How Boeing, Toyota, Caterpillar, and other OEMs can double their current net profit by using smart contracts to become unmanned “virtual companies”, with or without cryptocurrency: Part 19
Advanced Special Features
Some interesting options open up if most or all OEMs in the world are using a single smart contract app platform and/or if using blockchain to pay taxes (as discussed in part 17) applies to tariffs too.
1. Supplier capacity trading: Some supply chain management experts believe that forward-thinking OEMs will buy their supplier’s capacity, not just their parts. For those who are basketball fans, zone defense vs man coverage is a roughly apt analogy.
“Instead of simply buying parts and products from suppliers, manufacturers should reserve those suppliers’ capacity. By doing so they’ll gain more flexibility, better cost control, and higher product quality”- http://www.supplychainquarterly.com/topics/Procurement/scq200902capabilities/
Imagine a future where Thor Industries and Polaris are both transacting with their supply chains on a common platform.
In September 2027, the snowmobile market is down because of global warming while the RV market happens to be up from a large wave of retiring Gen Xs.
A “master meta-level smart contract” notices that they both share the same exterior lighting supplier; Denali. It automatically offers to sell 30% of the Denali capacity that Polaris had reserved to Thor Industries at a price of 10,000 ether per month. All parties win!
In this regard, smart contracts would allow parties to trade supplier capacity, with the common platform serving as the “exchange”. This is well within the capabilities of smart contracts considering that many have speculated that the Ethereum virtual machine can eventually simulate and replace Wall Street, at least partially. (The World Bank bond from part 16 already hints at this. For further reading on this tangential topic, please see appendix A towards the bottom of part 20).
2. Joint multi-OEM purchases of raw materials: Large megacorps are efficient because they can leverage economies of scale. In the case of OEMs, this often means buying materials in bulk for your suppliers.
Let’s say an OEM has 40–50 suppliers for various sheet metal parts. It would be very inefficient if the 40–50 suppliers individually ordered aluminum stock from Ryerson. Instead, the OEM buys a combined order of aluminum stock from Ryerson to get the bulk price discount and then sells it back to the suppliers accordingly.
This is possible because all 40–50 suppliers are on the same OEM’s accounting system, in other words, they’re on a single ledger.
What if this could be taken even further? The common smart contract app platform is also a single all-in-one ledger. But on a grander scale in that it deals with units of OEMs, not suppliers.
Let’s say the master smart contract notices “Hey Oshkosh, Komatsu, and CNH Industrial, you all seem to be buying 6063 aluminum from Ryerson with heat temper T52” and suggests teaming up to make a bulk order with the understanding that 35% will go to Oshkosh, 20% to Komatsu, and 45% to CNH Industrial.
Such features could be built into the meta-level smart contract architecture and automatically deploy themselves.
3. Make America Great Again through real-time adaptive tariffs: If we transacted with smart contracts, then tariffs could vary based on the real-time trade deficit with China.
Every morning, the decentralized oracles (i.e. Chain Link) would reach consensus on what the current trade deficit with China is and feed it to all OEM smart contracts with Chinese suppliers. Based on the deficit (that specific day), the smart contracts would automatically calculate the tariff rate (using a formula predetermined by the government) on that specific day in real time.
“Tariff on imported auto parts is currently 25%. For every $10 billion the trade deficit creeps above $375 billion, apply additional 3% tariff on imports. If trade deficit goes below $250 billion, then reduce tariffs by 0.3% for every $10 billion below.”
Provides daily, real-time self-correction.
Continue to part 20….