Blockchain Scope For Upstream Supply Chain Management

Blockchain the underlying technology for Bitcoin and other altcoins has been seen as an instrumental tool to bring in the next industrial revolution. The blockchain is basically Distributed Ledger Technology, which promises distribution of power and management through the use of technology.

Although the technology got recognization only after Bitcoin became a rage, and people realized that if implemented correctly, DLT can help society in various sectors like Healthcare, Agriculture, Supply-Demand chain, Entertainment and many more.

There have been several pilot projects going on based on Blockchain and the initial results have been more than satisfactory. Of all the sectors that can incorporate Blockckchain to help them ramp up the work and make it more efficient, “Upstream Supply chain Management” can make the most of it.

In any supply demand chain, time plays a very pivotal role. It’s very common to have shipment delays which can affect the quality of goods being shipped. But with Blockchain into the picture, these delays are cut down significantly as there are predetermined conditions which need to be fulfilled to execute the contract. Any delays carry a penalty which makes the delivery more prompt and on time.

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What is Upstream Supply Chain And How Does Blockchain Help in its Management?

Upstream supply chain refers to the system where raw materials are processed to make the consumer goods and it may include big factories, small factories or any firm dealing with raw materials and not a finished consumer product.

Thus, time plays a very important role as the quality of raw material being delivered can deteriorate if there are delays. With Blockchain into the picture, these time delays can be cut significantly with the help of smart contracts, where all the criteria are preset by the receiving party and the money is held in an escrow, which will be only released after the delivery of the shipment. Any delays or degrade in quality will lead to a penalty.

Let us take an example to understand the situation better, let us suppose Bob lives in the USA and owns a factory for orange juice. He has identified a supplier in China who would deliver him oranges on a weekly basis. Now both the parties can arrive at the cost and time of delivery.

Now Bob contacts his friend who is into making smart contracts for supply chain businesses, he would tell his friend that the deal has been set to deliver 2 tons of oranges every week for a certain amount, where the quality of the oranges is very important. So his friend would create a smart contract with following conditions,

  1. The quality of oranges should be as per the demand of the
  2. The starting time
  3. The delivery time
  4. The cost of the shipment

When the supplier starts the shipment on time one part of the contract is executed, once the shipment arrives at Bob another part of the contract is fulfilled, Bob checks the quality of the oranges, and if it’s on par the third part of the contract is fulfilled. If everything is fine, the supplier receives the money held in the escrow and if there are delays or degraded quality, Bob can set penalty as well which will be automatically deducted from the final fee.

With the use of Blockchain, everything can go on smoothly without any need for human intervention, the delivery is on time, and if not the seeker can cut penalty and the supplier does not have to make rounds to get their payment.

So, we can see be it upstream supply demand chain or downstream one, blockchain based smart contracts does not only save time but also brings in efficiency and saves cost too.

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Final Thoughts

The blockchain based solutions are not a magic tool but an efficient tool which ensures to weed out the middlemen who are mostly responsible for all the in-efficiency. The human mind is fickle and it tends to go the wrong way if the condition does not fit, however with blockchain based computer programmes which cannot be tampered with or changed without the consent of both the parties involved in the business.

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