Blockchain in the Supply Chain Finance
The supply chain finance is the short-term credit offered by the seller to the bank and financial institutions to avail funds. It is an instrument sold by the suppliers to the banks once the buyer approves the payment. Thus, it lets the suppliers conduct trade efficiently without concerning costs, risk and liquidity. The blockchain in the supply chain finance is one of the big transformations to happen.
Supply chains have always been complex in nature. Instead of direct transactions, they involve a number of parties. The complexity arises due to lack of trust, lack of funds and a massive investment of time. The new technology of blockchain will enhance the system. It shall soon evade the complexity of the instrument.
The need for the supply chain finance emerges more in the small and medium enterprises. These organizations find the shortage of funds, if trading on credit. Thus, the blockchain supply chain finance will have a huge impact on the small businesses.
Benefits of blockchain in the supply chain finance
Following are some of the popular ways how blockchain would enhance the use of supply chain finance:
1. Build the much-required trust
The supply chain in the current scenario is not entirely optimizable. It is a manner of collecting payments via banks. This happens because the selling party does not possess enough trust on the buyers. It is ultimately the customer who’s let down. The blockchain technology will build a factor of faith among these parties. It will use the public ID and ratings to give you a clear picture of readily available goods and services.
If you want to deliver value to your customers consistently, the technology will help you do so. Moreover, the customers will be able to find trustful suppliers based on the real-time data. The technology, in this way, will reduce the instances of fraud. This means a person’s finances and reputation, both stay under protection.
2. Audit Trails
The audit trails maintained by the blockchain is the greatest benefit. The new technology has a repository that has the entire record of transaction history. Whenever a payment or a transaction takes place, it automatically records the same with accuracy in detail. Thus, we can assert that the blockchain technology has a robust audit trail. It is apt to implement the technology from an ethical and legal point of view.
The audit trail will automatically evade money laundering and related activities. If you view from a logistical perspective, the blockchain technology will be a benefit from its records. One can identify everything right from the items being traced, delivered and stored.
Thus, any gap in efficiency or productivity can be easily defined and quickly solved. The delays will get rare. No item will go out to be missing. The technology has the capability to make the supply chain finance more efficient and transparent.
3. Efficiency
The blockchain development will also improve the efficiency in a significant manner. It will eradicate the traditional invoicing methods. This technology can record all the purchase orders. It features unalterable blocks in the chain. When the suppliers approve the purchase order, they will have to mandatorily deliver the items. Further, the suppliers need to fulfill their commitment at the agreed cost. Thus, this will stop suppliers from making invoices and asking for more. Consequently, this will improve the operational performance of the supply chains.
Final Words
The blockchain features massive transparency and efficiency. The industry has been transforming their business operations to opt the new technology. It is a valuable source to retain the trust and work without risks.
