An Overview of Blockchain in Supply Chain

Management: Benefits and Issues

Komal Pardeshi*

The need for having an integrated supply chain has been highlighted by several researchers. Supply chain is a
complex network of manufacturers, suppliers, distributors, retailers and consumers. The last two decades have
witnessed several studies on the implementation of information technology to integrate these parties in the supply
chain. With the introduction of Blockchain in 2009 by Santoshi Nakamoto, its application to supply chain has
been considered to bring a revolution in supply chain management approaches. This paper reviews the past
literature on blockchain to explore several benefits and issues related to application of block chain in supply chain
area. A block is a data structure that contains a series of transactions. While holding these transactions,
it provides security, transparency, immutability and decentralization. Hence, blockchain is used in financial
sector. Similarly, blockchain can also be used in supply chain management. Using blockchain for supply chain
management provides all these parties a shared, transparent, distributed and immutable ledger so that all can
access it.

Introduction
Blockchain was introduced in 2009 by Santoshi Nakamoto in the market with its first
application being bitcoin, a digital currency used in the place of fiat money for trading.
The blockchain is an emerging technology which stores data in blocks that are chained
together. It is a decentralized distributed network with data sharing platform which
empowers numerous authoritative domains, who do not trust each other to cooperate,
coordinate and collaborate in a rational decision-making process (https://nptel.ac.in/noc/
courses/noc19/SEM1/noc19-cs26/). One significant difference between blockchain and a
traditional centralized database is that blockchain puts away information which one
cannot erase or alter. But in a centralized database, there is always a danger of digital
attack. Blockchain is a distributed ledger, where all transactions are recorded and all the
participants in the network agree on that transaction by using consensus mechanism.
According to Dan Burrus, the third party is not required when blockchain is involved.
Whenever a third party is required to send a transaction, the blockchain replaces it
(Benning, 2016).
Since the whole system is running transparently, the system is absolutely open source
and there is no need for trust among every node of the system as no one node can cheat
* Assistant Professor, Computer Science and Engineering Department, Walchand Institute of Technology, Solapur,
Maharashtra, India. E-mail: [email protected]

38
© 2021 IUP. All Rights Reserved. The IUP Journal of Supply Chain Management, Vol. 18, No. 3, 2021
other nodes. Blockchain can give extended supply chain transparency as well as condensed
cost and risk across the supply chain. With a different group of design, plan, create,
execution and distribution of a product, the supply chain is usually linear in nature. Supply
chain management is the performance of synchronizing the flow of products, as they move
from raw materials to manufacturer, from manufacturer to distributor, then from
distributor to retailer and from retailer to seller to end user. This route involves order
generation, order taking, data collection and the well-organized and appropriate
distribution of goods and services (Aburto and Weber, 2007). Several researchers have
shown the integration of all these processes within the firm as well as integration of
manufacturers outside their firm with suppliers and customers through information
technology that leads to improved performance of the firm (Soosay and Hyland, 2015; and
Afshan and Motwani, 2021).
Usually, supply chain managers try hard to manage volatility, volume, velocity, and
visibility of a product during supply chain as they try to improve the result throughout
a series of goals which incorporate the total expenditure, service, value, and support for
innovation (Afshan and Motwani, 2021). These predictable objectives are not prone to
change, however pushing ahead, supply chain managers should have the option to
accomplish higher levels of performance with supply chain technologies improved with
new digital techniques. In addition to this, supply chain managers can assist to build
extra sources of revenue by providing latest and quicker access to markets and
supporting the creation of smart products. Such facilities would add income to the
current list of objectives of the supply chain. The capacity of any supply chain is based
on the speed and flexibility of movement of materials, finished goods, capital, and other
assets from place to place, as well as the production of completed products. At their
center, on the other hand, supply chains contain various transactions: the exchange of
time, money, information, or physical materials for some other unit of value. The
considerable technological and advanced digital evolution, such as higher computing
power and lower overall costs, have affected the supply chain in various ways, which
includes innovation related to production process and decrease in transaction costs.
Supply chain network is a series of processes and levels, which starts with the material
information, suppliers and ends with the customer. For effective management of flow of
information, material and funds, there is a need to have integrated supply chain which
can provide complete transparency right from suppliers to the end users (Afshan, 2013;
and Afshan and Motwani, 2018). The advancement of technology has made this easier
to collaborate with different partners in supply chain (Afshan et al., 2018). Blockchain
has contributed a lot in increasing the transparency of information throughout the
supply chain and enhances the relationship among different supply chain partners
(Soosay and Hyland, 2015).
This paper reviews literature on supply chain and explores the benefits and
challenges in application of blockchain technology in supply chain context.

An Overview of Blockchain in Supply Chain Management: Benefits and Issues 39

Literature Review
Blockchain technology has progressed from simply being a use case of immutable ledger
for cryptocurrency transactions, to a programmable interactive environment for
developing decentralized and reliable applications addressing different use cases globally.
Key areas of decentralization, fundamental system requirements, and feasible mechanisms
of developing decentralized product anti-counterfeiting and traceability ecosystems
utilizing blockchain technology are identified via a series of security analyses performed
against solutions currently implemented in supply chain industry with centralized
architecture. The decentralized solution will be a secure and immutable scientific data
provenance tracking and management platform where provenance records, providing
compelling properties on data integrity of luxurious goods, are recorded and verified
automatically across the supply chain (Yiu, 2021).
A potential empowering agent to blockchain innovation appropriation in Indian
agriculture supply chain, traceability of the horticultural items was observed to be the
key empowering influence for selection of blockchain technology in agriculture supply
chain. The Decision-Making Trial and Evaluation Laboratory (DEMATEL) approach
was used to imagine the complex fundamental connections between the recognized
blockchain technology empowering agents. The discoveries from the investigation
recommended that among the different empowering agents, recognizability was the
main justification for blockchain technology execution in agricultural supply chain,
followed by auditability, immutable, and original (Kamble et al., 2020).
The blockchain innovation is now being utilized by many organizations, expecting to
set up an established and limited environment to construct a simple and more practical
food creation and distribution, which incorporates the key participation into the
production phase of the products (Andreas et al., 2019).
Using blockchain in supply chain has more effect in traceability system in industry.
The quality supply chain identifiable framework is built to work on the transparency,
traceability and auditability of products along with the participants in the supply chain.
Though blockchain is more effective in supply chain, still it has to face some challenges
linking from physical to digital world, cultural adoption to decentralized network, trust
of people, etc. (Ju Myung et al., 2019).
Blockchain technology is expected to bring a revolutionary transition in the manner
the transactions are carried out in the supply chains. Blockchain technology provides
better clarity and transparency by removing the disadvantages of trusted supply chain. The
research came across that the Technology Readiness Index (TRI) builds uncertainty and
difficulty which insignificantly affects the apparent convenience and usefulness. This is
one of the fundamental investigations on blockchain technology appropriation in supply
chain and the results show that the supply chain professionals notice that blockchain
technology is effortless adoption and would assist them with determining most extreme
advantages for further development of the supply chain impact (Kamble et al., 2018).

40 The IUP Journal of Supply Chain Management, Vol. 18, No. 3, 2021
 As there are different supply chain management strategies like lean supply chain, agile
supply chain, and hybrid supply chain, the study found the effect of these strategies on supply
chain performance. The study also explored the effect of supply chain management practices
in terms of strategic supplier partnership, customer relationship and information sharing on
supply chain performance (Inda Sukti et al., 2012).
More profitable, secured and more flow of information in supply chain is started by
creating mutually beneficial relationship between supply chain members. More research is
done on conceptual-based supply chain, and very few researchers have attempted a more
rigorous analytical approach to supply chain issues. Researchers tried to provide a more
careful analytical approach to supply chain issues (Maloni and Benton, 1997).
In order to meet consumer demands for consistent supply of top quality, safe and
nutritious foods, as well as rebuild public confidence in the food chain, the design and
implementation of backward and forward traceable supply chains from farm to
end-user has become an important part of the overall food quality assurance system. Farmers,
post-harvest handling operators, marketers, research practitioners and policy makers need
good understanding of the concepts and implications of supply chain traceability to assist
in developing and implementing appropriate technological interventions to meet consumer
demands for traceable agricultural supply chains (Opara, 2003).

Blockchain for Traceability in Supply Chain

In the current world of continuous competition, it is essential for companies to know
about the recent technological innovations and trends. Incorporating modern technologies
to collaborate with supply chain partners have proven to improve firm performance
(Afshan et al., 2018; and Afshan and Motwani, 2021). We realize that the fundamental
point of any business or organization is to upgrade consumer loyalty and maintenance,
which must be accomplished if their supply chain is productive and stable. As any product
has a life cycle like introduction stage, growth stage, maturity stage and the decline stage,
technology too has a life cycle.

Security
Blockchain technology is an emerging trend to change every facet of our digital lives, from
the manner in which we send cash to the manner in which we heat our homes. By staying
away from outsiders, blockchain technology guarantees to make the frameworks more
capable as this technology has a distributed ledger shared among multiple parties who do
not trust each other. Blockchain is an approach to make our frameworks fairer (Andreas
et al., 2019). So, using blockchain for supply chain, hacking is unimaginable for any
intruders. A change has to be incorporated simultaneously on thousands of copies to hack
which is infeasible without the software picking up on it. This is made possible with the
block structure used in this technology. The audits required by internal systems can be
eliminated by the shared, permanent ledger with modified rules thereby increasing the
security of the processes.

An Overview of Blockchain in Supply Chain Management: Benefits and Issues 41

Traceability
Traceability in supply chain research on the issue of expanding transportation and
shipping items around the globe is fundamentally required. This experiment addressed the
issue of food wastage. IBM teamed up with Capgemini at the Watson Internet of Things
(IoT) to effectively build a model for smart container management dependent on
blockchain innovation. The smart containers are equipped with sensors which transmit
all quality-related data such as temperature, weight, pressure and vibration to an
integrated IoT platform. In this way, all collected data is visible to all the members of
supply chain. This gives guarantee about data availability and immutability. Organizations
minimize their response time by continuously monitoring the real-time quality data. If
they identify that the temperature is decreasing below the threshold, then during the
transport, a shipment of replacement products can be triggered in real time. At every point
of the shipment, the product’s history and its place of origin are verified and additional
information is added in the chain. The future of this is doing automation using smart contract.

Supply Chain Using Blockchain

The blockchain innovation has entered the universe of supply chain for better and more
secure transactions. It can disturb the manner in which we produce, market, buy and
consume our products. Blockchain in supply chain guarantees the proper flow of product
without any fake or loss of information; it assures the originality of the product. It also
supports simple preparation of the receipt at every point in the supply chain. For a large
administrative work, it is necessary to do the agreement between supply chains networks
computerized instead of manual agreement, which will automatically reduce the
unnecessary delay and threats. The business can be more worth by expanding truthfulness,
reducing hazards and improving productivity. Blockchain is an important part which gains
the customer loyalty and decreases the creation cost of product. It acts as a mediator
between manufacturer and customer. Blockchain brings together the transportation and
helps supply chain participants to reduce the cost. It is a matter of observing different
components of supply chain through the agreement and redistributing. Blockchain deals
with all the parts of customer needs like product transportation within time, satisfaction
with the product and many more. Blockchain suppliers offer different key points, which
include coordination ability, network examination, cost-regulation process, significant
business knowledge, sellers trust, and many more. There are various motivations to use
blockchain in supply chain like focus on improvement of customer satisfaction level,
coordination of the whole supply chain, reducing fraud, increasing proficiency, security
and flexibility, increasing efficiency, reducing vulnerability and uncertainty, ensuring no
assets are under or overused, and reducing personal and hardware cost.

Benefits
Information stored in blockchain is immutable; once data is written, no one can alter it
(Pardeshi et al., 2020). The advantage of applying blockchain to supply chain improves

42 The IUP Journal of Supply Chain Management, Vol. 18, No. 3, 2021
accuracy in information. It also reduces a large number of frauds by treating data as
immutable. It improves customers’ trust and helps in improving business and
disbursement of products. It increases honesty by collecting all historical records of a
product throughout the flow of the product over the supply chain. In this way, it gives
more flexibility to the members of the supply chain. It gives better security by a common,
permanent record, along with some suggestions to supply chain members.

Services Provided by Blockchain

There are different services provided by blockchain. First is delivery service selection-
blockchain. This helps in the choice of delivery service so that harm to the item while
in transportation can be reduced. Second is the development of distribution strategy-
blockchain, in which blockchain builds up the delivery strategy of an item in different
departments so that organizations can supply items in less time to the customer. Third
is stock bill payment and audit-blockchain, wherein by giving bill payment service, it
reduces the time needed for billing of transportation of firm. Using such services of
blockchain, an organization can focus more on important work. Fourth is information
system-blockchain, which provides a service, where a customer can directly communicate
with the manufacturer. In this case, blockchain transfers the data of request from customer
to manufacturer. Fifth is product distribution-blockchain, where products are classified
based on category and then they are distributed according to the category. This helps the
manufacturer to deliver product on right time and at right place. Sixth is product returns,
where customer can return the product to manufacturer using product return service of
blockchain. This saves the time of the customer who wishes to return the product, because
blockchain picks up the product and transfers it to the manufacturer, then customer gets
a new product from manufacturer through blockchain. Seventh is product marketing-
blockchain, which reduces the time required for packing and labeling the product. This
increases the effectiveness of the product. Eighth is the route and network optimization-
blockchain, which helps in selecting better route for delivery of the product. By selecting
better delivery route an organization can reduce the cost of delivery of a product.

Issues in Supply Chain Management

Probably the most earnest issues confronting supply chains can be tended to through
blockchain, as it gives novel approaches to record, send, and share information. Some of
the issues are discussed here.

Globalization
Globalization presents a few genuine supply chain management challenges to enterprises
and organizations: First, to lessen the expenses over the supply chain, undertakings are
moving assembling activities to nations which offer lower work costs, lower charges, as
well as lower expenses of transport for crude materials. For certain organizations, to
develop a particular product, they require different parts of the product to be collected

An Overview of Blockchain in Supply Chain Management: Benefits and Issues 43

from different countries. So such organizations do not tie up with only one country, but
with various countries. Outsourcing expands the organization’s procurement network
globally, not only for the assembly of the product, but various providers are involved in
these processes that are located at different geographic areas. Organizations should
influence, arrange, and team up with parties across the border with respect to assembling,
storage, and logistics. Besides, they have to increment or keep up quick conveyance lead
times to customers who need to get their item on time in spite of the expanded
unpredictability inside the manufacturers’ supply chains. Furthermore, they even need to
deal with constant visibility on their production cycle from crude materials to completed
products—to ensure the effectiveness of their assembling measures. Second, as
organizations grow and deal with worldwide business sectors, confinement of existing
items requires a major change inside the supply chain as organizations adjust their items
to various cultures and preferences. There is a risk of losing control, visibility, and
appropriate management over stock, particularly if enterprise applications are not
coordinated. This requires managing diverse structures of knowledge across geographies
effectively and overseeing assorted structures of information across geologies adequately.

Fast Growing Market

As per EduCBA, purchaser conduct is influenced by social, individual, and mental
components that are rapidly being changed by innovation and globalization. In today’s
social media world, different kinds of data are collected from customers, so it is a challenge
for organizations to reply to the changing preferences so as to stay interesting and
relevant. Like globalization, the fast changing customer market carries various challenges
to supply chain. First, products have more limited life cycles because of fast changing
business sector demands. To stay up with the new trends and innovative products,
companies are struggling by producing new products keeping the manufacturing cost low
because they know that the new trends do not stay for long time. This demands a flexible
supply chain which will be used for assembling different types of products and for future
activities. Second, apart from the new trends, organizations should also constantly need
to update their product features. Upgrading the product features helps organizations to
restore their supply chain to patch up and accommodate the product changes. Ultimately,
development presents a challenge in forecasting demand for perfect products.

Quality and Compliance

Apart from affecting the customer behavior, social media focuses on the importance of
high quality products. The online shopping behavior is mostly affected by reading reviews,
comments, and feedback of customers, according to the research conducted by eMarketer.
Social media not only focuses on customer expectation towards quality product but also
amplifies the damages caused by product recalls. In this manner, companies are under more
pressure to make high quality products consistently. They can do so at every stage of supply
chain by addressing the quality of the product, for example, collecting raw material,
manufacturing, packaging, logistics, and product handling during transportation.

44 The IUP Journal of Supply Chain Management, Vol. 18, No. 3, 2021
Companies must ensure that during manufacturing, they meet the local and international
regulatory standards. Besides finishing internal control and safety assessments, companies
additionally need to put together documents like permits, licenses, and certification which
may overpower them and their supply chain management system. New technologies like
IoT, smart packaging, and blockchain are changing how compliance is authorized and
estimated. However, these developments will create streams of knowledge that cannot be
handled with the innovations of the previous 20 years. Directors should carefully consider
where these investments add up, asking Information Technology as to whether the
business is using stages supported micro-services and enormous information to help these
heavy data for lifting requirements. Better data management and integration is needed as
the core of all these supply chain challenges from globalization to compliance (Douglas
and Paul, 1996).

Conclusion
The blockchain has been proven to make the information available across supply chain
safer, traceable and organized and improves supply chain integration. This will decidedly
affect all partners including clients, makers and conveyance administrations. The supply
chain and the whole strategic area have developed to be a functioning member to take
up and adjust to blockchain advancement. Blockchain innovation is an incentive to
business by boosting supply chain credibility and speeding up the whole operational cycle
for meeting activities that are in progress in specific ventures. It enables to make and
maintain embedded contracts that can be stored permanently in transparent and
decentralized databases, where the originality cannot be altered or updated (Pilkington,
2016). The system records every necessary action every time the product changes hand in
the business transaction from manufacture to sale that could be identified, validated and
shared. To provide stability, organizations must work together to set up trust-based
relationships, creating diverse community’s intent on delivering positive incentive from
the blockchain ecosystem, as said by Steve Treagust, vice-president, industries program
management at IFS (The Information Age Website, 2020). Blockchain is worldwide and
adaptable. The innovation can uphold overall organizations and interchanges similarly as
quickly as regional relationship. This makes it the ideal answer for an economy of
globalization. The blockchain innovation can likewise be used for boosting consumer
loyalty. Entrepreneurs can utilize the blockchain information base to see where things are
underway and shipment to assemble a conveyance timetable for their clients. It
additionally has a social advantage. An innovation like this is a generational innovation,
something that will change the way the world works. The blockchain innovation will
change the old framework, making things more secure and straightforward.

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An Overview of Blockchain in Supply Chain Management: Benefits and Issues 47

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