Implementation of Blockchain for the Supply Chain Resilience

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1		Farouq Nahi Sammour	--	1926	2022-06-24 10:49:06	\|
2	format correct	Nora Tang	+ 7 word(s)	1933	2022-06-27 08:57:44	\|

This entry is adapted from the peer-reviewed paper 10.3390/su14116427

The construction industry plays an essential role in economic development since it is one of the largest industries all over the world. Blockchain has the potential to reshape the structure of all accessible networks in the future. Construction businesses are increasingly interested in embracing blockchain technology to improve supply chain sustainability performance and supply chain resilience in times of globally increasing risks and volatility.

blockchain technology sustainability concrete producing supply chain management

1. Introduction

The global construction industry will be facing a boom in challenges in the coming digital era. Saudi Arabia’s infrastructure and construction sectors are still being driven by technology adoption, dynamic methods of construction delivery, and the application of new operational standards, all of which are fueling the country’s infrastructure and construction expansion. The construction industry in Saudi Arabia plays a vital role in economic growth; Saudi Arabia presently has US $1.15 trillion in future projects, with construction and infrastructure, as well as transportation, being the most important. The value of contracts awarded increased from US $11.2 billion in 2016 to US $14.6 billion in 2018 ^[1].

Generally, several factors affect this industry, causing frequent and lengthy delays ^[2]^[3]^[4]^[5], most notably change orders and re-designing, as 70% of projects face time overrun, with 45 out of 76 projects in Saudi Arabia experiencing delays. Lack of expert contractors, ineffective planning and scheduling of projects, poor site management, poor communication among ministries and other companies, and slow decision-making by the owners, are all factors that contribute to frequent and prolonged delays.

There is a noticeable weakness in the technical and financial aspects of construction projects so far in Saudi Arabia ^[6]. According to Deloitte ^[1], the construction industry ranked as the lowest industry in terms of the percentage of budget spent on IT among all industries they researched. The lack of investment in IT has had consequences for the construction industry worldwide, especially in Saudi Arabia. Research conducted by Algahtany ^[7] pointed out that construction projects in Saudi Arabia experienced poor performance for the past three decades and need more effective risk-management strategies for helping contractors deliver projects on time and within budget while meeting quality expectations.

Multiple internal and external hazards have increased supply chain vulnerability, necessitating the development of risk management approaches and strategies to foster organizational resilience and preparedness ^[8]. Blockchain has the potential to be a significant technology in a new technological revolution characterized by increased automation and the merging of the digital and physical worlds. It has an influence that extends beyond the economy, as it has the potential to change social interaction, governmental institutions, and the relationship to the environment, as well as countries’ possibilities for achieving sustainable development. Policymakers should enhance their digital capabilities to strategically position themselves to gain from this new technology wave. Several developing countries will need to improve their digital infrastructure, skills, and regulatory frameworks in order to achieve this ^[9].

Technological innovation and advancements within the construction industry can create smarter and more sustainable processes in Saudi Arabia. Many improvements can be gained by using Blockchain technology; for example, it may allow for enhanced good tracking with real-time planning, less administration, increased efficiency throughout the supply chain, and improved financial flows. The introduction of blockchain technology in the Saudi Arabian construction industry will offer many solutions for a more robust and resilient supply chain.

2. Implementation of Blockchain for the Supply Chain Resilience

A broadly acknowledged definition of a supply chain is given by Christopher ^[10] as “the network of organizations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate customer”. According to Liu et al. ^[11], it is a chain that links raw material, suppliers, and contractors as well as its operational decisions regarding inventory stock, prefabrication, procurement, and construction.

Supply chain integration is considered a well-researched area by both practitioners and researchers. Prajogo and Olhager ^[12] inspected the integrations of both interrelated information and material flows between different supply chain actors and their leverage on operational performance; their results showed a significant effect of information technology capabilities and information sharing on logistics integration. As well as this, logistics integration also has a significant effect on operations performance.

Environmental, economic, and social burdens from local and global governments, communities, and consumers pressure managers to achieve sustainability goals. The function of blockchain solutions in terms of sustainability is very crucial. Saberi et al. ^[13] listed four major blockchain features that can support sustainable supply chains: (1) Significantly lower product recall and rework due to its tracking capabilities; (2) making it simpler to trace the actual carbon footprint of products and determine the exact amount of carbon tax that each company should be charged; (3) encouragement of recycling actions by rewarding individuals who take part in deposit-based recycling programs; and (4) increased efficiency of emission reduction programs.

Parung ^[14] investigated how blockchain technology may help with the development of long-term supply chain management from an environmental, economic, and social standpoint. The findings showed that blockchain technology has the potential to improve cost and time efficiency and has the ability to bring social advantages to the enterprises engaged with it due to those organizations’ growing excellent reputation. Pollution decrease is one of the main environmental advantages of the more efficient shipping strategies. Blockchain also benefits all users financially because it lowers expenses by using more efficient manufacturing and delivery techniques. Social benefits are that customers feel secure and comfortable using the goods since they can track the product movement transparently and enhance the reputation of all supply chain partners.

Resilient supply chains are less prone to disturbances and speed up the recovery period. The use of blockchain technology facilitates several current initiatives to increase supply chain resilience using smart contracts to provide a transparent, safe, and fast data exchange and automation via blockchain. Lohmer et al. conducted simulation research for smart contracts employment for risk-related cooperation. The results showed that if the underlying cooperation is built on time-efficient procedures, resilience is increased by the reduction of network recovery time and the overall costs ^[15].

The supply chain is an essential part of any business and may have an impact on a variety of factors. The disturbance in the supply chain, in particular, has tremendous ramifications and repercussions that are difficult to manage. To address the challenge of supplier assessment and selection, Sawik ^[16] investigated several criterion decision-making methodologies and provided an overview of some of the most common multiple criterion difficulties in supply chain optimization. The techniques for prevention, reaction, protection, and recovery are discussed. The practical aspect focuses on risk-averse models that leverage single sourcing to reduce the worst-case situation. The CPLEX solver was used to solve computational experiments for practical instances.

The potential impact of blockchain technology on supply chain resilience (SCR) to cybercrime was highlighted in a study conducted by Bayramova et al. ^[17]. The most productive countries, sources, publications, and writers at the forefront of blockchain research and acceptance were identified through a scientometric study. Following that, a grounded theory analysis found six major research clusters: “case study”, “challenges and opportunities”, “traceability”, “smart contract”, “blockchain and IoT”, and “data security”.

Kim et al. ^[18] investigated the use of Blockchain technology in carbon trading in order to achieve the United Nations’ sustainable development goals. The study used blockchain technology to assess carbon emission rights to make transactions more credible. The study employs blockchain to verify carbon emissions rights. In mobile cloud settings, users may use big data and artificial intelligence to defend against carbon emissions oddities. The study developed a blockchain-based carbon emission rights verification system that uses governance system analysis and the blockchain main-net engine to overcome carbon emission rights issues.

It is more difficult to identify goals and objectives when many stakeholders exist within a project; undoubtedly, there is a correlation between time, cost, quality, and project complexity. Lundesjö ^[19] clarified the divergence between both the traditional and modern contractual structures within any construction supply chain.

Segerstedt and Olofsson ^[20] and Clough et al. ^[21] agree that CSC is complex because of its underlying processes and structure in a way that differs from the manufacturing supply chain, due to its complicity, Lundesjo ^[19] emphasized the importance of information sharing within construction projects and avoiding any re-creation or re-entering of information during the project life cycle.

Bjorklund and Vincze ^[18] defined supply chain financing as “a financial instrument method, usually an application that uses technology to optimize working capital effectively and manage the liquidity embedded in the supply chain via collaboration between buyers and suppliers and financial institutions”. They pointed out that the construction industry does not just need to improve digitization aspects but that there is also a growing need for another key area of essential improvement that focuses on increasing the efficiency of the financial flows in companies and the SCF within the whole industry.

The main objective of SCF is to reduce capital costs, and that is clearly done by improving financial performance and cash flow, or through interlinking the relationships between many actors in the supply chain ^[22]^[23]. To provide an effective way to solve the financing problem in any industry, Liu et al. ^[11] used a method to analyze the financing model of supply chain finance and the relationship between the members of the supply chain financial ecosystem. The resulting financing model of supply chain finance allows new ideas for solving a problem. However, any SCF solution is only efficient and applicable if all the supply chain actors agree on the solution.

The forces of globalization and digitalization are impelling the construction industry to make the industry more effective, productive, and efficient. Recently, there has been great attention paid to introducing an advanced technology that contributes mainly to disruptive innovation, called Building Information Modeling (BIM). Essentially, BIM makes a change in the design paradigm ^[24]; however, it has not yet created corresponding impacts on procurement, while blockchain has addressed more construction procurement aspects, fulfilling the unattended gap of BIM and also exploring further applications for both construction and the built environment.

According to Pal et al. ^[25], blockchain technology, or a decentralized secure ledger, is one of the most popular technologies that can eliminate and mitigate a third party’s requirement to validate any possible transactions over a Peer-to-Peer network. It generally enhances decentralization, transparency, equality, and accountability on the internet, as highlighted by Al-Saqaf and Seidler ^[26]. Moreover, members of the network within blockchain technology usually keep the transactions’ data in the form of a ledger. This ledger is updated by adding a new extra block of transactions to maintain the integrity and righteousness of the available data.

Some essential principles should be met either on a high or low level when using blockchain technology as a foundation. Public, hybrid, and private blockchain are considered the three main types of Blockchain technology in various projects.

Andoni et al. ^[27] pointed out that when there are no limitations or restrictions regarding the interactions with blockchain, when all information is visible for all actors in the network, and when they are encouraged to interact and contribute easily with the network, this is called a public blockchain.

Blocks in a blockchain are linked together, and the structure of a blockchain often comprises numerous blocks. The first block is called the ‘genesis’ block; each block comprises multiple transactions ^[28]. Apart from the transactions, each block includes a respective hash derived from the data stored on the block and the hash of any previously accepted block in the blockchain. In the same year, a study conducted by Nofer et al. ^[29] stated that the hash values are usually unique and matchless, so any change to a block in the chain will directly change the respective hash value.

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1. Introduction

2. Implementation of Blockchain for the Supply Chain Resilience

References