1 Blockchain’s roles in meeting key supply chain management objectives

TL;DR: This paper examines how blockchain is likely to affect key supply chain management objectives such as cost, quality, speed, dependability, risk reduction, sustainability and flexibility and illustrates the various mechanisms by which blockchain help achieve the above supply chain objectives.

About: This article is published in International Journal of Information Management.The article was published on 2018-04-01 and is currently open access. It has received 1076 citations till now. The article focuses on the topics: Blockchain & Supply chain.

Summary

1. Introduction

• Blockchain deployment outside finance has been largely experimental.
• Among many activities that are likely to be transformed by blockchain, supply chain thus deserves special attention.
• This allows an enhanced, real-time tracking of goods from their origins.
• Food companies such as Chipotle are not in a position to monitor their suppliers in real time.
• Then, the authors provide brief descriptions of the selected cases.

2. Literature review: supply chain objectives

• Logistics services often play a key role in a firm’s ability to deliver customer value (Mentzer, Flint, & Hult, 2001).
• In addition to the above objectives, prior researchers have addressed the role of supply chain management for sustainable products, which has become a notable research area in marketing and supply chain management (Bowen et al., 2001).
• According to Svensson (2000), the sources of risk in supply chains can be classified into two main categories, namely, atomistic or holistic.
• This approach is suitable for components and materials that are of low-value, less complex, and easily available.
• Some use supplier self-evaluation, in which supply chain partners declare how they have tackled environmental and social issues (Trowbridge, 2001).

3. Method

• The approach of this study can be described as theory building from multiple case studies, which is becoming increasingly popular in social science (Eisenhardt and Graebner, 2007, Kshetri, 2016a, Kshetri, 2016b).
• 1. Selection of cases Broadly speaking the selection of cases in multiple case study research has the same objectives as in random sampling.
• Table 1 presents the cases selected and their classification in terms of incorporation of the IoT and deployment of blockchain to validate individuals’ and assets’ identities.
• Seven replicated cases have been used which involve a high degree of incorporation of the IoT.
• The idea here is to make sure that the source as well as content of data are trustworthy (Wang & Strong, 1996).

4. Brief descriptions of the selected cases

• The Danish shipping company Maersk is the world’s largest container carrier and accounts for 18% to 20% of the market (Groenfeldt, 2017).
• Maersk’s supply chain solutions company Damco supported origin management activities of the shipment (Groenfeldt, 2017).
• Medicinal shipments that do not require refrigeration are tracked with a Modum sensor to monitors the temperatures of the medicines.
• Blockchain helps to make sure that each party in a supply chain oversees its own dataset.
• In April 2017, Intel revealed a public demo that explains how a seafood supply chain can be tracked using its open-source Sawtooth Lake codebase (https://01.org/sawtooth/).

5. The roles of blockchain in achieving various strategic supply chain objectives

• Table 2 provides illustrative examples of how blockchain can contribute to key supply chain management objectives such as cost, quality, speed, dependability, risk reduction, sustainability and flexibility.
• According to Everledger, one-fifth of the sales of international “fine wine” are of counterfeit bottles (Mathieson, 2017).
• Blockchain can also help to guarantee quality of products with relevant data.
• In prior literature researchers have used range and adaptability to measure flexibility.
• A 2015 report from Cisco and DHL estimated that by the next decade, IoT in logistics and supply chain will generate $1.9 trillion in value (DHL Trend Research & Cisco Consulting Services, 2015).

6. Discussion and implications

• The authors developed a framework that considers how blockchain can help firms meet key SCM objectives.
• There is an interesting contrast here between the use of blockchain in the financial-industry and supply chain activities.
• In many cases, the problems that are encountered in supply chain-related activities concern issues related to communications.
• Permissioned blockchains, on the other hand, are restrictive.
• This sector is dominated by a few big players (players with strong capabilities).

7. Challenges and limitations

• However, blockchain has a number of major challenges to overcome.
• First, the global supply chain operates in a complex environment that requires various parties to comply with diverse laws, regulations and institutions.
• Since international businesses operate against the backdrop of these established old laws, customs and institutions that are managed by human beings, implementing blockchain-based solutions can be an extremely complex task (Casey & Wong, 2017).
• The blockchain is about taming all of the virtual attributes of the container, all of the paperwork that accompanies it.
• A hacker can target a few of the participants.

8. Concluding remarks

• Supply chain activities are among the ones that are most likely to be transformed by blockchain.
• Among other things, blockchain facilitates valid and effective measurement of outcomes and performance of key supply chain processes.
• The example of the 2015 E.coli outbreak at Chipotle Mexican Grill is illustrative of a widespread problem faced by the food supply chain.
• A key element of blockchainbased model is that all the transactions are auditable, which is particularly important in gaining the trust of all interested parties.
• Various measures can be used to increase transparency in fish and seafood supply chains.

Figures

Table 1. The cases selected and their classification in terms of incorporation of the IoT and deployment of blockchain to validate individuals’ and assets’ identities.

Table 2. The roles of blockchain in achieving the various strategic supply chain objectives.

Frequently asked questions

Q1. What are the contributions in this paper?

This paper examines how blockchain is likely to affect key supply chain management objectives such as cost, quality, speed, dependability, risk reduction, sustainability and flexibility. The authors present early evidence linking the use of blockchain in supply chain activities to increase transparency and accountability. Case studies of blockchain projects at various phases of development for diverse purposes are discussed. This study illustrates the various mechanisms by which blockchain help achieve the above supply chain objectives. 

Q2. What are the factors used in the authentication of older wines?

For older wines, factors such as a label’s design and paper used by a producer in the stated year of production are used in the authentication (Mathieson, 2017). 

Q3. What is the key driving factor for achieving organizational goals?

As to the factors affecting Y, especially the incorporation of the IoT emerged as a key driving factor to achieve key organizational goals. 

Q4. What is the largest container carrier in the world?

The Danish shipping company Maersk is the world’s largest container carrier and accounts for 18% to 20% of the market (Groenfeldt, 2017). 

Q5. What are some of the promising applications of blockchain outside finance?

Some of the most promising non-finance applications of blockchain are expected to include those in supply chain, power and food/agriculture. 

Q6. What is the name of the company that keeps a list of owners of stocks?

For instance, the Depository Trust Company, which is a clearing and settlement institution established in 1973 is a member of the Federal Reserve keeps a list of owners of stocks. 

Q7. What is the main reason why blockchain is being used in supply chain management?

An increasing reliance on the use of Internet-of-things (IoT) applications is among the trends that will affect supply chain management (SCM). 

Q8. How long did it take to trace food origins?

the tests performed on Chinese pork, and U.S. mangoes revealed that tracing food origins could be handled in 2.2 s, which used to take many weeks with non-blockchain technologies (Nation, 2017). 

Q9. How long did it take to negotiate the relationships needed to make the service possible?

Everledger Founder and CEO Leanne Kemp noted that it took about 18 months to negotiate the relationships needed to make the Everledger service possible (Clancy, 2017). 

Q10. Why are not all countries ready to participate in blockchain-based solutions?

due to the requirement of high degree of computerization, not all countries are ready to participate in blockchain-based solutions. 

Q11. What is the key point that needs to be emphasized here?

A key point that needs to be emphasized here is that while IoT devices are one of the major means to validate identities, this process does not necessarily require IoT deployment. 

Q12. What are the key objectives of the supply chain management?

Table 2 provides illustrative examples of how blockchain can contribute to key supply chain management objectives such as cost, quality, speed, dependability, risk reduction, sustainability and flexibility. 

Q13. What is the main approach to evaluating suppliers?

Some use supplier self-evaluation, in which supply chain partners declare how they have tackled environmental and social issues (Trowbridge, 2001). 

Q14. Why are permissionless and permissioned chains more appropriate for the tech and auto industries?

Partly because there is a challenge in bringing a large number of parties together, blockchain-based supply chain products are likely to be more appropriate for the tech and auto industries. 

Q15. What is the main difference between IBM’s and previous methods?

Despite a higher degree of decentralization of IBM’s blockchain-based technology for tracking shipments compared to previous methods, it arguably “concentrates power in a handful of entities” (Popper & Lohr, 2017).