Even though the SCM literature does take into account legal considerations in abstract, as a general factor that impedes blockchain adoption in SCF [86, 150], there is limited in-depth consideration of the specific legal issues that arise and affect the feasibility of each theoretical proposition. Considering that blockchain solutions apply to different existing problems, understanding the pain points and barriers in SCF processes is necessary to perceive how blockchain can revolutionise SCF. The analysis of the selected literature suggests that lack of visibility in physical supply chain processes, time consuming and inefficient manual paperwork, regulatory and compliance related costs, the risk of fraud, and high transaction costs are essential barriers in SCF in general. As academic studies tend to fall behind the practical implementation of technological innovations, relying merely on academic literature would give a rather constringed view of the topic, especially considering the industry is teeming with blockchain projects.
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4 discusses the insights the literature offers for the barriers and pain-points of SCF systems, the ways blockchain can alleviate these, and the implementation challenges for the adoption of blockchain-based SCF systems. This section goes on to identify promising research directions using a cross-disciplinary perspective, and it concludes by presenting the limitations of this study. The book reveals new opportunities stemming from the application of BCT to SCF financing solutions, particularly reverse factoring � or approved payables financing. Another promising direction of research is the articulation of the legal implementation challenges, which is already underway by one of the authors.
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Second, the growing body of academic literature [23] and the emerging range of supply chain financing systems deserve a review, which will illuminate the benefits and the limitations of blockchain SCF procedures. Despite that blockchain provides for networked applications across an ecosystem of companies, with no single party controlling the application [142], to ensure that a company’s systems are compatible with blockchain SCF platforms requires surmounting some managerial challenges. Batwa and Norrman [15] discovered that the lack of acceptance in the industry, lack of technological maturity, and the need for collaboration and coordination among competing parties are the main obstacles for blockchain integration in SCF processes. Likewise, Queiroz and Fosso Wamba [115] discuss implementation challenges through the prism of technology acceptance models in order to understand the individual behaviours in IT adoption based on performance expectancy, effort expectancy, facilitating conditions, perceived usefulness, and trust among supply chain actors. Other scholars suggest institutional theory, diffusion of innovations theory [118], theory of planned behaviour, technology readiness and the classical technology acceptance model [80] to explain the reasons why a particular organisation adopts a new and disruptive technology [86, 150, 159].
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Artificial intelligence, in particular, comes to the fore as a means of overseeing just about every aspect of the supply chain, with its ability to make sense of more data than humans could ever manage. Considering the rapidly evolving nature of blockchain technology and the paucity of publicly available results on the implementation of blockchain-supported A Contribution to the SCF Literature SCF, we have used critical literature review methodology to be able to generate new perspectives [140]. To conduct a transparent and reproducible critical literature review, the process suggested by Torraco [140] and Snyder [128] has been adopted, which was extended by some elements of the PRISMA statement (see Fig. 1).
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Erik Hofmann (Dr. rer. pol., University of Technology, Darmstadt, Germany) is Director of the Chair of Logistics Management as well as a Senior Lecturer at the University of St.Gallen, Switzerland. His primary research focuses on supply management as well as the intersections of operations management and finance issues. He has published in several operations management journals, and is co-author of several bestselling Springer books like “Supply Chain Finance Solutions”, “Ways Out of the Working Capital Trap”, “Performance Measurement and Incentive Systems in Purchasing”, and “Financing the End-to-End Supply Chain” (Kogan Page).
- It provides a fallback option, giving negotiators the confidence to walk away if terms are unfavorable.
- This not only helps in gathering crucial information, but also in understanding the motivations and goals of the counterpart.
- Ensuring internal consensus and collaboration is critical for presenting a united front and negotiating from a position of strength.
- In a permission-less blockchain, such as Bitcoin or Ethereum, anyone can run as a pseudonymous full node, make contribution, and receive awards pursuant to the corresponding rules.
- This literature could not be neglected in the present review, because trade finance is not only highly related [54, 160] but it also partially overlaps with the concept of SCF [21, 84].
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Accordingly, Chod et al. [35] introduce a Bitcoin-based low-cost transaction verification protocol that maintains privacy. The study postulates that a high-type buyer is more likely to adopt blockchain if its reliability increases, if the product has no salvage value, e.g. highly customised or perishable, if its market size increases, and if the verification costs are lower. Focusing on transaction costs, Choi [36] shows that blockchain-based transactions in a newsvendor setting lead to higher profit than a bank-mediated trade, if the blockchain transaction costs are sufficiently lower than the bank charges. Lee et al. [91] compare dynamic interest rates with uniform interest rates in an abstract multi-stage trade finance setting where the bank may benefit from blockchain by reducing the information asymmetry or improving the efficiency of information flows. When there are long delays in collecting reliable information, the blockchain is required for the dynamic interest rates to be rewarding [91]. The review covers the state-of-the-art use of blockchain in SCF in the past five years, 2016 to 2020.
A thorough understanding of the commercial aspects of the contract being negotiated is essential. This includes knowing the market, understanding the financial implications, and recognizing the strategic value of different terms. Balancing legal and commercial understanding https://forexarena.net/ leads to more comprehensive and effective agreements. A successful negotiation hinges on a deep understanding of the other party’s real motivations and goals. This understanding goes beyond surface-level demands and delves into the core reasons behind them.
On August 13, the DOT announced that Ports in Oakland, Seattle and Tacoma have all been added to its Freight Logistics Optimization Works (FLOW) network, joining the Port of Los Angeles and the Port of Long Beach to round out the five largest West Coast shipping hubs. The FLOW initiative was first launched in 2022 as a response to disruptions brought on by the pandemic. It collects and aggregates purchase order information from importers, as well as data from ocean carriers, ports, terminals and railways, all to provide supply chain stakeholders with an up-to-the-minute snapshot of logistics networks across the globe.
The existing gap in the financing of trade, which according to the International Financing Corporation of the World Bank Group is now anticipated to exceed USD 4 trillion [74, 121, 139], is set to double. More granular product and input data enables faster, more accurate logistics cost calculation and more effective negotiations with service providers. This level of visibility will be key in calculating and mitigating carbon emissions as governments and large industrial customers put new rules and standards in place, especially for “Scope 3” supplier reporting.
The fear of losing out on a deal can cloud judgment and lead to agreements that are not in the best interest of the organization. A well-defined strategy and clear understanding of the organization’s goals can help mitigate the impact of FOMO. Focusing solely on immediate outcomes can damage relationships and lead to suboptimal agreements. Successful negotiators think long-term, considering the future implications of their decisions. Building trust and fostering strong relationships with counterparts can result in more favorable terms and opportunities down the line.
Therefore, the above list is supplemented by a desk-based research on blockchain-supported projects and an analysis of documents beyond academic publishing, such as industry-produced research, to provide a solid overview for understanding how blockchain technology is practically being used in SCF. The book reveals new opportunities stemming from the application of BCT to SCF financing solutions, particularly reverse factoring – or approved payables financing. To do so, it first identifies the principal barriers and pain points in delivering financing solutions. This book investigates how the Blockchain Technology (BCT) for Supply Chain Finance (SCF) programs allows businesses to come together in partnerships and accelerate cash flows throughout the supply chain. BCT promises to change the way individuals and corporations exchange value and information over the Internet, and is perfectly positioned to enable new levels of collaboration among the supply chain actors.
Moreover, the limited visibility does not only ignite more than 25,000 disputes in SCF every year with USD 100 million tied up at any given time [15], but also hampers the collection of receivables for the core firm [47, 92]. The lack of visibility impedes trust and commitment among supply chain partners [46, 119] and foments moral hazard problems [34] as well as more general adverse effects of information asymmetry [35, 91], which result in sub-optimal operational decisions that expose stakeholders in supply chains to financial risks [10, 13, 127]. As a result, many actors in the chain operate in opacity and a large group of MSMEs are precluded from SCF [45], especially if they do not transact directly with the core enterprises [93]. To our knowledge, this study is one of the very few to have contemplated the implementation challenges for blockchain adoption in SCF.
The lifecycles, availability and source of materials, parts and components used in a product should be integral to the product design process. With this knowledge in hand the supply chain team can configure transportation and logistics, calculate costs and manage risk well in advance of production and, later, parts replenishment. “It made people aware that there is no use in having a great product design or a perfect production process if you don’t have the material, if you can’t ship your product,” Schmidt says. While SCF is difficult to obtain for many stakeholders in an ordinary business environment, the ongoing pandemic and global recession magnify the existing pain points and barriers in SCF and pose new ones of unprecedented scale [73]. Most of the problems being faced today originate from the paper medium used in SCF and relate to the delivery and the handling of physical documents, the lack of staff, the inability to print, and business closures due to lockdown restrictions [96, 108]. Moreover, the necessity of validating the originality of documents and the legal matters that emanate from jurisdictions requiring wet-ink signed payment obligations and transport documents have challenged the industry’s capacity to deal with this unrivalled disruption on a global scale [73].
Moreover, Babich and Hilary [9] underline the ‘garbage in, garbage out’ weakness, namely the issue that there might be discrepancies between the information recorded in the blockchain and the physical state due to mistakes or intent. Although IoT is often presented as the solution to the flaw of introducing erroneous data into the blockchain [27], the technological risks of the system are not sufficiently discussed in the extant literature. For instance, the system is vulnerable to fraudulent activities by malignant actors, who may separate the sensor from the rest of the cargo to automatically trigger the release of an unlawful payment. “I was asked to look end-to-end through the whole value chain,” Volpe says, with attention to such critical elements such as data connectivity, real-time tracking of products and their condition in transit, alerting, sustainability, and digital-twin technology.
