How can Smart Contracts and Blockchain benefit Supply Chains?

What is a Smart Contract?

In summary a Smart Contract is a set of promises laid out in digital form. It allows for the execution of credible transactions once pre-agreed specified terms have been met. These are fully self-executing and self-enforcing and therefore without the need to involve third parties which can often come at a high cost and result in unnecessary delays.

Enable a responsive & highly efficient Supply Chain

The transparency inherent to Blockchain creates a rich data pool that can be studied and queried to provide sophisticated predictive analytics. Having a Supply Chain with greater visibility and tighter integration enables a more efficient, leaner supply chain. Utilising Smart Contracts and Blockchain technology to manage a Supply Chain means that all parties involved have complete visibility over every transaction, which could be leveraged to provide greater advance warning of the factors that contribute to supply shock and therefore allowing greater execution of contingency plans & improved material planning.

Examples of how a Smart Contract can be utilised with this increased visibility are allowing processes such as building an automatic diversification to switch suppliers if raw material costs spike in a certain region, or automatically route logistics via a different route if deliveries through a certain port are held up past an agreed timeframe, or utilise Smart Contract technology to initiate automated tendering on non strategic / Tail spend thus reducing the cost and accelerating the tender process.

Save your organisation money

Due to its multiple benefits it is estimated that blockchain could save at least £35 billion in B2B transactions per annum.

If an entire end-to-end supply chain were designed using smart contracts, once initialised, it would require no day-to-day management or auditing. Procurement and supply chain teams could operate leaner and at a more strategic level.

Blockchain-powered smart contracting could help identify risk exposure to vulnerabilities inherent in complex supply chains early on. Any deliveries outside agreed schedules, failure to meet payment terms or inconsistent stock levels could trigger pre-agreed escalation procedures.

Smart Supply Chains in action

These efficiencies will radically change the way supply chains are managed. The recent issues concerning availability of goods across multiple industries means that Supply Chain management must change.

Blockchain technology offers near-real-time information exchange that will streamline procurement processes, enhance security, provide decentralised trust, alongside complete visibility, and decrease administrative workloads across the length of the supply chain. This reduces the operational costs associated to Supply Chain management and increases efficiency & safety in material management