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Businesses can increase working capital, fortify relationships with suppliers, and lower supply chain risk by using blockchain supply chain finance. Your firm must increase the effectiveness and openness of its supply chain as change is happening rapidly. Fortunately, more recent technologies like the cloud, artificial intelligence, and blockchains can aid in streamlining the procedure. Supply chain finance (SFC) is undoubtedly the most significant solution for businesses wanting to improve their working capital and cash flow condition. This emphasizes the growing significance of supply chain finance initiatives, which frequently serve as economical sources of capital as well as aids in the ecosystem's improvement of financial structures, working capital, and payment flows.
Business Research insights states that the global blockchain supply chain finance market size was USD 10,660 million in 2020. The market is projected to reach USD 92,480 million by 2027, displaying a stunning CAGR of 33.6% during the forecast period.
Interrupted Supply Chains & Manufacturing During COVID-19
In the current scenario, where the COVID-19 pandemic has shown the flaws in the blockchain supply chain finance that are currently in use, digital transformation promises to reduce the friction in global trade. An up-to-date analysis of cutting-edge commercial implementations and theoretical stances on the usage of blockchain as a vehicle for the digitalization of supply chain financial systems is provided. By decreasing inefficiencies and enhancing visibility between parties—which have up to now been the key problems in this area—blockchain technology can help blockchain supply chain finance solutions innovation.
Benefits of Using Blockchain Supply Chain Finance
- Benefits for Buyers
While sellers seek to be paid as quickly as possible to lower their Days Sales Outstanding (DSO), buyers typically focus on extending their Days Payables Outstanding (DPO). SCF can meet the objectives of both parties by giving suppliers the ability to accept payments in advance while giving buyers the flexibility to make payments at a later time on an established invoice due date.
- Benefits for Suppliers
SCF helps suppliers gain access to affordable financing and DSO improvements without affecting their current credit lines. Suppliers have complete access into the payment process due to SCF programs that use cloud accounting technology, which also improves operational effectiveness. By utilizing early payment, suppliers can lower their DSO, which enhances their working capital position. Suppliers will be better able to grow their companies and invest in innovation if their cash flow is improved.
- Benefits for Financers
For modern finance teams aiming to automate and enhance their current supply chain finance operations, switching from on-premise and legacy accounting software programs to sophisticated cloud accounting software offers a wide range of advantages. The connectivity that transforms conventional supply chains into supply networks might happen swiftly as a result of supply chain financing operations in the cloud. It helps firms establish business cases and win executive buy-in at a low cost by supporting highly distributed operational processes.
Limitations of Blockchain
While blockchain may someday prove useful in the sphere of business, it is doubtful that this kind of innovation will occur in the area of funding until the technology advances. Blockchain is expected to soon play a part in the worldwide flow of finance, according to experts. But for the time being, this is unlikely to happen given the challenges of using blockchain and the maturity of the technology. Various demands for more protection and openness, particularly when sharing information, could pose difficulties for the implementation of the vendor-wide program. If a specific strategy were to change industrial landscapes, the arrangements would be needed.
Below mentioned are the top pioneers functioning in the global market:
- Mahindra
In November 2021, IBM and Mahindra, an Indian multinational conglomerate and lender, announced a cooperation to create blockchain applications for better, more effective supply chain finance among India's SMEs. This project would be the first blockchain supply chain finance initiative in India, according to IBM. In order to foster trust and transparency throughout the supply chain, it is intended to develop a standard platform for supply chain finance from supplier to manufacturer transactions.
- IBM
With the use of blockchain technology, IBM and the logistics and shipping firm Maersk Line will develop a new method for digitalizing the whole cross-border supply chain. To prototype the solution, IBM and Maersk collaborated with a range of partners, including governmental organizations, business associates, and logistics companies.
Future of Supply Chain
Additionally, the Internet of Things will be used to share data with other machines in the future of SCF, and artificial intelligence will be used to train machines to perform tasks more effectively over time. Businesses are now starting to recognize the significance of the data they gather. Data is the new currency, and how it is handled, processed, and secured will become increasingly crucial.