Smart Contracts for Supply Chain Managers: Three Criteria to Evaluate

By Sherree DeCovny, Co-founder and Research Principal, Chain Business Insights, LLC

​Participants on a blockchain have a copy of a transaction ledger mutually agreed upon by consensus. Blockchains typically support smart contracts, pieces of computer code that automatically perform business functions such as verifying and executing the terms of a supplier contract. On a blockchain, smart contracts simulate a trusted third party and enable trusted relationships to be created between various parties.
 
In a supply chain context, external changes could affect the terms of a contract such as the failure of a refrigeration system that ruins a shipment. To this end, smart contracts could possibly incorporate external data inputs from the IoT such as light, pressure, humidity, shock, temperature and other variables.
 
Three criteria can help you begin to evaluate whether it makes sense to use smart contracts in your supply chain:
 

• Your current processes involve a lot of manual intervention and many intermediaries.
• Your supply chain problem can’t be solved by existing technology such as database management structures and data warehouses.
• Blockchain and smart contracts would give your regulators more visibility over transactions, which in turn could accelerate your cycle time and save costs.

 
So let’s say you decide to automate through the use of smart contracts. How do you work with technologists to turn a physical paper contract into a smart contract?

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