IEEE 2418.7-2021 pdf download

IEEE 2418.7-2021 pdf download.IEEE Standard for the Use of Blockchain in Supply Chain Finance
4. Challenge of supply chain fnance
Before commodities are ready for selling, raw materials have to be passed through multi-tier suppliers, manufactories, multi-level distributors, and so forth. During this procedure, different entities are involved to construct the entire supply chain.
In the supply chain, the core enterprise, e.g., the manufacturer, has strong competitiveness and large scalability, so it may impose strict requirements on the upstream and downstream small- or medium-sized enterprises in terms of price, delivery, and account period. This results in the lack of cash liquidity for small- and medium- sized enterprises. Accompanying with prevalent globalization and off-shore production, the supply chain becomes longer and more complex, which further devastates the money liquidity problem of small- or medium-sized enterprises. More seriously, this imbalance among different entities could break the supply chain, and cause bankruptcy of relatively weak entities. By utilizing supply chain fnance, different enterprises are associated together. Based on credit endorsements of the core enterprise and real transaction data, fnancial institutions on the chain can provide fnancial service to the corresponding enterprises. In this way, the fnancial institutions can earn benefcial commission.
An example of supply chain fnance is illustrated in Figure 1, the commodity production line consists of multi-tier suppliers in upstream sectors, the core enterprise and multiple downstream distributors and sale companies.
To control the safety, the fnancial institutions, e.g., funding institution, insurance agency, typically recognize the credit of the core enterprise, and provide loans only to entities who directly trade with the core enterprise, e.g., the tier-1 supplier. However, the weaker points on the chain are small and medium size enterprises.
They have little power to bargain with the large counterparts, and banks are reluctant to lend money to them due to their vulnerability. The supply chain is a system with multi-party participations. If one point is broken, even far away from the core enterprise, it can cause damage to the whole system. It is critical that the fnancial beneft can be spread across the whole chain. To ensure supply chain safety, it is necessary to increase liquidity of small- and medium- sized enterprises, so that they can stabilize their operation or even expand production. On the other side, the fnancial institutions can accelerate capital fow and make proft by providing fnancial services.
Several challenges need to be solved to enable the inclusive funding support on the whole chain. Utilization of bills may try to solve the problem, but it is ineffcient in practice. For example, the use of commercial bills is limited to reputed corporates, the period for discount for bank bill always fuctuates, and there is a lot of uncertainty during transfer.
Owing to its tamper resistance, immutability and open sharing, blockchain can solve the credit transference with higher effciency and more fexibility (IEEE Std 2418.2-2020). First, information on the blockchain, including enterprise credit, transaction record, good delivery, debt/loan information, etc., is transparent and trustworthy and can be utilized by fnancial institutions to guarantee the fnancial safety. Credit of the core enterprise is transferred to the multi-tier suppliers, allowing them to enjoy lower costs on fnancing. Moreover, higher proft can be achieved by fnancial institutions due to decreased system risk, more served enterprises, and improved effciency.
5. Reference architecture
5.1 System operation framework
Enterprises represent the entities in the supply chain, e.g., the core enterprise, upstream suppliers, and downstream distributors. Different financial institutions including the account receivable management institution, the guarantee institution, the funding institution, and the clearing and settlement institution, can provide diverse financial services together. The business system provides a service portal to the participants such as enterprises and financial institutions by constructing a transparent and trustworthy platform for information sharing and transaction records. The access layer is for different participants to access the underlying blockchain platform. The system operation framework for SCF is shown in Figure 2.IEEE 2418.7 pdf download.IEEE 2418.7-2021 pdf download