Supply Chain Management, Blockchains and Smart Contracts

22 Pages Posted: 19 Jul 2018

See all articles by Bhavya Bhandari

Bhavya Bhandari

New York University School of Law

Date Written: June 28, 2018

Abstract

Many still view blockchain as an esoteric concept, often associating it only with the famous cryptocurrency, Bitcoin. But recent research shows that its application can have far-reaching implications in many areas; supply chain management being one such. Due to globalization, supply chains have become more complex in recent years. The products we use and consume everyday have parts and ingredients that have been sourced from all around the world. Today, both large conglomerates and small businesses rely completely on these global supply chains to deliver the ingredients and parts that ultimately go into making their final products. For these reasons, millions of dollars have been spent in the last few decades to refine the current supply chains and to make them more cost-efficient. Despite these efforts, global supply chains have substantial issues.

Blockchain, along with smart contracts and IoT, can tackle most of the problems existent in supply chains today, saving companies significant costs, time and effort. It can also help companies cut down on their contingent costs by improving the traceability of their products. This in turn would help companies avert future disasters – such as potential consumer lawsuits and reputational harm, saving companies a chunk of the hundreds of dollars they currently spend on resolving consumer litigation and PR. There are also collateral benefits to this; companies can potentially improve their Environmental, Social and Governance (ESG) ratings and their overall Corporate Social Responsibility (CSR) ratings – important criteria for today’s savvy and conscious investors. From economic and societal perspectives too, blockchain can significantly improve the sustainability and inclusivity of global supply chains. This would significantly benefit groups like farmers, cotton-harvesters and the like, whose profits are severely undercut by middlemen. Clearly, companies have many incentives to move their supply chains onto a blockchain. Many companies are already engaging consultants, NGOs and tech companies to run pilot projects on certain legs of their supply chain.

This paper focuses on the potential ways in which blockchain can improve the ecosystem of global supply chains to the advantage of its various stakeholders, as enumerated above. The first part of the paper focuses on the problems current supply chain systems face. The second part focuses on how these problems can be solved with blockchain, IoT and smart contracts. The third and the final part highlights the various pilot projects being run by various stakeholders today to improve the traceability and sustainability of the supply chains in various industries through the use of blockchain, IoT and smart contracts.

Suggested Citation

Bhandari, Bhavya, Supply Chain Management, Blockchains and Smart Contracts (June 28, 2018). Available at SSRN: https://ssrn.com/abstract=3204297 or http://dx.doi.org/10.2139/ssrn.3204297

Bhavya Bhandari (Contact Author)

New York University School of Law ( email )

139 MacDougal Street, 419R
New York, NY 10012
United States

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