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The use of blockchain and smart contracts find wider application in supplier onboarding. Enterprises adopt this technology to improve vendor qualification and performance.
This article outlines the second part of creating a process for supplier onboarding with the intent to improve vendor qualification and performance. In the previous part, we talked about merging systems and reducing third party risks. Today, we’ll look at ways to improve vendor qualification and performance with tokens.
We’ve already touched upon the many ways that blockchain and smart contracts improve existing systems and processes in our blog; even SpendMatters listed the top 12 ways to speed up supplier onboarding.
Today we’ll focus on the many ways you can improve vendor qualification and performance
By using a decentralised approach and an immutable audit trail built on the blockchain you can assign a score/rating to the supplier during the validation stage of their onboarding. Smart contracts then create a form of a digital passport for supplier identity on the blockchain network, thus allowing companies to share supplier information with any permissioned buyer on the network and improve vendor qualification and performance.
The qualification you assign to each supplier can be registered on the blockchain, remaining irrevocable and immutable until the next audit. But since smart contracts ensure a permissioned-based data sharing network, the tokens you use help reduce the time and cost associated with qualifying, validating, and managing new suppliers. You are therefore incentivizing performance as all participants in the blockchain work towards the same goal while reducing bad behaviour.
During the setup of the business relationships, the company can motivate the supplier to onboard with a system of tokens: in case of great performance the supplier could receive bonus tokens or, in the opposite situation, penalty tokens. Such an approach can help enterprises to significantly improve vendor qualification and performance with tokens.
Meanwhile, third-party validators, will provide outside verification or audit capabilities directly on the network. But such a relationship is beneficial for suppliers as both buyers and suppliers benefit from the capabilities of blockchain through reductions in cost, complexity, and speed.
The blockchain lets enterprises digitally establish the identity of their suppliers in a credible and trusted fashion.
The tokenization of the process, therefore, has a direct impact on the supplier’s reputation inside the network.
It can also drive process efficiencies across the entire supply chain.
While there have been previous attempts to create platforms that transmit information point-to-point, the decentralized ledger supported by blockchain offers few differentiators. The Blockchain makes it easier to create an archive of supplier information; this archive is updated not only by the suppliers but also by the commissioners. The token model serves as the incentive mechanism, driving participation.
Thanks to the blockchain, such a platform is designed to leverage network effects very quickly. The more buyers and suppliers use the platform, the higher the likelihood that they will share information through it. This increases the accuracy of the information, which then leads it to be more attractive to suppliers and buyers.
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