Blockchain has a pivotal role to play in today’s increasingly complex supply chains – and not just when it comes to security. Built on blockchain technology, smart contracts deliver greater transparency across the entire supply chain and help get goods to their intended destinations faster and more efficiently. Read on to find out more about smart contracts and some of the many benefits they offer.
More Supply-Chain Players, Greater Complexity
If you’re a regular visitor to this blog, you may remember my earlier post looking at how blockchain can enhance supply-chain security, without impacting speed. But this isn’t the only way blockchain and associated technologies can help master the challenges faced by logistics players. They can also increase transparency and boost efficiency by eliminating many costly and error-prone manual tasks throughout the supply chain.
Today’s manufacturing companies often use multiple logistics providers to get their products from the factory to customers. But the growing number of parties involved in transporting goods increases supply chain complexity – not least because of the huge volumes of information generated by all the various participants in the process.
More Data Doesn’t Always Equal Greater Insight
And it’s not just the many different players that pose challenges. Technology also plays its part. Data from the rapidly growing number of IoT devices, such as sensors and scanners, can also boost complexity and fragmentation, making it increasingly difficult to understand the supply chain as a whole.
Worse still, this lack of transparency can give rise to inconsistencies. In fact, industry estimates now suggest that 10% of all freight invoices contain inaccurate data. The resulting disputes and customer relationship issues impact efficiency and also drive up costs.
Built on Blockchain: Smart Contracts
This is where smart contracts come in – offering a solution that promises a host of attractive business benefits. These contracts are essentially programs that leverage blockchain to execute agreements. Based on simple “if/when <A>, then <B>” statements coded on a blockchain, they provide a combination of decentralization, verifiability, and cast-iron security. The rules encapsulated in smart contracts enable tasks to be initiated automatically if defined conditions are met. For example, a rule could be coded to trigger a payment when a product delivery is recorded.
This conditional contract logic can also be used to define roles, responsibilities, and authorizations. For instance, a smart contract could be set up to allow receivers to register serial number mismatches but prevent shippers doing so, avoiding duplication of tasks and reducing redundant data.
Two Real-World Examples of Smart Contracts
Deployed on a central platform, the smart contracts solution from Adapt Ideations can be used in a wide range of scenarios. It enables contractual partners to keep tabs on important information such as machine parameters. For example, sensors monitor machine temperature and transfer the data to the platform. If the contractually agreed threshold is exceeded, the smart contract is triggered, and all relevant parties are notified.
Another example of the tech in action is the track-and-trace system from Ship Chain, which is geared to the requirements of the transport and logistics sector. It supports end-to-end shipment tracking, from the factory right through to the customer. All associated information is recorded in a blockchain-based database, which can execute smart contracts if specified conditions (such as successful goods delivery) are met.
Adding Value for Supply Chain Players
These examples demonstrate some of the key benefits of smart contracts. By enabling partners in a blockchain network to define all the framework conditions for their relationships, they make for greater transparency. And because smart contracts are stored on a shared blockchain ledger, they cannot be altered or removed – increasing safety and fostering trust among contracting parties.
By automating processes, smart contracts cut out the middlemen, reducing complexity, costs, and errors while increasing efficiency. In addition, they eliminate costly delays and waste due to manual handling of paperwork and consolidation of hardcopy and digital records. What’s more, the digital sets of rules are automatically monitored by the system, reducing manual effort further still.
Be Smart: Act Now and Reap the Benefits
The benefits of blockchain and associated solutions for logistics and transport are reflected in market data gathered by Statista, with 55.3% of logistics service providers stating that they’ve already invested in blockchain to make their processes more transparent and improve organization. And the significance of the tech looks set to continue growing.
If you haven’t already looked into smart contracts and how they can benefit your logistics operations, now’s the time to do so. Accenture can provide you with the expert advice and assistance you need to make the most of this technology. Feel free to reach out to me to discuss industry insights into smart contracts in the supply chain or to identify the solutions that best fit your business.