November'22

Significance of shared ledger & its need

Background

Every business transaction involves two or more business entities within the organization or outside the organization. Each entity keeps information in its own systems to track and manage them. The way each entity builds its system may lead to potential issues in the interpretation of the contractual agreement, manual errors, etc., by each party. To ensure that all parties are in-sync with respect to understanding of the terms & conditions and execution of tasks performed by each participating party, the organization spends time and effort in verification, validation, and reconciliation to conclude the overall transaction.

Ledgers are the oldest way of recording financial transactions amongst accounting functions. They provide a correct understanding of the various transactions happening within business entities. Conventionally, these ledgers exist in physical books of accounts or siloed systems centralized in an organization. This structure consistently requires the teams to reconcile the transactions with relevant parties. When a dispute is encountered, it creates an operational overhead requiring enormous time in dispute resolution.

A typical case

Let us consider the business case of an organization where the buyer issues a purchase order, and the supplier delivers goods through a carrier to either an assembly plant or a parts distribution center. Based on the supply schedules, the supplier dispatches the materials that would be delivered by a carrier. The quality team checks the material at the warehouse or distribution center and creates the goods' receipt in their system. Post the receipt of goods, the system is updated, and the goods are taken into the plant warehouse or distribution center stock.

Now consider if there are damages during transit or quality rejections due to which the goods' receipt quantity differs from the goods shipped from the supplier. The accounting team ends up doing a 3-way reconciliation among purchase order, invoice, and the goods' receipt to arrive at the payables to its suppliers. This leads to disputes, discrepancies, and potential delays in supplier payment and requires extensive operational overhead in reconciliation.

The complexity will increase manifold if thousands of suppliers deliver multiple consignments to different warehouses. This reconciliation process significantly hampers the productivity of the accounts team for which the IT system was implemented in the very first place.

A shared ledger to alleviate this information asymmetry

There are numerous ways to deal with this information asymmetry. While physical letters and telephones are traditional ways, emails emerged as a new way couple of decades back.

However, when the number of transactions is high, it is difficult to trace every bit of information at a granular level. Hence, organizations end up setting an acceptable tolerance in invoices. With the evolving business scenarios and increasing competition, there is a need for a traceable and auditable system to cater to such use cases. Organizations need a mechanism where this process of reconciliation itself can be obviated.

This is where Blockchain comes into the picture, comprised of distributed ledger and where all organizations maintain a copy of the transactions, alleviating the need for reconciliation to a greater extent.

DL Asset Track™ shared ledger & the associated timeline

DL Asset Track™ is a permissioned Blockchain platform with features like auditability and traceability, which enables participants to seamlessly view the relevant data points of various entities in a value chain. The data can be either entered by onboarded participants of entities or can be ingested from the IT systems of these business entities. Further data access control can be implemented at a granular level for every business entity. As the blocks of data are being added along with the asset progress, this shared ledger will act as a single source of truth with a consistent view amongst all stakeholders. This minimizes future disputes and significantly reduces any need for time-consuming reconciliation.

The timeline view of this shared ledger visually engages the stakeholders to view the entire workflow along with the processing dates. The participants can also view the specific block of information added by the different business entities.

In the above example, the stakeholders of this shared ledger can create a set of records and view the records created by different users and business entities. The supplier's processing team can view the purchase order information on the platform and process the orders. The supplier accounts team can generate invoices basis the purchase order information. The supplier dispatch team can put carrier information and driver details. The warehouse team can further add information about the goods' receipt in this shared ledger, and finally, payment can be made for the goods which are delivered to the buyer.

Salient Features

• DLAT leverages distributed ledger technology, and it supports various permissioned Blockchain.
• Agnostic to networks like Ethereum, Hyperledger Fabric, and Corda.
• Function access control and Granular data access control.
• Single source of truth with events performed by each stakeholder.
• A timeline view of the process flow.

Steps

Shared Ledger & Show Timeline

1. Select the business workflows.
2. Select an instance and view the details.
3. Select show timeline.
4. Select the different business entities to view the shared ledger of that entity.

Please find more information here