Supply Chain Finance and Blockchain Technology

27 Dicembre 2017
27 Dicembre 2017 d.baldi

Maybe you’ve heard of both these terms, or maybe you’ve heard of neither. It doesn’t matter, as we’ll be explaining them both. What you need to know though, is that a link needs to be made between these two systems, a link that hasn’t been made yet. Therefore, we shall now first explain both terms and then bring them into connection with each other.

What is supply chain finance?

Nowadays we see more and more of these global supply chains, these chains comprise of various multinational buyers that purchase goods from various suppliers across the world. Supply chain finance is a way of payment that increases the efficiency of these supply chains. Originally, supply chain finance works via an online platform and it allows buyers to increase their payment term while suppliers can be paid in advance. These platforms will often ask for a small fee when a supplier requests payment before the buyer has paid the money. So, what does this have to do with that blockchain technology?

What is blockchain technology?

Blockchain technology is a network that is used for the transference of value, which can also be money. A blockchain network is made up of nodes, which are nothing more than computers connected to the network. This network contains a database, which has no central storage point, instead all nodes have a version of the database. Transactions of value or information can be made when a person initiates them, but they need to be verified first. The transaction will be encrypted into a block, which is verified when it is added to the blockchain. A blockchain technology contains complex mathematical problems, and if one solves such a problem, using a lot of CPU, then they have the right to add the next block to the chain and therefore verify someone’s transaction. Now you may have a suspicion that blockchain technology can be used in some way to replace the platform that we mentioned when talking about supply chain finance, and well, you’re right

The connection between blockchain technology and supply chain finance

As I’ve already mentioned, the blockchain technology can be used to make supply chain finance possible. The transactions can flow via the blocks, and as you might understand, each end of the transaction can completely their end of the transaction when they want to and at their terms. You don’t need a third party, or trust in the other party to allow a smooth transaction to happen. When these two are combined, buyers and suppliers can be paid and pay whenever they want while having full control and full transparency. Along with completely transparency, blockchain technology will speed up the process and decrease the costs due to the lack for a need of interference by banks. This system is also completely fraud-proof, as anyone has full insight into all the data, and there is no central platform that can be hacked when it comes to blockchain technology.

We’re not the first to come with this, some start-ups using blockchain technology to allow supply chain finance to happen have already made its way into the world, but these are only just beginnings. Yet, we believe that the connection between supply chain finance and blockchain technology is too good to be ignored, and that it will smoothen plenty of global supply chains across the world. Payments will happen faster, easier and with both ends of the transaction being more content. So, you better get yourself educated on this topic if you want to be prepared for the future of global supply chains.

%d blogger hanno fatto clic su Mi Piace per questo: