German luxury automaker Mercedes-Benz Cars and Icertis, a key supplier of cloud-based enterprise contract management solutions, have partnered to implement consistent documentation of contracts in the supply chain with the aid of blockchain technology.
Daimler, Mercedes-Benz’s parent company, demands that its direct suppliers stringently pass on and control standards and contractual duties with respect to working conditions, human rights, safety, environmental protection, business ethics, and submission within the supply chain.
The blockchain prototype facilitates the transparency and traceability of compliance with these strict standards through the entire supply chain. The network, which is designed like a secure accounting system, will signal if any of the suppliers deviate from their contractual duties.
According to a press release on February 25th by Mercedes-Benz Cars, together with Icertis experts, the blockchain prototype has been improved to introduce transparency in complex supply chains.
Wilko Stark, Member of the Divisional Board of Management at Mercedes-Benz Cars, Purchasing and Supplier Quality, stated that blockchain technology is capable of fundamentally changing their procurement processes, adding that its impact could affect the entire value chain.
According to Stark, the prototype system is the first step in testing one of many possible applications. The automaker aims to increase transparency beyond its direct suppliers, especially as global supply chains become more complex and interconnected.
A blockchain platform with contractual clauses can act as a ledger of sustainability. In this case, all the participants in the supply chain are able to record their activities to ensure and confirm that the Daimler sustainability requirements are being met. This assures the company that its global procurement and contractual practices follow the company’s strict requirements. The blockchain prototype fosters trust in the integrity of the supply chain, because it discloses information related to sustainability without divulging confidential corporate data that could harm competitiveness if made public.
Sabine Angerman, Head of Purchasing and Supplier Quality for Raw Materials and Strategy at Mercedes-Benz Cars, said that transmitting contracts to every member of the supply chain is needed to foster greater cooperation with their suppliers in terms of sustainability and ethical conduct. The blockchain prototype paves new ways for purchasing processes to become safer and simpler.
Creating an intuitive and user-friendly platform will go a long way towards making the project a success, as the automaker seeks to help suppliers get acquainted with the technology and attract users. In order to achieve sustainability, the blockchain platform must be adopted by all suppliers in the supply chain.
Blockchain allows complex supply chains and their origins to be discovered and traced across participants. The quality of the data and the level of digitization determines the capacity of a blockchain-based system, necessitating the luxury car brand’s partnership with suppliers.
Daimler has been operating in the blockchain space for a number of years. As a member of Hyperledger since 2017, the auto company has been working with the Linux Foundation for the development of blockchain-based technologies. Daimler also carried out a financial transaction with Landesbank Baden-Württemberg (LBBW), Germany’s biggest state-backed landesbank lender.
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