Introduction
The importance of traceability and transparency in the supply chain has grown recently. Businesses strive to reassure consumers about the provenance and origins of their products, particularly when it comes to commodities like food that are essential for both quality and safety. In 2018, Marks & Spencer made the claim that “every single piece of beef sold can be traced back to the farm and animal it came from.” Full end-to-end traceability helps consumers believe in and trust brands.
Nonetheless, there are still issues with supply chain transparency. Shortly after the M&S statement, problems were discovered at other UK supermarket chains: Sainsbury’s own-brand vegetarian meatballs contain pork, while a Tesco vegan ready-meal contained traces of poultry.
Blockchain Technology Implications for Operations and Supply Chain Management can help you realize the possibilities of simplified operations and transparent supply chains.
With so many suppliers in their intricate global supply chains, how can retailers really get transparency? One proposed solution is blockchain technology. Blockchain is a peer-to-peer network-maintained distributed ledger. It promises security, timeliness, and transparency by allowing users to record transactions immutably on a shared ledger. Private blockchains can enable automation and data sharing among parties. For beef traceability, Marks & Spencer uses DNA sampling; however, distributed ledger technology may offer thorough provenance tracing from farm to customer.
This article gives an overview of blockchain and its potential supply chain benefits, such as improved traceability and process coordination via smart contracts. It describes how blockchain technology can be used to mitigate the risks associated with counterfeiting, improve confidence between supply chain participants, and address sustainability issues in the supply chain. Due to the low uptake of blockchain technology thus far, there are many opportunities for research about implementation challenges, relationship effects, and other topics.
What is Blockchain?
A blockchain is a kind of distributed database that is encrypted. The chain is made up of chronologically connected “blocks” that contain the records of the transactions. This decentralized, shared ledger encourages responsibility and transparency among participants. Blockchains eliminate reconciliation delays by giving network users a real-time view of activity.
Key features include:
- A distributed, decentralized architecture is perfect for supply chain networks.
- Smart contracts that encode payments and conditions can help automate processes.
- consensus-building techniques that strengthen security by validating transactions.
- Transactions coded in blocks result in immutable data records.
Anyone can join “permissionless” public blockchains like Bitcoin. Only authorized entities are permitted to participate in private or “permissioned” blockchains. The latter are more appropriate for usage in business supply chains.
How does blockchain work exactly in Supply chain management?
The “blocks” that comprise the links in the chain are composed of gathered transactions. The necessary information is entered in a block when a user requests a transaction. For instance, the block would contain the buyer, seller, order information, delivery terms, and more for a purchase order. After that, data is checked against agreements by rules contained in smart contracts, which then initiate further actions.
For example, a smart contract may produce an invoice after automatically comparing a shipment notice to the initial order. Several significant advantages become apparent:
Increased visibility: Transaction history is visible to all participants on the immutable ledger.
Enhanced trust: consensus procedures authenticate transactions devoid of intermediaries.
Enhanced automation: smart contracts carry out actions like making payments in accordance with terms.
Blockchain’s process coordination and transparency in supply chains can improve activity optimization, decrease errors, boost accountability, and strengthen resilience.
Supply Chain Opportunities
The characteristics of blockchain match supply chain requirements perfectly:
- A distributed ledger improves consistency and transparency.
- Payment and ordering procedures can be automated with the use of smart contracts.
- Consensus checks increase the safety of asset transfers.
- Unchangeable data enables product tracking and prevents counterfeiting.
The use cases under consideration include:
Tracking provenance: Offer traceability for authenticity, sustainability claims, and recall management.
Quality control: Sensor data on the blockchain provides visibility into the state of the product in real time.
Counterfeiting prevention: Improved security and traceability measures to avoid counterfeiting and identify illegal items
Management of inventories: Real-time data on inventories allows for chain-wide optimization.
Trade finance: Tracking and automating payments lowers settlement costs and timeframes.
Applications in Supply Chain Management
There are several possible applications for blockchain technology in supply chain management. The tracking of food items by IBM and Walmart, the verification of cattle supply networks by UPS and HerdX, and the pilot project of Provenance for apparel supply chains are a few early examples. However, the majority of projects are still small-scale trials rather than rollouts across the entire company.
What advantages can blockchain offer in these situations? And what problems might occur with the technology’s uptake, application, and integration throughout supply networks?
Firstly, it is helpful to contextualize blockchain with other digital supply chain technologies.
Learning from History
Blockchain improves process coordination, data sharing, and security in ways that are similar to earlier corporate technologies like RFID and ERP. Where are the recommendations that apply to the adoption of blockchain?
RFID: This technology tracks and identifies products automatically throughout the supply chain. Implementation issues and expenses were impeding adoption. A significant factor in the success of RFID throughout the supply chain was partner infrastructure alignment.
ERP: ERP enables inter-organizational visibility but hinders intra-firm process orchestration. Blockchain and ERP integration can close this gap. While maintaining internal secret data access rules, it facilitates data sharing across businesses.
These experiences point to a few success- and adoption-related risks:
- Evaluate technological preparedness and coordinate chainwide infrastructure.
- Encourage everyone involved to acknowledge the advantages, including transparency and cost savings.
- Obtain the support of senior leadership to promote adoption.
- Use complementary technologies, such as Internet of Things sensors, to monitor
Moreover, overcoming change management obstacles is necessary to incorporate blockchain both internally and internationally in order to realize efficiencies. What incentives encourage the adoption of common standards among ecosystems? What measures are taken to address starting costs? Does integrating blockchain require new types of cooperation? In the early phases, when these innovative implementations take shape, researchers have the chance to investigate these kinds of aspects.
Evaluation and Adoption Decisions
However, management must thoroughly assess the risks and usefulness of blockchain technology for their supply chain context before allocating resources. Functional needs, expected benefits, cost analysis, and other variables impact adoption decisions, similar to earlier technologies like RFID. However, blockchain’s sustainability consequences should also be taken into account in addition to financial considerations.
Sustainability Tradeoffs
Blockchain’s hype includes sustainability promises, particularly for supply chains that are ethically conscious. Encouraging greater transparency by monitoring inputs at multiple levels can confirm ethical sourcing and production methods. Nonetheless, a conflicting sustainability issue is the energy consumption of certain blockchain protocols that require a lot of computation. While “proof of authority” variants aim to increase efficiency, there are still drawbacks, particularly with public blockchains.
What is the impact of environmental and social trade-offs on decision-making processes?
Should blockchains be the subject of an evaluation of their influence on sustainability? In what ways might technological decisions reconcile utilitarian requirements with moral duties? Decision frameworks and sustainability tensions would make for timely findings in research. More generally, there is benefit in examining product attributes, industry factors, and use-case scenarios that can distinguish between blockchain applications that have an impact and those that are unlikely to justify adoption costs.
Complex Supply Network Implementation
Effective deployment across end-to-end supply networks is the next challenge in cases where blockchain testing shows promising results. These kinds of environments comprise a multitude of organizations, each with its own heritage systems and culture. Relationships in the supply chain have previously faced difficulties with trust, accountability, and transparency. Risks associated with illegal subcontracting, unethical behavior, and counterfeit goods have increased as a result of outsourcing and offshoring.
Blockchain’s alleged benefits in information security, access restrictions, and immutable audit trails attempt to address these complicated supply chain weaknesses. Enterprise-wide distributed ledger systems have the potential to improve trust, transparency, and collaboration. Protocols for smart contracts and data integration must adhere to standards.
When users migrate from traditional workflows, change management and usage monitoring will follow suit. Researchers can considerably improve their understanding of the organizational and technical factors that restrict or assist blockchain adoption across supply chains.
Incentivization is another important consideration. Who provides the infrastructure with funding? What is the distribution of benefits and costs?
Network effects dictate that widespread adoption is necessary to optimize the value that blockchain tracking and automation produce.
Only once an ecosystem reaches a certain level of engagement can investments start to yield returns. There remain unanswered concerns about the necessary business plans and alliance arrangements, particularly in situations where smaller businesses lack blockchain resources or competencies.
Challenges
Although blockchain has many advantages, there are drawbacks as well.
- Limitations on tech maturity and setup costs
- Energy-related issues, particularly with regard to public blockchains
- Absence of data standards and common frameworks
- Reluctance to exchange private information, even in chains, with permission
The benefits might exceed the adoption difficulties in order to bring transparency to intricate global supply chains. Further investigation is necessary to determine the suitability of blockchain technology for various goods, services, and procedures.
Further research is required to address implementation challenges related to using the technology across multiple organizations. How does adoption affect relationships, and what incentives are there for adoption? In order to develop a research agenda for blockchain in supply chain operations and management, this article examines these kinds of questions.
Conclusion
Regarding its potential advantages for supply chain management, blockchain is an emerging technology that has created a lot of interest. Blockchain offers improved visibility, security, automation, and data integrity by offering a distributed ledger that is a visible, decentralized record of transactions and events.
Nonetheless, the use of blockchain technology in actual supply chains is still in its infancy. Instead of being large-scale implementations involving whole networks, the majority of initiatives are restricted pilots. Adoption incentives, change management, standardization, and cost-benefit uncertainty present a number of difficulties. Trade-offs between energy use and environmental sustainability should be taken into account while implementing blockchain technologies.
In this article, the fundamentals of blockchain technology were discussed along with applications that are relevant to supply chain management, such as process coordination and provenance monitoring.
Blockchain adoption can be better understood by comparing it to earlier technologies such as RFID and ERP, which offer valuable insights. We also identify open research concerns about implementation problems, blockchain’s implications for supply chain connections and governance, and the need to refine trust, transparency, and value distribution models.
Blockchain’s immutable data sharing, smart contract functionality, and consensus checks hold real promise for tackling persistent supply chain issues, even in the face of ongoing uncertainty. Blockchain could transform supply network topologies in the same way that earlier technologies like the Internet transformed communication channels, when innovative use cases start to appear in many industries.
However, achieving revolutionary effects will require in-depth study of blockchain applications as well as savvy management of organizational change elements as this disruptive, trust-altering technology becomes integrated across supply chains.
