Blockchain technology is becoming an increasingly popular and efficient tool for businesses to optimize their supply chain management. A blockchain is a distributed ledger technology that uses cryptography to maintain digital records of transactions on a secure, tamper-proof network (Shaik et al., 2022). It is organized into “blocks”, which contain information about previous transactions and any new ones that occur during a given time. Multiple participants in the blockchain system verify each block before being added to the chain in chronological order (Puthal et al., 2018). This ensures that all data stored on the blockchain is accurate and reliable. Supply chain management involves coordinating and integrating resources to ensure that products are produced and delivered efficiently and effectively to customers (Tarigan et al., 2021). It includes activities such as procurement, production planning, inventory management, warehousing, order fulfilment, transportation, customer service, and more. With the increasing complexity of supply chains in today’s business environment, there is a need for new technologies that can help ensure the efficient operations of these networks. According to Dutta et al. (2020), using blockchain technology in supply chain management presents numerous opportunities for businesses to improve efficiency and transparency throughout their operations. However, many companies are still hesitant to adopt these technologies due to concerns over cost or lack of knowledge about how they work or how they can be integrated into existing systems. Cole et al. (2019) highlighted that for businesses to fully benefit from this technology, they must clearly understand how blockchain works and how it can be implemented into their existing supply chain systems. This requires careful planning and consideration on behalf of managers and IT professionals alike to ensure that all necessary steps are taken before implementation. Additionally, it is important for enterprises to understand any potential risks associated with using blockchain technology so that they can take measures to mitigate them before adopting this new system.
For these reasons, it is essential that we discuss blockchain’s potential applications within supply chain management as well as its implications for businesses operating within this highly competitive industry. By doing so, we will gain greater insight into how this revolutionary technology could improve operations while preventing fraud and protecting businesses from malicious actors attempting to exploit weaknesses within complex networks. Ultimately this will enable businesses operating within this space to remain competitive while ensuring their customers receive products safely and securely through an efficient operational model driven by cutting-edge technology, such as blockchain-based solutions for the supply chain management.
Current Discussions and Research on the Topic
Benefits of incorporating Blockchain into SCM
The use of blockchain technology in supply chain management (SCM) can potentially revolutionize how businesses operate. First, blockchain technology has the potential to dramatically reduce fraud in a supply chain system (Tijan et al., 2019). The transparency and immutability of blockchain records make it difficult for fraudulent activities to go undetected or be tampered with. This could lead to more accurate data tracking and reduced costs associated with fraudulent activity. Additionally, because every transaction is recorded on an immutable ledger, there are no worries about lost or misplaced documents (Duan et al., 2020). This can help streamline operations while ensuring data integrity and accuracy.
Subsequently, by utilizing smart contracts on a blockchain platform, businesses can automate many of their SCM processes (Chang et al., 2019). Gong et al. (2021) acknowledge that smart contracts allow businesses to define specific terms and conditions that must be met before any payments are made or services rendered. By automating these processes on a blockchain platform, businesses can reduce labour costs associated with the manual processing of orders and invoices, as well as increase transaction speed and accuracy.
Moreover, blockchain technology provides improved visibility into a company’s supply chain network by allowing real-time tracking of items within the system (Helo & Shamsuzzoha, 2020). This increased visibility allows companies to better monitor their supply chain activities and identify any potential issues quickly so they can be addressed promptly before they become major problems. This real-time insight into product movements also helps companies make more informed decisions about inventory management, reducing costs associated with excess inventory or stockouts (Ada et al., 2021).
Finally, implementing a blockchain-based solution for SCM also offers improved security compared to traditional systems, as all data stored on the platform is encrypted and protected from malicious actors attempting to gain access without permission (Khalid et al., 2023). This enhanced security helps ensure that sensitive information remains private while allowing users access when needed via permissioned access levels defined by stakeholders within the system.
Risks and Challenges of implementing Blockchain in SCM
There is much potential for blockchain technology to revolutionize how supply chains are managed, and improve their efficiency and transparency (Cole et al., 2019). However, some risks and challenges associated with implementing blockchain in SCM must be considered before adopting the technology.
Risks of Implementing Blockchain in SCM
The primary risk associated with implementing blockchain in SCM is security. Blockchain networks are vulnerable to attack due to their distributed nature; if one node is compromised, it can potentially compromise the entire network (Farahani et al., 2021). Additionally, since data stored on blockchains are immutable once written onto the ledger, it cannot be changed or reversed without consensus among all participants; this means that any malicious actors who gain access could potentially cause irreparable damage. Moreover, smart contracts used for supply chain management can contain bugs or vulnerabilities that could be exploited by malicious actors (Lou et al., 2021). Finally, although encryption provides an additional layer of security for data stored on blockchains, encryption standards must be regularly reviewed and updated to ensure that data remains secure over time.
Another risk associated with blockchain is scalability. As more companies begin to adopt blockchain technology for their operations, it may become increasingly difficult for existing blockchains to handle large volumes of data and transactions without becoming overloaded or slowing down significantly due to high traffic volumes (Prewett et al., 2020). This could lead to delays in processing transactions or even cause outages that could disrupt operations if not addressed properly by developers. There is also the risk of fragmentation due to incompatible versions of the same blockchain protocol being used by different organizations within the same supply chain network (Choi et al., 2020). This could result in conflicting records being stored on different versions of the same blockchain, leading to problems when attempting to reconcile them later on down the line.
Another risk posed by implementing blockchain in SCM is regulatory uncertainty due to the lack of clear guidelines around how blockchains should be governed and how transactions should be taxed (Kryzanowski & Boys, 2022). This lack of clarity means that organizations may face legal issues if they do not comply with relevant regulations when operating a blockchain network which could result in significant fines or penalties. Organizations need to understand relevant laws before launching a blockchain solution to ensure compliance and avoid any legal repercussions.
Finally, there is also a risk associated with privacy when using blockchain technology for SCM purposes. While transaction data stored on a blockchain can be encrypted to protect its confidentiality, there are still concerns about how private such data is when stored on a public ledger like Ethereum or Bitcoin’s blockchains, which can be accessed by anyone who knows where to look for it (Jin et al., 2019). Furthermore, there are also concerns about how companies store personal data related to customers on their blockchains which could potentially be exposed if not handled properly by developers or if malicious actors gain access to such data through exploits (Blondell, 2023). It is, therefore, important for companies to ensure that any personal information stored on their blockchains remains secure at all times before implementation into their SCM systems can take place safely without compromising customer privacy rights.
Challenges of Implementing Blockchain in SCM
The main challenge associated with implementing blockchain in SCM is creating an effective governance structure that ensures all participants adhere to predetermined rules and regulations while allowing flexibility when needed (Dasaklis et al., 2022). This requires a delicate balance between centralization and decentralization; too much centralization can stifle innovation, while too much decentralization can lead to chaos within the network. Companies must also ensure that they have adequate oversight over their networks to quickly detect any suspicious activity or malicious actors who might try to manipulate the system for their gain.
Another major challenge of implementing blockchain in SCM is the technical complexity of the process. Blockchain is an inherently complex technology requiring specialized knowledge to properly set up and maintain (De Filippi et al., 2020). There is still a lack of understanding among many people about how blockchain works and how it can be used effectively in SCM operations. Businesses looking to implement blockchain must be prepared to invest time and resources into learning about the technology before attempting to use it (Demirkan et al., 2020). Additionally, organizations may need additional personnel, such as developers or IT experts familiar with blockchain technology, to successfully implement it into their existing supply chain processes, which can also incur additional costs.
Moreover, implementing a blockchain network requires a significant upfront investment in hardware infrastructure and development costs for coding smart contracts and setting up nodes on the network (Kuperberg et al., 2019). Additionally, ongoing costs may be associated with maintaining the system, such as electricity costs for running nodes or paying miners who validate blocks on proof-of-work networks (PoW) (Sedlmeir et al., 2020). Organizations need to consider these costs when considering whether or not they should implement a blockchain solution for their SCM system.
Another challenge associated with implementing blockchain in SCM systems is interoperability, which typically requires connecting disparate systems and processes between different organizations (Al-Rakhami & Al-Mashari, 2022). This requires a high degree of coordination and agreement between the organizations involved, and there are often security or privacy concerns related to sharing data across different networks. In addition, different blockchains can have different protocols and algorithms, which can reduce the interoperability of different networks (Bhat et al., 2021). Finally, according to Rijanto (2021), blockchain technology is still in its early stages, and it is difficult to create a comprehensive, integrated solution that covers all aspects of a supply chain.
Examples of Companies Using Blockchain in Supply Chain Management
In recent years, some companies have implemented blockchain solutions to improve their operations and gain competitive advantages. For example, Maersk is an international shipping conglomerate that has been using blockchain technology since 2018 to track vehicles, containers, cargo, and supply chain management (Musienko, 2023). They have implemented their own TradeLens platform which collects data from industry partners and combines it into a single secure blockchain network (Musienko, 2023). This platform allows for the automation of almost the entire document workflow and digital business processes related to shipping logistics, including receiving bills of lading, financial transactions, customs fees and transfer of ownership/responsibility via smart contracts and IoT technologies. As of 2019, TradeLens had grown to cover 35% of the market and had over 15 major sea carriers signed up as partners (Musienko, 2023).
FedEx has partnered with Hyperledger- a Linux Foundation project and Blockchain in Transport Alliance (BiTA) to improve logistics through the use of distributed ledger technologies (Musienko, 2023). The company uses blockchain technology to help resolve customer disputes by creating a “single source of truth” which can be trusted by all parties involved in disputes (Musienko, 2023). FedEx also plans to use blockchain technology and smart contracts to track records for strategic planning and analysis purposes and create a standardized ledger for manufacturers and transport companies (Musienko, 2023).
IBM has also been at the forefront of blockchain technology, developing the IBM Food Trust ecosystem in 2017 (Musienko, 2023). This platform brings together ten major global food manufacturers and distributors, including Walmart, Dole, Nestle, Tyson, GSF, Unilever, McCormick, Kroger, Driscoll’s and McLane. The platform is based on the Hyperledger Fabric distribution registry, and it is designed to increase the transparency and traceability of food supply chains by creating end-to-end “stories” of each product (Musienko, 2023). This network collects and integrates information on the production, transportation and storage of food, intending to provide the most secure and traceable food supply chain possible. The initiative has been successfully tested on food supplies on the Walmart network, with the supply chains of mangoes from Mexico and pork from China being transferred to the IBM Food Trust blockchain (Musienko, 2023).
Regulatory Requirements for Implementing Blockchain in SCM
In order for an organization to implement blockchain technology in its supply chain, it must first ensure that they comply with all applicable legal requirements. This includes local, national, and international laws that govern the use of blockchain technology. These laws vary across jurisdictions, so organizations must ensure that they are aware of the specific laws in their area. For example, organizations must ensure that they comply with data protection laws, such as the European Union’s General Data Protection Regulation (GDPR) which regulate the use of personal data in the supply chain (Hoofnagle et al., 2019). Organizations must also be aware of anti-money laundering, intellectual property, and other applicable laws in their jurisdiction.
In addition to complying with applicable laws, organizations must also ensure that they comply with the specific requirements of the supply chain sector. This includes the need to ensure that all data is accurate and up to date, as well as secure and confidential. Additionally, organizations must ensure that their blockchain system is compliant with industry standards and best practices (Li et al., 2020). This includes ensuring that all transactions are traceable and verifiable, as well as ensuring that all transactions are completed in a timely manner.
Impact of Emerging Technologies on Blockchain-based SCM
The increasing complexity of supply chain networks has made it difficult for traditional SCM systems to effectively manage them. As the global economy continues to expand, the need for efficient, secure, and transparent supply chain systems has become increasingly important. In response to this demand, emerging technologies such as artificial intelligence (AI), Internet of Things (IoT), 5G networks, and distributed ledger technology (DLT) have been developed and integrated into blockchain-based SCM systems (Vilas-Boas et al., 2022).
Artificial Intelligence (AI)
AI has become an increasingly important tool in supply chain management due to its ability to process vast quantities of data quickly and accurately (Helo & Hao, 2022). AI can be used to automate mundane tasks such as data entry and analysis, as well as to identify trends and anomalies in data. Additionally, AI can improve forecasting accuracy, optimize inventory management, and reduce costs associated with SCM operations. By leveraging AI, blockchain-based SCM can be conducted more efficiently and with greater accuracy (Alabdulatiff, 2023).
Internet of Things (IoT)
The Internet of Things (IoT) has revolutionized how SCM is conducted by providing real-time visibility into the supply chain. IoT devices, such as sensors and tags, can be used to provide real-time data on the location, temperature, and condition of goods throughout the supply chain (Sharma et al., 2020). This data can then be stored on a blockchain to provide a more accurate and transparent view of the supply chain. Furthermore, IoT devices can be used to trigger smart contracts on the blockchain, allowing for more efficient and secure execution of SCM operations (Hasan et al., 2019).
5G Networks
The introduction of 5G networks has enabled faster data transfer, improved communication, and enhanced scalability of the supply chain. 5G networks have enabled the integration of multiple connected devices into the supply chain, allowing them to communicate and exchange data in real-time (Taboada & Shee, 2021). This has enabled the tracking of goods and materials throughout the supply chain, as well as the monitoring of their condition. Furthermore, 5G networks have enabled the sharing of data between stakeholders in the supply chain, thus improving collaboration and efficiency (Taboada & Shee, 2021). By leveraging the 5G network, companies can use IoT devices to collect real-time data from the supply chain and store it on a blockchain, allowing for better visibility into the supply chain and more efficient execution of SCM operations.
Distributed Ledger Technology (DLT)
Distributed ledger technology (DLT) is the underlying technology that powers blockchain networks (Gourisetti et al., 2021). By leveraging DLT, companies can ensure that the data stored on the blockchain is secure, accurate, and immutable. Additionally, DLT can be used to create smart contracts that automate the execution of SCM operations, providing greater efficiency and accuracy (Li & Kassem, 2021).
Significant Issues Arising From and Driving the Topic
The primary issue arising from the introduction of blockchain to the supply chain is the need to develop new systems and processes to accommodate the technology. Blockchain technology is still relatively new and developing, and companies need to take the time to understand the technology and how it can be implemented and utilized (Agbo et al., 2019). Furthermore, companies must also evaluate the cost and benefit of implementing the technology. While there are numerous potential benefits of introducing blockchain to the supply chain, companies must consider the cost of developing and implementing the technology, as well as any potential difficulties or challenges that may arise.
Another significant issue is the need for companies to develop and embrace a culture of collaboration and trust. Blockchain technology is based on the concept of distributed networks and trust, and companies must be willing to collaboratively share data and information in order for the technology to be successful in SCM operations (Dubey et al., 2020). Companies must also be willing to adopt a culture of trust, in which they are willing to trust the data and information that is shared by other parties in the network.
Finally, there is the issue of security. The security of the blockchain network is paramount, and companies must ensure that the technology is secure and reliable (Cole et al., 2019). This requires companies to invest in the necessary security measures and protocols, such as encryption and authentication, to ensure that their data and information is safe and secure.
Prospects for Work for SCM Grads Related to the Topic
The implementation of blockchain technology in the supply chain requires expertise in both the technology itself and in supply chain management. Therefore, SCM graduates with knowledge of blockchain have a distinct advantage in the job market. One of the primary opportunities for SCM graduates is in the field of consulting. Companies need advice on how to integrate blockchain into their supply chains, and SCM graduates with expertise in the technology are in a perfect position to provide this assistance. Consulting firms are also likely to be interested in hiring SCM graduates, as they can help to develop solutions that leverage blockchain technology.
Subsequently, graduates may pursue roles such as software engineer or developer that involve designing and developing new systems that leverage blockchain technology to improve existing SCM processes. Moreover, graduates may pursue roles such as project manager or business analyst that involve managing projects related to the implementation of new SCM systems that leverage blockchain technology.
In addition to these traditional roles within organizations, SCM graduates also have the potential to pursue opportunities as entrepreneurs. They may create their own startups in this space or join existing startups that are focused on developing innovative solutions for supply chain management using blockchain technology.
Conclusion
Blockchain is a digital, distributed, decentralized ledger system that allows multiple parties to securely store, share, and validate data in a shared, immutable ledger. Blockchain technology is used for various applications, including the management of digital assets, money, and transactions. Incorporating blockchain into SCM offers many potential benefits, including improved fraud prevention capabilities through its transparency features; automation of business processes through smart contracts; increased visibility into product movements; and enhanced security measures on all information stored within the system. While there are many potential benefits associated with using blockchain technology in supply chain management (SCM), numerous challenges must be addressed before implementations can become widespread. These include technical considerations such as scalability and privacy issues, regulatory compliance, and security issues such as protecting against malicious actors gaining access or changing data stored on blockchains. Companies must remain aware of these challenges when considering implementation options if they want their projects to succeed over time. Companies such as Maersk, FedEx and IBM are leading the way in terms of implementation and developing innovative platforms and solutions to improve their operations. These companies are leveraging blockchain technology to improve the transparency and traceability of their supply chains, as well as to reduce disputes with customers and increase consumer confidence. Emerging technologies such as Artificial Intelligence (AI), the Internet of Things (IoT), 5G networks, and Cloud Computing are profoundly impacting blockchain-based SCM, increasing efficiency, transparency, and security. Therefore, it is clear that blockchain technology is becoming an increasingly important part of the business world, and more companies will likely begin to adopt it in the future.
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