Execution errors such as mistakes in inventory data, missing shipments and duplicate payments are often impossible to detect in real time. Even when a problem is discovered, it is often difficult and expensive to trace the origin of the discrepancy as it requires extensive audits of data and information across various accounting ledgers and Enterprise Resource Planning (ERP) systems.
Supply chain activities are often extremely complicated as orders, shipments and payments may not synchronize swiftly. Multiple orders may be merged into one order and one order may be split into various shipments and invoices.
Audits of supply chain structures help in compliance in contracts but they provide limited help when it comes to improving operational efficiencies.
Supply chain requires extensive data handling in various ERP systems most of which cannot and are not completely integrated with each other resulting in discrepancies in tracing of inventory and documentation at various stages in the supply chain processes.
The three flows that take place in a supply chain (Financial flow, Information flow and Inventory flow) are easily catered in a blockchain because the data is not recorded in a financial ledger therefore the dependency on particular ledgers for particular types of transactions is eliminated. Each node in the blockchain has access to the tamperproof information in real time.
Since participants have their own copy of transactions, they can review the status of transactions as well as inform the other party if there have been any discrepancies.
Data cannot be overwritten because the data on all previous blocks would also have to be rewritten. This in turn will reduce their audit costs to a significant degree which are error prone and time consuming.
Banks are benefited as well as they are able to make more informed decisions when providing lending services to suppliers as they have access to real time data of transactions between the supplier and retailer.
Smart contracts will allow the bank to execute contracts automatically without any intervention when particular terms and conditions of a contract have been met.
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