Blockchain systems form what is known as a decentralized ledger, a type of database that is stored in several different physical locations. Processing is distributed among multiple stakeholders, and each party receives real-time updates in a completely secured system. These aspects make a decentralized ledger an ideal system for the creation, issuing and execution of contracts that can help to protect business models.
What is a Smart Contract?
A smart contract, or cryptocontract, is a self-executing contract, in which the contract terms and conditions are written directly into lines of code. Smart contracts are a blockchain application, self-executing because the terms and conditions of a contract are automatically enforced by the ledger itself.
Smart contracts, applied properly, can make business models more efficient and more profitable in from increased accuracy, efficiency, and security.
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Key Benefits in Automating Electronic Component Purchasing
Implementing smart contracts and blockchain in the electronics industry will transform the supply chain for the following reasons:
- A smart contract defines the obligations of each party within the code and automatically enforces those obligations. Enforcing the contract is automatic because as information is updated it is measured against the rules of the contract; and the system can then determine, for example, whether an asset should be transferred, held or returned.
- A smart contract can be used to execute a sales transaction all the way from the initial order to the final reconciliation. A distributed ledger can see the process through multiple transactional hops, including purchase order, sales order, material issuance, payment and receipt, inventory reconciliation, and ship and debit. When each step of the process is satisfied and registered in the distributed ledger, the next step is initiated.
- A smart contract, underpinned by distributed ledger technology, can make a business model more efficient because all parties receive information in real time. Each stakeholder has a distributed ledger, which is automatically updated as each contract condition is met. All parties have 100% up-to-date, real-time information to work with.
- Also, because a smart contract includes the automatic enforcement of obligations, the human factor is eliminated, reducing the risks of error, fraud, or manipulation. Smart contracts help to eliminate the middleman, reducing third-party costs and building trust directly between business partners. Finally, with fewer manual steps, processes are faster, more efficient, cost-effective and less prone to human error.
The blockchain provides that a smart contract has a high level of security. The contract is encrypted and distributed among nodes, guaranteeing that the contract cannot be misplaced, and terms cannot be changed without the knowledge of all parties.
Smart contracts not only save an organization time and money, they can prove beneficial to transactional executions all along the supply chain.
A smart contract guarantees all parties a very specific outcome, and eliminate confusion, while providing an automatically self-enforcing process in a secure, real-time environment.
While the technology is cutting-edge, the applications of smart contracts are almost unlimited, in supply chain as well as industries including manufacturing, real estate, travel, healthcare, finance, government, the electronic component supply chain and more.
Impacting the Electronics Supply Chain
In the electronic parts industry, smart contracts can be used to efficiently and automatically lead stakeholders through a number of transactional hops, to complete a sales transaction with a minimum of manual effort and third-party intervention. Using a smart contract helps to improve the efficiency and profitability of business processes, while provide a secure, updated environment to ensure that terms and conditions of all parties are satisfied.
Orbweaver Connect
Orbweaver Connect is a universal integration and translation engine for manufacturers and distributors along the supply chain to securely collect and transmit data. Whether it’s API, XML, an EDI software solution, or Blockchain, Orbweaver Connect seamlessly integrates with technology protocols to exchange electronic component data, request for quotes and purchase orders while eliminating manual processes.
To learn more about Orbweaver Connect and our automation solutions for the electronics industry, request a free consultation Orbweaver today.
