Pros and Cons

Chief among this consideration for companies is that blockchain will enhance transparency and traceability throughout the supply chain therefore allowing increased visibility for demand forecasting and risk management. This is made possible as a blockchain is essentially a shared ledger that is validated and updated in real time. Critically, such a system prevents redundant mirroring of the same document across the supply chain and therefore also avoids the problem of desynchronization. As such, this mitigates delays from paperwork required for trade finance record keeping while simultaneously optimizing production and transportation time throughout the supply chain by enabling real time synchronization of decisions with supply chain partners.

Consequently, this live tracking of transactions also ensures authenticity through improved traceability. This will likely be brought about by blockchain adoption pushing the industry to move towards an API-based technology. Hence, quality control is better assured via tracking the provenance and proper handling of goods. Better traceability and improved lines of accountability will also enhance consumer protection as it becomes easier to detect if and when a product was compromised. Moreover, verification of certifications on the blockchain makes document forging and signing much harder therefore minimizing instances of counterfeiting. Of course fraud is still possible if data uploaded to the blockchain is malicious or misleading

however, this could be minimized through cryptoeconomic incentives, reputational systems or managed access in the case of private blockchains.

Paperwork digitization also enables smart contracting functionality to be built on top of such invoices and contracts further optimizing end-to-end processes. Smart contracts can be programmed to automatically check when there is an out-of -balance condition based on pre-agreed contract terms therefore eliminating the invoice reconciliation process while also automating the tax process. Moreover, this prevents bad transactions to be written to the ledger in the first place. If smart contracts are properly coupled with tamper-proof IoT devices, such devices could then act as the trigger for smart contracts which opens up the possibility for much more fine-grained management of the supply chain.

Even without smart contracting functionalities, the increased data resolution on the blockchain will significantly improve demand forecasting and inventory management. More micro tracking of demand better allows the buyer to send the supplier the actual level of inventory consumption to be set against a pre-agreed service level rather than deal with purchase orders. Synchronous access to such data will also democratize forecasting and mitigate inflation of orders as they move upstream. At the same time, such live data will also improve financial liquidity for participants in the supply chain as payment lead times and payment review time is minimized as document transfer time is effectively eliminated. Goods might also be redirected based on multichannel demand changes given the information made available to intermediaries. Additionally, companies are expected to benefit from improved just-in time production as the product spends drastically less time incurring rent while being stuck at a port.