Research Brief explains power of Smart Contracts, outlines Supply Chain Case Studies while also highlighting challenges and offering an Implementation Roadmap
Chain Business Insights, an independent research firm focused on the application of blockchain in supply chain management and trade finance, has published its latest research brief. Smart Contracts in Supply Chain: Making Sense of a Potential Game Changer explains the concept of smart contracts and their application in supply chains, as well as highlighting their pros and cons. It also lays out an initial path for gaining expertise in these tools.
“A smart contract is computer code hosted on a blockchain that defines and executes the terms of an agreement between parties,” says Ken Cottrill, co-founder and research principal at Chain Business Insights. “Given their versatility, the range of potential applications in the supply chain domain is vast.”
The research brief identifies and elaborates on several benefits of smart contracts including verification, visibility, lower costs, self-execution, clarity of agreement terms, fraud protection and connectivity. It also notes the challenges that come along with implementation. Among them are legal standing, lack of standards and protocols, privacy fears, error intolerance and resistance to change.
A case study on a cotton supply chain proof of concept in which 88 bales of cotton were shipped from the US to China illustrates how smart contracts work in practice. The participants claim that this was the first global trade transaction between two independent banks that combines the emerging disruptive technologies of blockchain, smart contracts, and Internet of Things (IoT), for a real transaction and shipment of goods.
“Several companies recognize the applicability of smart contracts to the supply chain space,” says Peter Harris, co-founder and research principal at Chain Business Insights. “IBM, Maersk, Microsoft and SAP Ariba are among the first to engage in proof of concepts, but we expect that list to expand rapidly.”
The authors emphasize that despite its many advantages, smart contracts are by no means a panacea for fixing inefficiencies in supply chains. The rationale for using them depends on the type of agreement under review, as well as its scale and scope. They offer some pointers for exploring this solution and discuss some future developments. Finally, a useful appendix lists smart contracts vendors.
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Chain Business Insights is the first company to provide research, analysis and business intelligence on blockchain technology specifically geared toward supply chain management and trade finance professionals. Our clients include supply chain practitioners in a wide range of industries, intermediaries such as third-party logistics providers and import/export agents, financial services, technology vendors, legal firms, government, management consulting and academia. By becoming a client, you can keep abreast of the latest developments and learn how blockchain can help promote efficiency, save costs and improve regulatory compliance. Clients pay a single annual fee to access all Chain Business Insights research offerings and services. Clients benefit from a substantial discount and exclusive services.