In recent years, the concept of Smart Contracts has shown many tremendous benefits across a wide array of industry verticals. The supply chain has for a long time faced a lot of challenges especially because companies now deal with more than just their local environment. It is no wonder that these firms are now beginning to acknowledge the benefits of Smart contracts to their supply chain space.
In this article, we will highlight the different benefits of the supply chain, challenges, and future evaluations.
What is a Smart Contract?
A smart contract is a digital contract which executes itself once all preexisting conditions of the contract are met.
Primarily, Smart contract is a digital contract prepared in the form of codes and pre-written logics which is then stored and replicated on a distributed storage platform like Blockchain to be run by a network of computers. The Blockchain provides the storage feature whereas the Smart contract ensures that all pre-set conditions are met accurately
These Smart contracts are already developed with preset conditions as well as penalties if the terms of the agreement are not fulfilled in the particular time frame.
Smart contracts are built to support, implement or verify the negotiation conditions or the performance of the contract through the context of cryptocurrencies and blockchains. This code-based contracts do not need intermediaries or operators to execute the terms of the contract but do so without bias or delays.
How is the Smart Contract Beneficial to the Supply chain?
The blockchain on its own has a certain unrealistic feel to it. Smart Contracts connect Blockchains to the real world. They are instrumental in ensuring a more transparent and unmanipulated platform for transactions to take place. Through the use of Smart contracts, all kinds of trades and services can be carried out through the blockchain. Here are specific ways Smart contracts can be beneficial to a wide range of transactions to allow a more unobstructed view of its importance:
As earlier stated, Smart contracts execute themselves as soon all specified conditions are met or penalties if otherwise. Given the amount of paperwork in the supply chain, the use of Smart contracts will provide a faster way to efficiently carry out all activities, eliminating all kinds of bottlenecks from the equation.
- Trust and Security
One of the factors that hinder the efficacy of any transaction is the time spent in ensuring that deals are made with a trustworthy individual or company. Through the use of Smart contracts, blockchain enhances trust and security especially in sensitive activities such as the transfer of assets in the supply chain. It can efficiently help startup companies engage and sustain their client bases as payment processes are made faster and more comfortable.
- Eliminates many steps in the supply chain
Because Blockchain changes how data is transacted in the supply chain, it removes all significant measures that would have otherwise taken an enormous amount of time. It equally eliminates the need for intermediaries to monitor the system, therefore avoiding all avenues of error or manipulations.
- Can speed up multi-party agreements
In events where the supply chain is made up of different intricate actions and individuals, the Smart contract can provide a simpler and more effective avenue to execute the contract. For instance, in events where a specific transaction requires the approval of a large range of people, smart contracts can act as a “multi-signature” account where funds will only be spent once the preset amount of people agree.
- Quality control maintenance reporting
The Blockchain also ensures that quality services are always delivered. They can equally serve as a platform to checkmate and help find and improve on all activities carried out in the system.
Blockchain and the Supply Chain
More businesses now operate on the global scene which poses a new set of challenges especially in terms of risks of theft, efficiency, and tracking. The Blockchain might not wholly eradicate every business problem but due to its core process of exchanging values and ownership can simply many of these transactions.
Blockchain offers not benefits not only to companies but equally to their customer base. With the more straightforward approach afforded by smart contracts, businesses can create and sustain a credible outlook to their customers while ensuring the protection of all information transacted between parties. This is because Blockchains give companies transparency and clarity to their entire supply chain. Through its efficient processes of sharing relevant data such as order and shipment data, sales data and inventory day, companies can eliminate all kinds of uncertainties and enhance their productivity. This leads to fewer experiences incurred in distribution and boosts sales for the company.
Companies can also use blockchains to enhance their supply chain visibility. This is a prospect that is often pursued but very difficult to achieve in many other setups. By providing a platform that allows all partners post to a single ledger, businesses can gain a lot of visibility to all kinds of services, products, and networks beginning from their supplier’s supplier to their customer’s customers. This, therefore, helps this business reach a more accurate picture of their position and help them improve and expand on their core business processes.
There are sensitive products such as food and pharmaceuticals which are often tricky in distributing through traditional platforms. By using a blockchain platform, customers can always purchase authentic products because it is possible for them to track the origins of their products. It also ensures that all parties also adhere strictly to all proper handling procedures.
The challenges of smart contract-supply chain implementations
The Smart contract has a lot of positive effects on the supply chain. But there are some new challenges that have risen with its implementation. Among many of these perceived challenges are error intolerance, resistance to change, lack of standards and protocols, privacy fears and legislature differences. This challenges, therefore, draws attention to the fact the supply chain is not an all-around solution to supply chain inefficiencies. However, studies are carried out to find ways around these problems.
With the use of Smart contracts, global trade will take on a different outlook. Different aspects of production and distribution will take on a proficient perspective. Enormous piles of paperwork will be eliminated while ensuring that all kinds of trade are made in a secure, transparent and authentic network.
The use of Smart contracts might be relatively new, but it has a lot of potential benefits that can transform all kinds of supply chains. Even as there are challenges with this system and more to come in the future, it is widely acknowledged that all potential problems can be resolved quickly owing to the flexibility of the system.