Grid Purchase Order

Grid Purchase Order is a smart contract that enables buyers and sellers to automate and synchronize their purchase order processes and data. It aims to reduce administrative overhead, improve transaction accuracy and speed, and reduce the number of disputes, ultimately improving business relationships.

Problem overview

Today’s supply chains are complex, which makes managing them difficult and expensive. Some of this complexity comes from the volume and intrinsic complexity of the transactions and relationships between buyers and sellers. This is often compounded by buyers and sellers maintaining their own set of purchase order records.

Separate record keeping creates two primary problems: it creates disputes when the parties do not agree, and it imposes a cost on both parties to maintain their systems in an agreeing state.

Grid Purchase Order Overview

Purchase Order leverages distributed ledger technology (DLT) to solve the problem of separate record keeping, thereby reducing costly disputes between parties and eliminating multi-system maintenance activities. It enables buyers and sellers to work on the same purchase order contract in a controlled and secure way and to see updates in real time.

Purchase Order is a complete solution for the purchase order process: a Grid Purchase Order contract represents a negotiated purchase order between a buyer and seller throughout its lifecycle and contains all its data, including its history. Purchase Order uses the Grid Workflow feature to mirror real-world business processes, defining the possible business states through which contracts can flow, the criteria that must be met to move to the next state, and the actions each party can take in each state. It also leverages Grid Pike to configure role-based access control.

Key benefits

  • A complete solution for the purchase order process
  • Trade partners always see the same data and get updates in real time, reducing disputes
  • Trade partners have equal footing, with neither party having more information or control than the other
  • Data is more automated and integrated, reducing overhead
  • Smart contracts enforce the purchase order workflows and access control
  • Format and content is standardized across all purchase orders, across all partners, according to GS1 XML Order standards

Organizations can use Purchase Order either as a system of record or as a bridge between their and their business partners’ existing systems of record.

Problem background and detail

A purchase order is a contract that specifies the details of goods or services a buyer orders from a seller under agreed-upon conditions. It contains information about the trade items ordered (with associated quantity and price), shipping details, payment terms, quality constraints, tracking information, and other relevant data.

In the simplest scenario, a purchase order is issued by a buyer, confirmed in full by a seller, and fulfilled with no further collaboration necessary. In more involved business scenarios, such as where product is out of stock or requested delivery dates must be adjusted, trade partners interact to reach agreement and modify purchase order records.

Today, the communication of order information occurs in various ways: by phone, email, SMS, eCommerce marketplaces, Electronic Data Interchange (EDI), etc. Both the manual coordination and automated, point-to-point sharing of purchasing information between trade partners present challenges within day-to-day supply chain operations including but not limited to:

  • poor data accuracy stemming from manual data entry errors,
  • discrepancies between systems which impact receiving or result in financial claims,
  • costs related to administrative/clerical time, and
  • management of custom integrations.

In addition, communicating Purchase Order details via email, EDI, or other traditional methods creates uncertainty for buyers and sellers because they lack a shared view of the order’s status and contents. Siloed views of order data can lead to misalignment between partners and result in undesirable outcomes, such as customer disputes. Purchase orders often require updates to dates and quantities, which involve substantial communication between trading partners. This can lead to delays and an inability to see the most updated status with which to formulate supply and demand plans.

Purchase Order detail

Purchase Order addresses the challenges outlined above by enabling trade partners to directly collaborate on the creation and modification of a single purchase order contract, with all partners enjoying a real-time view of the state of the order.

Expected outcomes of using Purchase Order

The primary outcomes we expect organizations using Grid Purchase Order to see are:

  • Improved cost efficiency: An organization’s financial results can benefit from a less time being spent manually inputting data, reconciling transactional differences with trade partners, performing credit/debit adjustments, addressing receiving problems, and handling product returns.
  • Improved transaction accuracy: Automated sharing of purchasing data can reduce errors that stem from manual data entry.
  • Increased transaction speed: Large volumes of data can be quickly communicated between organizations, leading to faster response times, improved buying decisions and production planning, greater customer satisfaction, and visibility into order status.
  • Improved team productivity: Less time spent comparing documents and resolving discrepancies means team members can focus on move value-additive business activities.
  • Improved business relationships: Faster transactions, less overhead, and fewer disputes lead to less friction in business relationships.

How we expect Purchase Order to be used

As mentioned above, organizations may adopt Grid Purchase Order as the system of record between them and their partner organizations. In this case, their technology integration teams will likely enable users to interact with Grid through some integration application.

Organizations that choose to use their existing systems of record can use Grid Purchase Order to synchronize the purchase order records of them and their partners. In this case, their technology teams will integrate Grid directly with their systems of record.

How Purchase Order works

Purchase Order uses distributed ledger technology (DLT) to mirror the underlying order data between the connected nodes (organizations). It enables all parties in a private Splinter circuit or Sawtooth blockchain to have a current and complete view of purchase orders at all times. Unlike centralized databases, which can achieve a similar result, Grid gives equal standing to all parties in the circuit by using DLT to ensure data integrity in a decentralized way. It also increases reliability by providing each party with their own copy of the data.

Purchase Order structure

Purchase Order enforces GS1 XML Order standards for purchase order content, ensuring clarity and consistency across purchase orders, even across organizations.

Each purchase order contains one or more versions. Organizations can propose or consider multiple versions of a purchase order before finalizing one.

Each purchase order version is comprised of one or more revisions. Each change to a version’s content creates a new revision, providing users with a revision history for every version.

Purchase Order workflows

Purchase Order offers solutions for both simple and complex collaboration needs by defining two built-in Purchase Order designs. These designs leverage Grid Workflow, which requires the use of a state transition model, to define the states through which a purchase order may flow. The first was inspired by vendor-managed purchasing relationships, and the second by a more traditional procurement relationship between a buyer and a seller.

Purchase Order workflows use three core components to facilitate transactions:

  • workflow states - these represent the steps of the business process
  • constraints - these represent business rules that determine when the purchase order can move between workflow states
  • permissions - these define the actions that each organization can take at each step of the purchase order process, i.e. at each workflow state

For more information on the built-in workflows, see the Purchase Order RFC.

Organizations can use the built-in workflows or create their own to fit their needs. For more information about the Grid Workflow feature, see the Workflow RFC.

Future development

In the near-term, the Purchase Order feature is focused on delivering better communication and collaboration on purchasing information. Looking to the future, it sets the stage for further integration, both upstream and downstream, with order fulfillment and settlement business processes.