How Distribution Agreements Will Be Formed with Smart Contracts in the Future

Distribution agreements are a contracts formed between a supplier and a distributor for the transfer and sale of goods.

What are a Distribution Agreements needed for?  

The agreement outlines key provisions about the goods to be delivered, when and where the goods are to be delivered, who is responsible for delivery, and the price of the goods.

Supply chain managers often face several day-to-day challenges including a lack of trust between the supplier and the distributor, receiving damaged goods, and invoicing errors. New technology promises to solve these challenges and increase transparency among buyers and sellers.

The Future of Distribution Agreements 

Smart contracts, commonly associated with cryptocurrencies, is a digital agreement between two or more parties that self-executes when specific requirements are met.

These contracts have real-world applications in the business world and can be used to facilitate, simplify, and secure supply chain functions.

For example, a smart contract can be formed between a supplier and a distributor. The contract outlines what goods are to be delivered by the supplier and the goods are tagged with a barcode or other tracking device for shipment. The payment for the delivery is debited from the distributer’s account and held in the contract until the delivery is confirmed.

Damaged and low-quality goods are recorded and returned; their return is also facilitated by the smart contract. Furthermore, the shipping company can also be a part of the smart contract. The contract will specify whether the supplier or distributor is responsible for freight costs and debit the respective account.

Although smart contracts are promising, it is always a wise idea to keep a hard copy of your distribution agreement. Keep a copy on hand by filling out this template.