The supply chain finance landscape is plagued by issues such as inefficient operations and inadequate funding. As the supply chain financing focuses on improving the working capital, lenders liquidity, financial flow optimization, and cash flow management the complexity is growing day by day.

While the introduction of aspects like factoring, reverse factoring, payables financing, and dynamic discounting have streamlined the SCF ecosystem to a certain extent, it still continues to remain complex. This is due to lack of trust and transparency besides visibility and process optimization, which is also going for a toss.

Supply chain finance and Blockchain

Blockchain 2.0 or the smart contracts offer the desired panacea for the challenges of traditional SCF. Let us look at what Blockchain supply chain finance has to offer:

Transparency

Smart contracts will enable all the stakeholders of supply chain finance Blockchain to automate the transactions. Each stakeholder remains responsible for updating the shared ledger on their part. As these updates can be viewed across the ecosystem, trust, transparency, and efficiency is enabled.

Speed

The current paper-based transaction processes are slow and add to the infrastructure cost. With a Blockchain solution in place, processes can be automated thereby improving speed and efficiency of the supply chain finance ecosystem. The Smart contract functionality will help eliminate trust issues that are inherent in a centralized system.

Single Source of truth

All the transactions are recorded over a shared ledger in a decentralized manner. As the ledger is immutable the transaction authenticity and provenance cannot be questioned. A single source of truth can be maintained by facilitating trusted financial collaboration across Supply chain finance.

A clear state of fulfillment

As activities of each stakeholder of supply chain finance are recorded on the ledger, every participant will have access to real-time state of fulfillment.

Low costs

Payment initiation time and loan approval time can drastically be reduced with the implementation of blockchain solutions for supply chain. The reduced time will, in turn, reduce the processing fees making the process radically cheap.

Compliance

Blockchains built into SCF will directly address the compliance challenges. The contracts will be built in compliance with government regulations and other internal rules thereby eliminating fraudulence completely.

To wrap

Financial institutions are adopting blockchain for realizing greater supply chain transparency. As blockchain encrypts the transaction records and offers easier and faster ways of authenticating transactions, it lowers the risks for financing institutions.

As a leading name in the Blockchain space ‘Sofocle’ offers its market ready product ‘sofoChain’ that is designed to mitigate the pain points of the supply chain ecosystem of various industries including supply chain finance.