Supply chain finance (SCF) is a set of technology-based business and financing processes that link various parties in a transaction to boost efficiency and lower financing costs. A proper SCF ensures businesses can foster strong relationships with suppliers, decrease currency risk and improve liquidity. Equally important is to adopt SCF solutions that are efficient and reliable.
Blockchain is helping accelerate supply chain finance by deploying smart contracts that get triggered when a predetermined event takes place. It increases trust between all the parties involved in a transaction and prevents a single entity from having too much control and thus maintaining an efficient supply chain management.
Also, the blocks created and validated by blockchain can't be deleted, erased or modified. This results in enhanced security and thus acceleration of SCF solutions. Also, with a blockchain-based SCF being more specific, where all parties work on a shared ledger, the same brings efficiency into operations.
Blockchain also prevents supply chain disruption by eliminating the distrust in SCF. By storing historical demand data, it helps in accurate prediction of consumer buying and payment cycle. Through smart contracts, the outstanding balance from the buyer reaches the seller within the stipulated time.
With smart contracts carrying out all the transactions within seconds, blockchain gives greater control, speed and reliability thus creating robust supply chains in the process. By eliminating paperwork and information asymmetry, SCF is all set to witness radical changes in the coming days thanks to blockchain. With SCF being available to smaller entities with increasing adoption of technology, its effective management is possible through blockchain.