Who saves the Italian, Spanish, and Greek economies? Ask Dianrong and Foxconn — and Blockchain.
A Chinese startup is building the keystone technology for resilient economic systems.
Have you spoken to business owners, managers and entrepreneurs in Italy recently? With the potential collapse of major financial institutions, all of them lenders to many small and medium size companies, credit is nearly impossible to obtain. Small and medium sized businesses continue to be the lifeblood of developed economies and employ large parts of the workforce. However, they suffer most from reductions of credit in the overall economic system.
Credit is critical to financing production, inventory, and time between delivery of goods and receipt of payments. In multi-layered supply chains, significant inefficiencies exist resulting in challenging operating environments for small suppliers of large companies. Just to name a few: Delays in order confirmations, delays in payments for goods delivered, dependency on very large customers, etc.
Any one such issue can cause financial havoc on suppliers and result in difficulties to meet delivery obligations, or bankruptcy. For a large company the impact of losing just one small supplier can be dramatic: Production lines may stop, contractual penalty obligations kick in, valuable engineering resources are deployed for work-arounds, new suppliers must be validated…
So, how can complex economies, with multi-layered supply chains increase overall efficiencies? [Hint: Not by Central Bankers with their Billions paying Bank CEO and MD salaries, and not by ERPs or centralized payment rails].
Complex supply chain financing is solved by companies like Dianrong and Foxconn with a blockchain based service called Chained Finance. Its platform has already financed over $6.5m in loans to Foxconn suppliers which normally do not access bank lenders. Thanks to blockchain transparency, suppliers have easier access to funding and Foxconn increased visibility on transactions.
A brief word on blockchain in this context for readers not yet familiar with this technology. Just imagine that in a blockchain enabled ecosystem, a company can immutably prove it received an order, certain inventory exists, or a shipment is out for delivery. Such data can then be selectively disclosed to obtain credit from a lender (or a bank — if they are still needed). Additional possibilities include immediate and automatically executed payments on delivery thanks to smart contracts, eliminating the need paperwork proving receipt, completeness, etc.
Principles of the Dianrong/Foxconn platform can be applied beyond firms and their suppliers. Consider closely linked economic regions, or entire economies, such as Italy, Spain, Greece, under permanent financial distress due to a lack of credit for the most productive parts of their economies.
Increased transparency, based on universal blockchain transaction layers, will result in dramatically improved resilience of entire economic systems. A world, where capable and productive manufacturers no longer depend on rent seeking, inefficient financial institutions, but can access financial markets directly for expansion and working capital needs, generating returns for all share- and stakeholders.
http://www.coindesk.com/foxconn-wants-take-global-supply-chain-blockchain/
https://hbr.org/2017/03/global-supply-chains-are-about-to-get-better-thanks-to-blockchain
