Blockchain-enabled Supply Chain Finance solutions for Logistics Service Providers
Blockchain, along with smart contracts, promises to change business processes and revolutionize financial transactions. The ability of these technologies to digitize transaction workflows, increase transparency and build trust could enhance the use of Supply Chain Finance (SCF) for Logistics Service Providers (LSPs). Therefore, the purpose of this paper is to investigate the application of blockchain technology (BCT) and in particular smart contracts to existing SCF solutions offered by LSPs. Inventory financing and status based receivable financing (SBRF) are introduced as SCF solutions that can be optimized by BCT. The paper highlights the potentials and limitations of blockchain for the two SCF use cases. In case of inventory financing, blockchain enables LSPs to offer a multi-funder inventory financing model based on transparent, immutable and distributed information about inventory as well as customers’ transaction history. Through blockchain-based activity registries, warehouse receipt data is automatically verified by a smart contract and the risk of fraud or double-financing can be mitigated. In case of SBRF, by combining blockchain with smart sensors tracking the physical supply chain flow, LSPs could become providers of a blockchain-driven SBRF service that distributes a transparent and validated supply chain status to all network members. The immediate availability of invoice information together with the increased supply chain visibility enables financiers to offer new and more attractive receivables financing services earlier in the supply process and at lower risk. Nevertheless, blockchain is still an emerging technology and there are challenges to overcome before it will be adopted on a wider scale.