The Role of Blockchain Smart Contracts in the FMCG Sector

Blockchain, which came up as the foundation of Bitcoin, is now spreading its wings to become the backbone of many cybersecurity systems. This is one evolving technology that is discussed the most and receiving huge media attention. Blockchain works on a distributed record system where all the transactions are logged for the stakeholders to view, which is a conceivable way to build trust and security. In the fast-tracking business processes, blockchain technology brings in more relevance by covering up the human component. Many enterprises and tech experts are exploring blockchain technology in many imaginable ways, and blockchain-based applications are going to surge in the future.

In this article, we will discuss in-depth smart contracts, which are self-executing contracts in which conditions of the agreement between the sellers and buyers are written clearly in the code. The codes and agreements which are enclosed within the blockchain store function as a decentralized and distributed blockchain network. Businesses are also looking at ways to automate different transactions based on blockchain technology to make a more efficient and smooth process for all parties. Smart contracts will enable this objective too.

Over the past few years, developments in smart contracts enabled more trust among agreements and transactions implemented among different parties without the need for a single central authority, external system of enforcement, or a legal structure. This will make sure that the transactions are made clear, visible, and unalterable.

Benefits of smart contracts

Smart contracts are alternatives to conventional contracts, which follow a centralized business model. Here, we will discuss some of the benefits which smart contracts offer to businesses.

1. Direct customer transactions

With the use of smart contracts, you can eliminate the need for any middlemen and can also enable a very clear relationship directly with the customers.

2. Resistance to failure

By using smart contracts, users need not have to depend on any third party to establish contracts between businesses and individuals. Also, there is no sole person or third person in control of the data or money involved in the contract. Decentralizing the data will ensure that even when no individuals exist in the blockchain network, it will keep functioning with no loss of data.

3. More trust

The business agreements as per the terms of the contract are executed automatically and enforced. Adding to it, these agreements are also immutable and unbreakable. This brings more authenticity to the contracts and also the power of automated execution.

4. Fraud detection

By default, the smart contracts get stored in a distributed network in the blockchain system. With this, the outcome of the contracts is also authenticated by all in this network. No individual will be able to take control and release the data or funds of other people as all the other blockchain participants in the network will spot this and invalidate such an attempt.

5. Cost-efficient

By eliminating any intermediary, blockchain-based smart contracts will help to eliminate any add-on fees. It will enable businesses and customers to interact directly and do transactions with any third-party fee or consulting fee.

6. Better record-keeping

All the smart contract transactions will be stored in sequential order as a block by a block which can also be accessed along the full audit trail.

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Blockchain in supply chain

As of late, there are a lot of talks going on about the adoption of blockchain in the consumer goods and retail sector for better supply chains. The conventional supply chain models largely rely on paper contracts, text files, and electronic mails to function. When we consider fast-moving consumer goods, these modes or contracts are susceptible to errors and biases. This will delay the processes and may cause problems that are so difficult to track down.

However, if the contracts are placed on a shared ledger supported by blockchain, then the FMCG transactions are made more open and visible to the stakeholders. These smart contracts are powered by blockchain systems that can instill more trust in the transactions between users and businesses. These types of immutability features in distributed ledgers imply the inter-enterprise processes, which will become more trustworthy. Overall, it will enable the FMCG-related business contracts to improve different suppliers’ management and guarantee operational and regulatory compliance.

When it comes to FMCG, supply chains are very complex. It may be difficult for companies to find the apt stages where any fraudulence may have ensued. With smart contracts, this possibility can be fully eliminated. At the imitating may be a huge problem, enhanced immutability of data and the distributed ledger induced trust will ensure corporate compliance with the corporate principals, which can identify any inconsistencies in the supply networks. Along with ensuring product quality, smart contracts’ usage can also help build trust with the stakeholders.

A real-time example of a smart contract is how Walmart uses blockchain technology for the same. By finding that a bad batch of vegetables may result in large customer dissatisfaction, they conducted a two-year trial and then announced the introduction of a technology-enabled system to track each lettuce. Now, by the year 2021, the Walmart supermarket chain will compel the farmers to provide all information to a distributed database. As a result, in case of any future sickness outbreaks, the provider may be able to identify and dispose of the affected batches only as opposed to clearing out the whole shelves. Similarly, the tech giant IBM also developed a system which is also tried out by Dole, to track through the supply chain.

It is important to remember, however, that blockchain technology still does not offer a fully compliant solution to tackle the challenges of the FMCG industry. For example, even though much of these are made of the ability to store data in the chain, blockchain itself may not protect against the scope of any fraudulent data being inputted at the first point. We can rely on blockchain-based systems only to secure the available data against any manipulation.