October'22

Seamless dispute management – Raising & resolving them

Background

In a typical supply chain, multiple parties are involved due to the nature of the industry and its operational geography. To establish a standard operating procedure, contracts are signed between organizations that are involved in the overall value chain. The contract contains critical information such as the agreed rates, turn-around time, materials, specifications, quality standards, and payment terms. Businesses function smoothly if the consignment or the order meets the agreed criterion. However, disputes arise when there is a deviation, mismatch, or deliberate play around.

Disputes and associated delay

Typically, the contracts are paper-based. Even if it's digitized, the required information is not shared with the relevant stakeholders who are executing it. Now, whenever there is a breach of any of the agreed terms, it causes a situation where the dispute is raised by one or the other organization and often this flag is raised quite late in the game.

Traditionally, disputes are resolved by doing follow-up communication using phone calls, emails, and even face-to-face meetings. These dispute-resolution mechanisms eventually consume time and effort, which subsequently impacts the cost of operations. The delay in dispute resolution is attributed primarily due to three things:

• Broadly laid out terms & conditions, which give space for interpretation.
• Lack of availability of information.
• Silo systems and lack of digitization.

As disputes cause delays, there are tangible and non-tangible financial implications. Disputes elongate the Procure-to-Pay(P2P) or Order-to-Cash(O2C) cycle, which eventually puts tremendous pressure on the cash flow of the payee, who eventually gets compelled to inflate the subsequent quotations. Delay in payments also affects the market image of the payer organisation and negatively impacts the brand value among its suppliers and customers.

A typical case

Let's take the example of company X, which is in the import business. They have global suppliers who ship goods across different warehouses based on the purchase order (PO). Company X has a contract with ocean freight forwarders for every trade lane based on the container's size. The contracts are based on published rate cards which include fixed and variable charges. Fixed charges are ocean freight, inland transportation & terminal handling charges at the origin/destination, etc. Variable charges include detention charges of containers and demurrage charges at the port beyond the standard free period.

Now, consider a case where due to an extraordinary delay in customs clearance, the variable charges have been levied by the freight forwarder. As the charges are beyond the agreed terms, X's accounts payable raises a dispute.

The complexity would increase manifold with multiple suppliers and multiple freight forwarders for different lanes. If there is a lack of clarity in and around levied charges, disputes would be raised. The disputes would significantly hamper the productivity of import operations teams, who would be followed up through emails, and virtual or physical meetings by their accounts payable team and freight forwarders receivable teams to arrive at a conclusive outcome.

An integrated dispute redressal system is the need of the hour

As digital data is available for every process, a significant change in the existing dispute redressal system is needed to curtail the delays and associated overheads. Delays in dispute resolution can easily be curtailed by a three-pronged strategy:

• Well laid out terms and conditions at a granular level.
• Availability of information.
• Digitized information with an appropriate access control.

DL Asset Track™ dispute management: an integrated approach

DL Asset Track™ is an industry-agnostic permissioned blockchain platform with a feature called dispute management which enables participants to raise disputes for applicable instances of a business workflow.

The participants can also withdraw the disputes if it was raised by mistake or clarification was furnished. The raised disputes are attended by internal auditors, who, in turn, have complete visibility of value chain transactions on the platform. External independent auditors can also be onboarded to resolve or arbitrage inter-company disputes with minimal human interactions.

The platform can also be configured with specific rules for the automatic trigger of disputes, which eventually may be withdrawn if the rules are met by system refresh. Additionally, these auto disputes can be resolved manually as well.

In the above example, in case of a dispute, the auditor would investigate the actual timeline and event happening at a particular date or time such as customs filing, duty payments, clearance, and subsequent cargo movement from the port, and then analyse this data to find out the root cause which leads to the delay and the subsequent charges. Since the dispute is getting observed and resolved by an independent auditor, it creates transparency and trust amongst the parties when the dispute gets resolved.

Salient Features

• Smooth and seamless process to raise a dispute across the value chain.
• Automatically trigger a dispute based on specific rules.
• Capability to have an internal or external auditor to cater any disputes raised and resolve it.
• Easy interface for an auditor to see details at a granular level.
• End-to-end visibility of a process in real-time, facilitating instant dispute resolution.

Steps

Raise a dispute

1. Select a business workflow.
2. Select a particular instance to view its details.
3. Raise dispute (if required) and provide the necessary details.

Resolve a dispute

1. Select a business workflow
2. Select the instance against which a dispute was raised
3. View the details of that instance and resolve the dispute by providing resolution comments
4. If required, the auditor can update the instance details.

Withdraw a dispute

1. Select a business workflow.
2. Select a particular instance for which a dispute was raised.
3. Withdraw the dispute by providing withdrawal comments.

Auto-Dispute

1. Configure automation rules for a particular business entity while configuring a workflow.
2. In the automation rules, configure the condition to automatically raise a dispute.
3. Update the business workflow to enable the automation rule.

Please find more information for Dispute Management here

Please find more information for Auto-Dispute here