On May 25, 2023, SupplyChainBrain quoted A.J. Zottola on the role smart contracts could play in supply chains.
According to the article, more suppliers are adopting digitization, and traditional contractual agreements in the supply chain space are being superseded by new arrangements known as smart contracts, a type of self-executing program that automates the actions required to fulfill a contract, saving the involved parties time, energy, and money.
A smart contract is an arrangement that’s digitized and takes effect after being created, without the need for any other type of physical or digital interaction once a set of predetermined conditions are met. Even though smart contracts have offered another way to draft and create contracts for almost 20 years, they’re still relatively rare. The unique aspect of smart contracts is that they don’t require human interaction once they are drawn up, automating the process of fulfilling contractual obligations.
Highlighting some of the ways smart contracts could be beneficial to supply chains, Zottola says security is a major advantage of smart contracts, along with the ability to execute increasingly complex agreements almost instantaneously. “That could facilitate a lot of supply chain transactions in a positive way,” he said.
For all their advantages, smart contracts come with certain problems. It’s extremely difficult to amend a smart contract that has already been executed. Instead, the parties must come up with a completely new contract that supersedes the old one. “Before, you would have changed the terms and made the old contract disappear, but it doesn’t work like that anymore,” said Zottola.
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