Blockchain in business

Published by Jan H. Jansen on

Blockchain in business

In this series of posts I would like to discuss with you six topics:

  1. Familiarize with blockchain definitions specifically for supply chain management (SCM)
  2. Learn how blockchain works in SCM; general overview of data involved
  3. Understand what makes smart contracts be so “smart”
  4. Stakeholders involved, how they are connected to each other in blockchain, what type of information is used, how information is stored, how information is protected, which costs to be paid are considered, how payments are arranged, how the money flow starts, how physical flows are arranged
  5. Example/use case
  6. Learn how blockchain will change our world and your career – trends and prospective

Let us start first with a definition of blockchain (Kückelhaus & Chung, 2021):

Evolving beyond its association with bitcoin, blockchain and other distributed ledger technologies can remove significant layers of complexity from global supply chains. It can facilitate greater trust and transparency between supply chain stakeholders, supporting the automation of administrative and commercial processes. Smart contract concepts will also create opportunities for new services and business models in logistics.’

So blockchain can be defined like a network of distributed ledgers that record transactions with a time stamp. So we see blockchain  as a  non-public or business network in a B2B environment or a peer-to peer business network of companies (in the supply chain).

Important functionalities of such a peer-2-peer business network in a supply chain are:

  • Processing invoices between business partners
  • Sharing forecasts in the supply chain
  • Confirmation of sending and receiving physical flows in the supply chain between companies (incl. documents like Bill of Lading, Letter of Credit, etc.)
  • Confirmation of payment decisions or discussions about disputes
  • Etc.

In figure 1 the 3 well-known flows in the supply are plotted: physical flow (in red), the information flow (in blue), and the financial flow (in green). Blockchain technology is nested between the physical flow and the financial flow, the distributed ledger (blockchain) technology records data from both processes in a peer-to-peer business network in the supply chain.

Suuplu chain flows
Figure 1 Supply chain flows (Jansen, 2021)

References

Jansen, J. H. (in press). Principles of Supply Chain Finance. Arnhem (NL): Amazon.

Kückelhaus, M., & Chung, G. (2021, November 17). DHL. Retrieved from DHL: https://www.dhl.com/content/dam/dhl/global/core/documents/pdf/g0-core-trend-radar-widescreen-2019.pdf

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