Supply Chain Management Using Blockchain

Version	Summary	Created by	Modification	Content Size	Created at	Operation
1		Muath Obaidat	--	2443	2023-09-23 00:41:59	\|
2	layout & references	Sirius Huang	Meta information modification	2443	2023-09-25 02:58:00	\|

This entry is adapted from the peer-reviewed paper 10.3390/su151612193

Blockchain is a groundbreaking technology widely adopted in industrial applications for improving supply chain management (SCM). The SCM and logistics communities have paid close attention to the development of blockchain technology. The primary purpose of employing a blockchain for SCM is to lower production costs while enhancing the system’s security. Blockchain-related SCM research has drawn much interest, and it is fair to state that this technology is now the most promising option for delivering reliable services/goods in supply chain networks.

supply chain management (SCM) blockchain privacy preservation logistics hyperledger smart contract

1. Introduction

The manufacturing industry now demands a sustainable environment and an effective balance of societal and financial goals ^[1]^[2]. Manufacturing companies can now meet increasing customer demands while having little negative impact on the ecosystem and community. With the significance of sustainable practices, manufacturers are adopting various technologies and methods to improve their sustainability performance in the market, including big data analytics, artificial intelligence, and blockchain ^[3]^[4]. Blockchain is one of the newest and fastest-growing digital technologies that can support sustainable manufacturing. Blockchain technology uses a distributed and independent data structure, which enables data sharing on a public network. In Blockchain ^[5]^[6]^[7], every transaction is authorized, confirmed, and made accessible by other network users ^[5]^[6]^[7].

Moreover, the Blockchain guarantees the security and integrity of the transactions ^[8]. Blockchain was first used in the banking sector to replace manual validation of transactions with digital credentials for cryptocurrencies ^[9]^[10]. Blockchain has drawn interest from academics and industry experts because it might improve accountability, trust, openness, data consistency, and security. In general, blockchain implementations can be either private or public. In addition, it has the potential to provide complete transparency throughout international supply chains. Consequently, it can result in better tracking of items and offer tamper-proof data to create trust between stakeholders. The supply chain ^[11] industries can adopt more sustainable practices due to the potential benefits of blockchain technology.

1.1. Types of Blockchain

Blockchain is generally categorized into three types: public, private, and consortium, in which public Blockchain is a permissionless network accessible to everyone. Anyone can join the network and engage in this kind of Blockchain by learning, generating content, or interacting outside it. A public blockchain has decentralized features and lacks a central authority that governs the entire network. Moreover, the data on a public blockchain are safe since it is impossible to change or edit data once verified on the Blockchain. A private blockchain is permissioned since a network operator manages it, and only approved users can join the network. The network is controlled by a few entities, which makes it necessary to conduct transactions through external parties. Only the parties involved in the transaction will know about it in this type of Blockchain; others will not be able to access it, making the transaction private. A hybrid blockchain combines elements from both private and public Blockchain. It seeks to balance the two blockchain techniques’ advantages while minimizing their drawbacks. It has applications for businesses deploying private and public Blockchains to benefit from the integrated benefits. A private permission-based system and a public permission-less system are both possible with such a Blockchain network. The other type is a consortium blockchain, which aims to eliminate the private Blockchain’s single-entity independence.

Contrary to a private blockchain, more than one entity exists on the network in the event of a consortium blockchain. The decentralized nature of the control is maintained because no single authority controls it. The core features of these blockchain techniques are illustrated in Figure 1a, and the difference between the types of blockchain technologies are illustrated in Figure 1b. The major drawbacks of using private blockchain are given in below:

Figure 1. (a). Features of Blockchain. (b). Difference between various blockchain technologies.

Establishing trust: A private network has fewer users than a private network.
Reduced security: Since there are a smaller number of nodes or participants in a private blockchain network, hence it is more susceptible to a security breach.
The limitation of private block chains is their need on a central Identity and Access Management (IAM) solution. This system offers complete managerial and tracking capabilities.

1.2. Supply Chain Management (SCM)

The supply chain management (SCM) and logistics communities have paid close attention to the development of blockchain technology ^[12]. Supply chain management typically involves managing and preserving producer relationships with vendors, administration, and customers to provide higher customer value at a lower cost. The notion of the Internet of Things (IoT), which enables the use of numerous intelligent actuators and sensors connected to the Internet, provides creative ways for monitoring the movement of goods and commodities essential to supply chains ^[13]^[14]. It specifically addresses the essential element of supply chain management—the seamless exchange of information about a product between parties involved in its entire life cycle. Figure 2 shows the uses of Blockchain in SCM.

Figure 2. Blockchain SCM.

For the management of distribution centers, reviewing the past transactions will help them have confidence in the supply reliability and optimize the supply chain; therefore, the issue of ensuring the reliability and openness of the supply chain is equally crucial for intermediate suppliers. Due to rising competition in the market for logistics mediators and the need for new, creative ways of working with digital technologies, the concerns of supply chain management optimization and improvement are also pertinent and in demand. The capacity of digital technologies to radically alter the current organizational and financial procedures of supply chain management. The linear supply chains are already evolving into dynamic, interconnected open supply systems (digital supply networks), where information flows are perpetual and readily available to all network customers, allowing the avoidance of various operational issues and delays present in the traditional supply chains. One of these modern digital technologies is the blockchain. Due to the rapid expansion, it has just lately become more widely used. In the beginning, it was employed to hide transaction information. Presently the blockchain technology is rapidly rising in popularity. On its foundation, startups are being presented in many different economic sectors. It is the subject of media outlets, forums, and industry-specific conferences.

2. Supply Chain Management (SCM) Using Blockchain

The fundamental characteristics of openness, verification, automation, and tokenization are only a few of the essential advantages that blockchain technology ^[15] offers to enhance the coordination and integration of supply chain systems. The main drawback of conventional SCM systems is insufficient end-to-end transparency. Multiple supply chain people ^[16]^[17] can exchange real-time information about the location and condition of an object through blockchain technology. With the help of advanced sensors and the prevalence of IoT, it is now possible to track any quantifiable situation, such as the temperature of a product in the cold chain or the availability of technical equipment in a supply chain. Deploying proactive and reactive risk management strategies is also made easier due to enhanced information accuracy.

Moreover, the Blockchain allows people to monitor assets directly from their source by providing a centralized database with readily accessible and unchangeable records. The integrity of assets encompassing both items and technical apparatus is guaranteed by data on provenance to verify legitimacy ^[18]. This could enforce ethical sourcing and make it possible to identify or stop counterfeit products and other fraudulent processes. Applications may involve tracking down the owner of an object after a sale for purposes of warranty. It also reduces documentation in international trade by guaranteeing the validity of goods documentation, such as those used in customs clearance processes. The supply chain operating as extremely automated based on predefined rules by fusing automation with transparency and validation using smart contracts. Since data and associated actions or choices are spread across the supply chain, this quickens the process and makes coordination easier ^[19]^[20]. To make things more explicit, in the event of a machine failure, the machine might contact the supplier to request a spare part, request restoration, and alert downstream stakeholders to potential disruptions. The following Table 1 shows the list of Blockchain’s contributions in the SCM field. Table 2 shows the analysis of Blockchain adopted supply chain systems and Table 3 presents the comparative analysis of the blockchain techniques.

Table 1. Contributions of Blockchain in SCM.

Properties	Sub-Domain	Major Contributions
Consistency ^[21]	Customer Assistance Manufacturers’ support Longevity of shares Accuracy of predictions	Increasing information accuracy and reducing errors and mistakes assisting manufacturing automation improving the effectiveness of production processes Increasing the effectiveness of supply chain operations Increasing the precision of predictions
Neutrality ^[22]	Design adaptability Availability of purchases reliability of the source flexibility in production reactivity of the delivery Selling adaptability Availability of returns Adaptability of the supply chain	Removing mediators as well as directly involving stakeholders Promoting stakeholder collaboration and communication Facilitating the sharing of information and resources among stakeholders Minimizing transactional expenses and time Improving production techniques Enhancing operations Reducing production duration Reducing client response times Reducing the duration of maintenance
Resilience ^[23]	Providers’ adaptability Adaptability in the supply Flexible production methods Adaptability in delivery	Avoiding intermediary firms along with directly involving constituents Facilitating information and resource sharing among stakeholders Facilitating interaction as well as collaboration among stakeholders Promoting the development of innovative processes Facilitating the decentralization of operations Supporting quick decision-making Maximizing collaboration Increasing the industrial process’s flexibility Improving the ability to make personalized goods Enhancing responsiveness to transformation and agility
Fiscal performance ^[24]	Cost of design Cost of manufacturing, Cost of shipment, Cost of return Supply chain constraints	Lowering hazards Lowering risk-related expenses Strengthening stakeholder trust Minimizing transactional expenses Lowering information tracking and verification expenses
Quality ^[25]	Quality of goods or services Performance of suppliers in terms of quality Quality of production	Promoting stakeholder information exchange Facilitating access to information on products, suppliers, retailers, manufacturing, and supply chain operations Enhancing process surveillance Simplifying the diagnosis of faults Allowing buyers to check the product quality Confirming that products adhere to quality control standards Ensuring that products are legally sourced and in compliance with the law Enhancing quality assurance and surveillance

Table 2. Analysis of Blockchain adopted supply chain systems.

Refs.	Supply Chain Area	Technology Used	Framework Model	Contribution
^[26]^[27]	Business application	IoT-integrated blockchain smart contracts	Conceptual framework	It enables effective resource and service sharing. It automated the workflow models of the time-consuming tasks.
^[28]	SCM	Blockchain-based data storage	Conceptual framework	It helps to reduce the transaction cost and improves the process of executive commitments.
^[29]	SCM	Blockchain-integrated IoT data storage	Conceptual framework	It assured the properties of data validity and traceability.
^[30]^[31]	Manufacturing sectors	Blockchain model	Conceptual framework	It helps to improve the supply chain operations in the manufacturing industries.
^[32]^[33]	SCM	Information management	Empirical model	Better adaptability and traceability in the supply chain.
^[34]^[35]	Logistics-based business modeling	IoT-integrated Hyperledger technology	Use case model	It helps to improve the efficacy of inbound logistics with better traceability.
^[36]^[37]	Supply chain risk management	Artificial Intelligence (AI) based blockchain technology	Conceptual framework	It supports enhancing the resilience of the supply chain system.
^[38]^[39]	Supply chain in e-commerce industries	Distributed blockchain technology	Empirical model	It safeguards highly sensitive information by avoiding intermediaries.
^[40]^[41]	Financial sector	Blockchain-integrated IoT framework	Conceptual framework	It helps to facilitate market establishment with ensured traceability.
^[42]^[43]	Supply chain provenance	Hyperledger technology	Conceptual model	Data validity and accuracy.
^[44]^[45]	Business application	Decentralized data storage and security	Conceptual model	It helps to improve the decision-making capability in the supply chain.

Table 3. Comparative analysis of the blockchain techniques.

Blockchain Techniques	Privacy	Security	Consensus	Speed	Scalability	Transaction Cost	Incentive	Smart Contracts
Bitcoin ^[46]	No	No	Computationally Intensive PoW	7 transactions per sec	No	High	Required cryptocurrency	No
Ethereum ^[13]	Yes	Yes	PoW and PoS	15 transactions per sec	No	High	Required cryptocurrency	Solidity
Hyperledger ^[47]	Yes	Yes	Multiple approaches	3000 transactions per sec	Yes	Low	It does not require cryptocurrency	Yes

The first wave of blockchain technology, often referred to as the Bitcoin blockchain, is made up of cryptocurrency-based network systems. In a Bitcoin network, users are portrayed by the nodes, each with a copy of the same ledger to which blocks of information are sequentially added. The sender, recipient, and transaction amount are only a few examples of the data types that make up a block. Additionally, a block has a hash or message digest that distinguishes it. Each block has a unique hash, calculated from the data in each block, and extra features such as a timestamp. Similar to Bitcoin, Ethereum is a blockchain that runs on cryptocurrencies. It is based on a public network, which can also be used to construct a blockchain with restricted access. Ethereum uses the same PoW protocol as Bitcoin, where the execution of smart contracts allows the decentralized applications to be built on top of Ethereum ^[48]. It is one of the most crucial features of the Ethereum blockchain. Since it was the very first blockchain platform that launched the idea of smart contracts, it has become quite popular for creating decentralized applications using smart contracts. One of the most cutting-edge blockchain platforms in the Hyperledger series. A blockchain network that is entirely permissioned and tailored for operations requiring private and sensitive information is called Hyperledger Fabric. Granular authorization, secret channels, and zero-knowledge proofs are all supported by hyperledger technology due to their extremely robust privacy and security features. Table 4 and Table 5 compares the conventional blockchain techniques based on the different types of parameters, which includes the techniques of Privacy Preserving Blockchain (PPBC) ^[49], Federated Learning Blockchain (FLBC) ^[50], Remote Data Integrity Blockchain (RDI-BC) ^[51], Support Vector Machine (SVM) –Blockchain ^[52], Access Control Model Blockchain (ACM-BC) ^[53], clustering BC ^[54], Forest Fire Detection Blockchain (FFD-BC) ^[55], Anonymity Access Control Blockchain (AAC-BC) ^[56], Medical IoT (MIoT)—Blockchain ^[57], Privacy-Preserving (PMIoT-BC) ^[58], and Skin Monitoring IoT-BC (SM-IoT-BC) ^[59].

Table 4. Qualitative comparative analysis of the blockchain techniques.

Techniques	Security	Privacy	Anonymity	Dynamics	Exactness	Energy Utilization	Overhead	Integrity
PPBC	🗸	🗸	X	X	X	X	🗸	X
FLBC	🗸	X	X	X	X	X	X	X
RDI-BC	🗸	🗸	X	🗸	🗸	X	X	X
SVM-BC	🗸	🗸	X	X	X	X	X	X
ACM-BC	🗸	🗸	X	X	X	X	X	🗸
Clustering BC	🗸	🗸	X	X	🗸	X	X	X
FFD-BC	🗸	🗸	X	X	X	X	X	X
AAC-BC	🗸	🗸	🗸	X	X	X	X	X
IoT-BC	X	🗸	X	X	X	X	X	X
MIoT-BC	🗸	🗸	X	X	X	X	X	X
PMIoT-BC	🗸	🗸	X	X	🗸	🗸	X	X
SM-IoT-BC	🗸	🗸	X	X	X	🗸	X	X

Table 5. Comparative analysis of the blockchain techniques using different parameters.

Techniques	Con	Avail	Eff	Acc	Cost	Scal	Run Time	Rel
PPBC	X	X	X	X	🗸	X	X	X
FLBC	X	X	🗸	🗸	X	🗸	🗸	X
RDI-BC	X	X	X	X	X	X	X	X
SVM-BC	X	X	🗸	🗸	X	X	X	X
ACM-BC	X	🗸	🗸	🗸	X	X	X	X
Clustering BC	X	🗸	🗸	🗸	X	X	X	X
FFD-BC	🗸	X	X	🗸	X	X	X	X
AAC-BC	X	X	X	X	X	X	X	X
IoT-BC	X	X	🗸	X	X	X	X	🗸
MIoT-BC	X	🗸	🗸	X	X	X	X	X
PMIoT-BC	X	X	🗸	🗸	X	X	X	X
SM-IoT-BC	🗸	X	X	X	X	🗸	X	X

Con—Confidentiality, Avail—Availability, Eff—Efficiency, Acc—Accuracy, Cost, Scal—Scalability, and Rel—Reliability.

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Muen Uddin

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Update Date: 25 Sep 2023

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