Dive Brief:
- IBM and Sichuan Hejia launched the Yijian Blockchain Technology Application System to help improve the pharmaceutical supply chain through blockchain financing technology, CoinDesk reported Tuesday.
- A pharmaceutical retailer, hospital and bank also joined the partnership, which seeks to decrease payment delays from hospitals to retailers by increasing transaction transparency, and thereby decreasing credit risk.
- Chinese drug retailers may at times be subject to delays in payment from hospitals due to standard processes, leaving them cash-strapped. Meanwhile, their relatively small scale can lead them to have low credit ratings in China, and unable to secure temporary loans from banks.
Dive Insight:
IBM's new blockchain partnership reveals the powerful side effects transparency and industry collaboration can have on supply chain efficiency.
Financial risk due to delayed terms of payments is not an uncommon issue within individual chains. In fact, another Chinese company, Foxconn, also recently turned to blockchain to help provide suppliers with small loans, directly, and avoid supply delays because of it. Establishing a quick, transparent and reliable method by which suppliers improve their cash flow benefits all parties in a chain.
Blockchain promises to do just that. The theory behind IBM's new partnership is that, by jointly tracking transactions between banks, medical suppliers and hospitals, a digital record of the supply chain can be formed and accessed by the partners, thereby improving trust. At first, this would simply help boost credit rating ... but in the long-term, IBM believes payments could be made within days of receiving supplies.
