency | Low: information silos, manual reconciliation required | High: shared, immutable version of the truth |
| Efficiency | Slow and manual, repeated data entry and verification | Automated and streamlined with smart contracts |
| Cost | High: intermediary fees, administrative overhead, manual labor, and reconciliation efforts | Lower: reduced intermediaries |
| Security & fraud prevention | Vulnerable to tampering | Highly resilient; cryptographic hashing and distributed consensus |
| Implementation & integration | Well-established: mature technologies and processes | Complex: requires significant investment in new infrastructure and skills |
| Speed & settlement | Can be slow | Near-real-time transactions |
| Regulatory clarity | Mature | Evolving and uncertain |
| Data management | Centralized | Decentralized |
Application across different procurement types
In a broad sense, there are four types of procurement:
- Direct procurement includes any raw materials that are required for an end product. Machinery parts, components, and items for reselling are among the examples.
- Indirect procurement refers to anything that is necessary for an organization’s operations and is not linked to the product itself. For example, it may be office supplies, consulting services, equipment maintenance, etc.
- Goods procurement involves physical items and software.
- Services procurement deals with third-parties, such as vendors or contractors, for certain services.
When we talk about the peculiarities of applying blockchain technology in procurement, we do not concentrate on the types according to the product, be it a final product service, or disposables, but rather challenges that the digital ledger may address with various procurement types.
- For example, in the government procurement sector, clients would be looking for maximized transparency of funds to fight corruption and increase citizen trust. Blockchain in government institutions ensures public fund accountability.
- In the commercial (corporate) procurement, companies are waiting for the supply chain resilience, cost reduction, automating MRO (maintenance, repair, operations), and direct spend.
- As for the specialized cases, such as healthcare, aerospace, and luxury goods, ensuring the provenance is essential and strict compliance with safety standards.
| Procurement type | Main focus | Blockchain solution |
| Government procurement | Maximum transparency, accountability for public funds, preventing corruption | Public, tamper-proof ledger for bids and contracts |
| Commercial/corporate procurement | Supply chain resilience, reduced operational costs | Smart contracts to automate orders and payments |
| Healthcare & pharmaceuticals | Verifying drug authenticity and ensuring compliance with safety standards (e.g., FDA, EMA) | Immutable track-and-trace from factory to patient |
| Aerospace & defense | Ensuring part provenance, quality, and compliance with safety and regulatory standards | Digital passport for part history and provenance |
| Luxury goods & fashion | Proving authenticity and ethical sourcing to consumers | Unique digital certificate of authenticity and origin |
Real-world use cases and implementations
Procurement and logistics are among the most active sectors for blockchain take-up. Global brands turn to digital ledger technologies for various reasons, that’s why the solutions are unique and interesting to analyze and get inspiration from.
Luxury goods
Brands selling exclusive items need product authentication. They are losing millions on counterfeit products. For example, according to RunRepeat, the counterfeit sneaker market was expected to reach $600 million in 2023, which was around 1.5 times bigger than the legitimate shoes market.
- Aura Blockchain Consortium is an organization that was established by such brands as Prada, Cartier, Louis Vuitton, and others. They aim to develop technological standards for luxury clothes, watches, jewelry, etc. Blockchain helps them to prove the authenticity of their products.
- Breitling is a watch brand that provides watches with their own digital passports. These Breitling NFTs allow clients to claim unique services, access the watches’ warranty status, and ownership history.
- De Beers is a UK luxury diamond jewelry brand that relies on blockchain for tracking the gems from mine to market. It allows for reducing fraud and manipulation due to real-time monitoring of the supply chain that provides all the participants with process transparency. Besides that, cryptographic security protocols are used for data integrity.
Automotive
In the automotive domain, blockchain helps to process financial transactions. Traditional banking transactions involve third parties and might have delays. Bitcoin transactions can be handled much faster, which is beneficial for international payments, as they do not depend on business hours and do not require any intermediary approvals. However, Bitcoin’s price volatility is a major challenge for merchants, that’s why it is still under exploration.
- The Australian car manufacturer Tomcar was an early adopter, allowing Bitcoin payments to circumvent issues with international transfers, such as high exchange rates and credit card fees.
- Tesla is exploring the initiatives of applying blockchain technology for monitoring sustainable raw materials for their batteries. For example, they have reported on tracking cobalt from Congo and nickel from Australia. Sustainable resources align with Tesla’s general mission of providing ecological vehicles.
PixelPlex has developed a system that supports data integrity for the automotive supply chain. It allows for process optimization and reduced costs. Check out the case
Internet of Things
Smart contracts allow businesses to benefit from automated processes in the IoT sector. In the car rental industry, smart contracts may “tell” vehicles to lock or to drive to the company’s office if there is no payment for the rental services. It is a promising pilot project that might drive the car rental industry forward soon.
- BMW offers its customers a digital passport that contains information about the vehicle’s history, such as mileage, previous check-ups, accidents, etc. Another application is a decentralized charging network for electric vehicles, which enables seamless, automated payments between cars and charging stations without the need for physical documents or multiple user accounts.
Food
Food supply chain management also benefits from blockchain. It improves the safety of the products on the table and adds to the providers’ reputation.
- Walmart uses blockchain to track the sales of pork in China. If there’s anything wrong with the product and the recall is required, the company can trace the affected batches and take relevant measures.
- Starbucks also uses blockchain technology to follow the way coffee beans pass from the initial location to customers’ cups.
Here is a table summarizing the information about well-known blockchains in procurement and supply chain use cases and their business results:
| Company/sector | Application of blockchain | Results |
| Aura Consortium (Luxury) | Product authenticity platform for luxury goods | Provides proof of authenticity and ownership history for consumers |
| Breitling (Luxury) | Digital passport (NFT) for individual watches | Enables service claims, warranty tracking, and secures ownership history |
| De Beers (Luxury) | Tracking diamonds from mine to market | Reduces fraud and ensures ethical sourcing via a transparent supply chain |
| Tomcar (Automotive) | Accepted Bitcoin for vehicle payments | Solved issues with high international fees and exchange rates |
| Tesla (Automotive) | Exploring tracking for battery raw materials (cobalt, nickel) | Aims to ensure sustainable and ethical sourcing for its mission |
| BMW (Automotive / IoT) | 1. Vehicle digital passport 2. Decentralized EV charging network |
1. Transparent vehicle history 2. Automated, document-free charging & payments |
| Walmart (Food) | Tracking pork in China for traceability | Enables rapid identification and recall of affected product batches |
Critical aspects of blockchain implementation
As blockchain technologies continue to develop, there are important aspects that any business should take into consideration before plunging into the implementation process.
Technical considerations
Think about what you want to achieve with blockchain. You need to decide what exactly you need to store (e.g., details, certificates, delivery history, etc.). Next, you should choose the right blockchain (permissioned or permissionless) and core functionality. Then, you plan the security measures, such as encryption, restricted access, and others. Finally, you will need to integrate a new system with a legacy environment.
The legal and regulatory aspect
Before implementing a blockchain solution for procurement, it is crucial to account for the evolving and uncertain regulatory landscape across different countries. Organizations must develop a strategy to navigate complex legal challenges, particularly in mixed economies that aim to foster technological innovation while maintaining regulatory control. Furthermore, the environmental implications of blockchain technology cannot be overlooked. A dedicated focus is needed to manage its energy consumption and carbon footprint, especially as future industry standards for sustainable procurement practices continue to develop.
Here is a comparative table of current US and European regulations and compliance frameworks relevant to blockchain in procurement development.
| Region | Primary regulation | Key focus |
| United States | Securities Laws (Howey Test) | Classifying tokens as securities, requiring registration |
| AML/CFT Rules (FinCEN) | Enforcing KYC and anti-money laundering checks on crypto businesses | |
| IRS Guidance | Taxing cryptocurrencies as property for capital gains | |
| European Union | MiCA (Markets in Crypto-Assets) | A unified license for issuing and trading crypto-assets across the EU |
| GDPR (Data Privacy) | The “right to be forgotten,” which conflicts with blockchain immutability | |
| AML Directives | Regulating Crypto-Asset Service Providers (CASPs) for KYC/AML |
Current trends
Blockchain’s transparency is a powerful tool for reducing corruption. However, its integration into different legal systems and mixed economies remains a complex challenge that requires careful navigation. Furthermore, the significant energy consumption and carbon footprint of some blockchain systems cannot be ignored. Some blockchains have high energy costs, which are tied to the Proof-of-Work consensus mechanism. However, many modern technologies, such as Solana and others, use Proof-of-Stake, which is more energy-efficient. Businesses might choose relevant platforms to reduce their carbon footprint.
| Aspect | Proof of Work (PoW) | Proof of Stake (PoS) |
| Energy consumption | Extremely high; computationally intensive | Very low; minimal computational power needed |
| Transaction speed & scalability | Slow; limited transactions per second | Faster; higher throughput and scalability |
| Decentralization | Tends toward mining pool centralization | Can risk centralization among the largest token holders |
| Cost | High operational cost due to energy and hardware | Low operational cost; no specialized hardware needed |
| Relevance to procurement | Generally unsuitable due to high cost, slow speed, and environmental impact | Highly suitable; aligns with needs for efficiency, low cost, and sustainability |
How much does it cost?
Every project is unique, and the expenses depend on its complexity. Here’s some general information on blockchain solutions’ price formation.
| Solution type | Description | Approximate price range (USD) | Approximate timeline |
| Supply chain traceability (Focused) | Tracks a single high-value product or component (e.g., organic cotton) from source to factory. | $50,000 – $250,000 | 3 – 9 months |
| Smart contract automation (payments) | Automates invoice-to-payment processes upon fulfillment of predefined conditions (e.g., goods receipt) | $100,000 – $500,000+ | 6 – 12 months |
| Supplier & document onboarding | Creates a decentralized system for managing supplier credentials, certifications, and compliance documents | $75,000 – $300,000 | 4 – 8 months |
| Full procure-to-pay platform | An end-to-end solution integrating traceability, smart contracts, document management, and a supplier network | $500,000 – $2,000,000+ | 12 – 24 months |
| Consortium blockchain setup | Establishing a private, permissioned network for a group of partners (e.g., a manufacturer and its top 10 suppliers) | $250,000 – $1,000,000+ | 9 – 18 months |
The future: Prognosis for 2026 and beyond
As mentioned in the introduction to this article, blockchain and AI are the drivers that push the procurement sector forward, making it a critical component of business strategy. No surprise, the combination of the two technologies is the field’s future. AI-powered procurement agents like the one built on IBM will take supply chain processing to the next level. They are designed to reduce costs and improve workflows, as users will prebuild their own automations without coding. These agents will cooperate with enterprises’ systems via APIs. Automation will boost team productivity and minimize risks.
Another trend for blockchain adoption in procurement is its deeper integration within specific, high-value sectors like pharmaceuticals, luxury goods, and sustainable sourcing, where verifying authenticity and ethical provenance is paramount. A critical enabler for this growth will be a sharp focus on interoperability — developing standards and protocols that allow different blockchain platforms used by various partners to communicate and share data seamlessly, creating a truly connected and efficient supply chain ecosystem.
Conclusion
Blockchain is no longer a niche tech term. It’s a powerful tool capturing the imagination of businesses worldwide. Why? Because it promises to rebuild our supply chains from the ground up, making them transparent, efficient, and deeply connected.
Of course, any transformative technology comes with growing pains. Businesses are wisely asking tough questions about speed, cost, and integration with existing systems. They’re also rightfully focused on finding energy-efficient options that align with sustainability goals.
But the momentum is unstoppable. We’re seeing incredible progress. Companies are now using blockchain to track a product’s journey in real-time, automate agreements with smart contracts, and create unbreakable digital identities for everything from a component part to a shipping container.
So, what’s next? The future is about making blockchain easier to use and more tailored to specific industry needs. We’re moving toward a world where this technology isn’t just an experiment but a standard business tool. It’s the key to building a new kind of global supply chain — one that is not only faster and smarter but also more accountable and sustainable for everyone.
