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ii
Abstract

The recent explosion of interest in blockchain technology has led to the

development of numerous use cases for blockchain technology. Starting off as
the core technology behind bitcoin (Nakamoto, 2008), blockchain technology has
now found a place in every sector. The purpose of this paper is to explore the
potential application of blockchain technology in improving the efficiency and
transparency in SCM. With demands for traceability, fair practices, and
sustainable products from customers, supply chains are not completely integrated
to provide key information up the value chain. This research paper explores the
main drivers and issues in SCM frameworks, studies the capabilities of blockchain
technology and its core applications and maps them against each other to
propose a conceptual design framework which integrates blockchain technology
in SCM. Systematic literature review and design science research methodology
guide the direction of the research paper. The proposed design is evaluated
against two blockchain platforms which were identified to be relevant to this
research. Academics and companies involved with SCM may be interested in this
paper as it outlines the major applications of blockchain technology and also
points out the limitations in the SCM domain.

i
Acknowledgements

First I would like to express my gratitude to all the individuals who helped me
realize this master thesis. I would like to especially thank my supervisor, Dr. Wei
ZHOU and ESCP for giving me this opportunity to explore this topic. I would also
like to thank Professor Markus Bick who guided me and helped formulate the
initial thesis idea. Finally, I would like to thank all my friends and family for the
never-ending support and motivation during the writing phase.

ii
List of figures and tables

Figure 1: Disruptive and important technologies for supply chain strategies

worldwide, as of 2017 ......................................................................................... 1
Figure 2: Flow of value and decisions in a supply chain ..................................... 4
Figure 3: Size of the blockchain technology market worldwide ........................... 5
Figure 4: SCM software market revenue worldwide, from 2008 to 2021 ............. 7
Figure 5: Visualization of thesis flow ................................................................. 11
Figure 6: Research Method Process................................................................. 13
Figure 7: Visualization of steps taken in research paper ................................... 14
Figure 8: Supply chain network structure .......................................................... 16
Figure 9: Conceptual Framework of SCM, key decisions and elements ........... 17
Figure 10: SCM, integrating and managing business processes across the
supply chain ...................................................................................................... 20
Figure 11: SCM, fundamental management components ................................. 21
Figure 12: Processes of SCOR model .............................................................. 22
Figure 13: Triggers for sustainable supply chain management ......................... 24
Figure 14: Triple bottom line and the supporting facets for SSCM .................... 26
Figure 15: Framework for analysis of technology.............................................. 27
Figure 16: Digital Supply Network of the future ................................................. 29
Figure 17: Online survey results for most important factors for big data
management according to shippers, 3Pl and 4 PL providers. ........................... 32
Figure 18: Different network architectures ........................................................ 35
Figure 19: Visualization of blockchain ............................................................... 36
Figure 20: How simple digital signature is applied and verified ......................... 37
Figure 21: How does blockchain work? ............................................................ 38
Figure 22: Representation of smart contract logic............................................. 42
Figure 23: “Internet of Things” as convergence of different visions ................... 44
Figure 24: Proposed conceptual design for SCM.............................................. 52
Figure 25: Zoom in view of Figure 24 of the conceptual design for SCM .......... 53
Figure 26: Table of blockchain platforms for case study ................................... 58

Table 1: Key identified drivers and issues in SCM from literature review .......... 47
Table 2: Identified objectives for the solution to defined problem in Table 1. .... 49
Table 3: Survey result of biggest impact of blockchain in Supply Chain ........... 57
Table 4: Survey result of top benefits of blockchain technology (2016) ............ 57
Table 5: Range of solutions offered by VeChain ............................................... 60
Table 6: Range of solution offered by Waltonchain........................................... 63
Table 7: Comparison between proposed design, VeChain platform and
Waltonchain platform ........................................................................................ 65

iii
List of Abbreviations used

DSC Digital Supply Chain

DSN Digital Supply Network

DSR Design Science Research

GSCF Global Supply Chain Forum

ICT Information and Communication Technologies

IOIS Inter-organizational information system

IoT Internet of Things

PoS Proof-of-Stake

PoW Proof-of-Work

P2P Peer-to-Peer

RQ Research Question

SCM Supply Chain Management

SCS Supply Chain System

SSC Sustainable Supply Chain

SSCM Sustainable Supply Chain Management

iv
Content

Abstract ................................................................................................................. i
Acknowledgements .............................................................................................. ii
List of figures and tables ..................................................................................... iii
List of Abbreviations used ................................................................................... iv
1. Introduction................................................................................................... 1
1.1 Current state of supply chain management ............................................... 2
1.2 Blockchain Technology .............................................................................. 4
1.3 Smart Contracts ......................................................................................... 6
1.4 Research Objective ................................................................................... 6
1.5 Limitations ................................................................................................. 9
1.6 Thesis Outline ............................................................................................ 9
2. Literature Review ....................................................................................... 12
2.1 Methodology ............................................................................................ 12
2.2 Contribution ............................................................................................. 14
2.3 Drivers for Supply Chain Management .................................................... 15
2.3.1 Supply Chain Management Framework ............................................ 17
2.3.2 Supply Chain Operating Reference (SCOR) Model........................... 21
2.3.3 Sustainable Supply Chain Framework............................................... 22
2.4 Technologies and Facilitators Overview .................................................. 27
2.4.1 Digital Supply Chain .......................................................................... 28
2.5 Blockchain Technology and smart contracts ........................................... 32
2.5.1 How blockchain technology works? ................................................... 34
2.5.2 Blockchain applications: Smart Contracts ......................................... 40
2.5.3 Smart Contracts and IoTs .................................................................. 43
3. Analysis ...................................................................................................... 46
3.1 Combined analysis of supply chain frameworks ...................................... 46
3.2 Objectives of a solution............................................................................ 48
4. Synthesis and Tentative Design Proposal .................................................. 50
4.1 Conceptual Design Proposal ................................................................... 50
4.2 Main Elements of proposed conceptual design ....................................... 53
4.3 Limitations of proposed conceptual design .............................................. 55
5. Evaluation with case studies ...................................................................... 56
5.1 Methodology ............................................................................................ 56

v
 5.1.1 Selection Criteria ............................................................................... 57
5.1.2 Selection Process .............................................................................. 58
5.1.3 Limitations ......................................................................................... 58
5.2 Case study: VeChain ............................................................................... 58
5.3 Case study: Waltonchain ......................................................................... 62
5.4 Evaluation ................................................................................................ 63
6. Conclusions and Recommendations .......................................................... 66
6.1 Findings ................................................................................................... 66
6.2 Discussions ............................................................................................. 68
6.3 Recommendations ................................................................................... 69
6.4 Suggested areas for future Research ...................................................... 69
7. References ................................................................................................. 71
Appendix ........................................................................................................... 80
Blockchain Newsletters.................................................................................. 80
List of blockchain platforms ranked by market cap: ....................................... 80
Affirmation ..................................................................................................... 82
Additional Affirmation ..................................................................................... 83

vi
1. Introduction

Technology is ever-evolving and companies that take advantage of such

technologies tend to advance with the technology. The pressure is on supply
chain managers to adapt to the latest technology and remain competitive in the
market. Customers are demanding more information, faster services, fairer
products and sustainable practices along the supply chain. Delivering on
customers’ demands is the only way to remain competitive. Figure 1 illustrates
the disruptive and important technologies for supply chain strategies in 2017.

90
80
Share of responndents (%)

70
60
50
40
30
20
10
0

Figure 1: Disruptive and important technologies for supply chain strategies worldwide,
as of 2017
Source: Gartner (SCM World). (n.d.). Statista

Adopting a digital network with data analytic capabilities is impacting the supply
chain across a multitude of industries. Although technology seems to empower
transformation in supply chain management (SCM), at the other end of the
spectrum there is large fragmentation in supply chain networks. With rising
concerns about environmental and social problems along supply chains,

1
companies need to take responsibility and gain control over the full cycle of their
supply chain. The way of conducting business is dramatically changing as
corporations try to incorporate environmental and social responsibilities as well
as ethics into their business practices. Corporations are adopting CSR strategy
and implementing them to address the problems along the triple bottom line.
There is an increasing recognition that organizations must address the issue of
sustainability in their operations. Addressing sustainability issues is not
necessarily going to cost the company but instead could foster a new wave of
innovation, new markets, and opportunity.

Along the numerous factors which play a role in enabling a sustainable supply
chain, the flow of information plays an important role. Information and market
asymmetry are big factors which cause increases in variability of orders at each
stage of the supply chain. This phenomenon known as the bullwhip effect causes
inefficiencies all along the supply chain. Information is a key aspect to improve
relationships and coordination between actors in a supply chain, which increases
the overall competitiveness of the company (Harrison, Lee, Neale, & Whang,
2004). Supply chain collaboration involves transforming suboptimal solutions of
individual links into a comprehensive operational solution which includes the
elimination of inefficiencies and visibility of information (Cannella & Ciancimino,
2010).

1.1 Current state of supply chain management

With globalization, global connectivity, demanding customers and increasing

competence, we have extremely competitive markets which spread and competes
across the world. To remain competitive companies will engage in supply chains
which are longer and more complicated. Modern-day sophisticated supply chains
have inherent risk associated with its interlinked nature. SCM is an important
management paradigm which continuously seeks for efficiency. Supply chain and
logistics can deliver plentiful ways to increase efficiency and productivity and
hence contribute towards improved costs. Lean manufacturing, just-in-time

2
inventory, offshoring, outsourcing are some of the incorporated models that
improved efficiency while posing its own challenges. SCM can be defined as “the
management of upstream and downstream relationships with suppliers and
customers in order to deliver superior customer value at less cost to the supply
chain as a whole.” (Christopher, 2011). From an operational point of view, SCM
translates to effectively managing all points along the value chain. Along with the
value, there is a flow of information upstream and downstream.

“Many companies are not aware that they need to segment their
customers, and they currently treat everyone with the same supply chain
strategy [a one-size fits-all approach]. While this helps keep things simple,
the needs of some customers may not be met and for others, the cost of
meeting their needs is too high.” (Bender, 2013)

Companies need to adopt agile strategies to react to sudden changes in demand,

deal with risk mitigation due to ripple effects along the chain and increase visibility
throughout the supply chain. A one-size fits-all approach will not help companies
to meet the current demands. To maximize the value the differences in costs and
functioning along a supply chain requires visibility on numerous factors such as
production, transportation, distribution, government fees, etc. Information flow
relies on facilitation of data sharing and storage. To truly maximise the overall
benefits for the customer and the company along the supply chain, a systemic
approach should be taken to improve trust, the flow of information and limit the
manifestation of information flow. For example, supply chains of automotive
companies can have suppliers who employ millions of people that are located
across numerous countries. As there are numerous layers of movements of goods
and transactions, there is a loss of information at every step. The further away
incidents are reported in the supply chain the harder it is to obtain relevant
information about it (Cecere, 2014).

3
 Figure 2: Flow of value and decisions in a supply chain
Source: Illustration complied by Author

Creating visibility along the supply chain requires understanding the mechanisms
along the supply chain, isolating them and implementing the right tools to capture
and share information across various layers. By providing buyers and sellers
reliable tools to verify the value of goods and services purchased, they can, in
turn, return the value to their customers. The current systems also do not include
ways to track environmental damage and illicit activities conducted in the supply
chain. We are paying a price for the service or product which does not reflect the
true cost.

1.2 Blockchain Technology

Although blockchain grabbed its attention in the cryptocurrency space, the influx
of money into blockchain technology has fostered innovation and expanded the
applications of blockchain technology into numerous domains. Transactions
between two parties are usually controlled by a centralized party, and in most
cases, an additional fee is charged to carry out these transactions. This trend is
particularly present in digital payments, but it also applies to various other
domains. Although the transactions take place between two principal parties, they
involve a third party in order to facilitate the transaction and insert a layer of trust.
Most third party organisations which facilitate transactions store and collect in a
centralized manner which makes them more dependent in nature. Blockchain
technology was developed to facilitate these transactions without the involvement
of third party organisations. At the core of the technology, a distributed ledger
enables for a large number of parties to share resources and information without

4
having to trust each other or a central broker. Blockchain is immutable, append-
only data structure that contains records which are cryptographically linked
together.

Size of the blockchain technology market worldwide

from 2016 to 2021 (in million U.S. dollars) Market in
million U.S. dollars
2,500.

2,000.

1,500.

1,000.

500.

0.
2016* 2017* 2018* 2019* 2020* 2021*

Figure 3: Size of the blockchain technology market worldwide

Source: Statista. Accessed 9 March, 2018

Since the reception of bitcoin in 2009, the first application of blockchain

technology, there has been multiple proofs of concepts of blockchain solution in
numerous domains but nothing at the scale of Bitcoin. The applications of
blockchain technology are not only limited to financial transactions. Figure 3 is a
clear indicator that blockchain technology is being adopted at an exponential rate.
Supply chain has been identified as a specific domain where blockchain
technology will have an enormous impact. Blockchain in SCM could boost trust,
transparency and improve information sharing as the platform is an immutable
ledger. Current supply chain systems rely on a vast number of paper works for
approval and decision making which slows down the overall process and reduces
efficiency. As an immutable ledger blockchain technology can serve as a trust
layer to enable automation and swift functioning of SCM. The obvious advantages
of using blockchain technology can be classified into the following: increased

5
efficiency, reduced transaction and legal costs and greater transparency and
anonymity (Giancaspro, 2017).

1.3 Smart Contracts

As blockchain is a relatively new concept, the potential of blockchain technology

is only starting to be realised and seized upon (Giancaspro, 2017). Blockchain
technology has a major role to play as it can provide a simple infrastructure which
is cost effective and secure to enable smart contracts. Rather than rely on an
intermediary to carry out the transfer of digital property or any micro-transactions,
smart contracts can be coded to execute such transactions. A small transaction
fee is deducted based on how the blockchain rewards its miners, but the
dependency on intermediaries are removed. Smart contacts are self-executing
contracts which are triggered by the programmed logic and real world events. The
potential of smart contracts lies in the imagination of the logic programmed into
the contract. When smart contracts are used in scale it can aid the removal of
multiple human interactions between transactions which can translate to
increased efficiency and reduced errors in SCM. Various instructions can be
programmed into supply chain processes such as the codes of conduct,
accessibility to information, order fulfilment criteria, etc. with the help of smart
contracts. Smart contracts also facilitate the applications of IoT solutions which
have been an emerging trend in SCM. Automation of IoT infrastructure for SCM
becomes possible using smart contracts which truly shortens the digital/physical
link.

1.4 Research Objective

With rapid improvement and ease of use of digital technologies, a new wave of
opportunities are presenting itself to improve the efficiency and transparency of
SCM. SCM must explore ways to embed these technologies to improve operating
efficiencies. The environmental and social externalities associated within supply
chains are extremely hard to monitor and manage. To address some of the most

6
important problems in modern context such as climate change and meeting
consumer expectations, SCM needs to evolve. The risks commonly faced in the
supply chains are operational, environmental and social, hence all aspects must
be simultaneously looked into. For a corporation to build an effective supply chain
system, it is important to implement their CSR strategy within the company and
among their supply chain stakeholders. An efficient supply chain system is
extremely important for a company’s survival in the long term. As a company
grows, it manages more suppliers, more inventory and takes up bigger mitigation
risks. The pressure is on companies to adopt modern digital supply chain
capabilities. With the advances in information and communication technologies
(ICT), in the recent years, companies are willing to spending more to improve their
IT infrastructure in order to gain competitiveness, collaboration and reduce their
risks (Figure 4). With increasing volume of unstructured and structured data
available there is immense potential of ICT’s to solve some of the most concerning
problems in supply chain management.

Revenue in million U.S. dollars

20,000.
18,000.
16,000.
14,000.
12,000.
10,000.
8,000.
6,000.
4,000.
2,000.
0.
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*2021*

Figure 4: SCM software market revenue worldwide, from 2008 to 2021

Source: Statista. Accessed 15 March 2018

The purpose of this thesis is to analyse the main supply chain management
frameworks and identify inefficiencies and risks within traditional supply chain

7
models. Furthermore, sustainable supply chain frameworks and digital supply
chains are also explored to understand the underlying drivers to ease the shift
toward sustainable models. We want to explore the applications of digital
networks, ICTs and blockchain technology in the context of SCM. There has been
an exploding interest in blockchain technology in various sectors. Blockchain
technology which is relatively new to the supply chain sector is explored regarding
its capabilities and ability to solve some of the problems to improve the efficiency
and transparency of supply chains. A comprehensive understanding of blockchain
technology and its applications particularly that of smart contracts are mapped to
understand how companies can address their operational, environmental and
social risks faced using these technologies. In order to do so, the thesis will seek
to answer the following research questions:

RQ1: What are the major drivers and issues in supply chain frameworks?

RQ2: What are the capabilities of a smart contract?

RQ3: Which mechanisms of a blockchain technology add real value to sustainable

SCM?

To answer the research questions, a systematic review of the literature on the

topics of sustainable supply chain, digital networks, blockchain technology and
smart contracts will be carried out. We adopt design science research
methodology to review literature, identify and define a problem, propose a
solution, evaluate the solution based on case studies and make
recommendations. This literature review serves as a foundation to carry out the
exploratory research using design science research methodology.

8
1.5 Limitations

SCM has a wide range of mechanisms and drivers which run along the value
chain, all aspects of SCM cannot be explored in this thesis. Aspects in SCM that
relate to ICT’s are the main topic of interest. The focus on strategy and
management in SCM is ignored. Blockchain technology which is recognized for
its data security and exchange mechanisms does not solve the underlying
problem of the quality of the data. Blockchain technology is not error proof and
the data in the blockchain is only as good as how the data is recorded into the
blockchain. Also, blockchain technology is a relatively new technology whose
reliability, in the long run, has not been extensively tested. As the size of each
block and the overall length of the blockchain increase over time, it is going to be
extremely challenging to keep the blockchain decentralized as not every miner
will have the capacity to run the complete chain on their systems. This would
contradict the decentralization system blockchain technology stands for. The cost
of maintaining extremely long blockchains over time is not taken into
consideration.

1.6 Thesis Outline

The thesis is structured in the following way:

1. Introduction

The introduction provides a broad overview of the current state of affairs and
implications of the main topics covered in this thesis. The purpose of the
thesis, the research questions along with its limitations are presented.

2. Literature Review

A comparative review of literature over a wide range of topics such as SCM

frameworks, SSCM frameworks, ICT technologies, digital networks,
blockchain technology and smart contracts are systematically explored. The

9
methodology and purpose of the research paper are laid out. A glimpse of the
design science research methodology adopted is also included.

3. Analysis

The literature review is analysed and synthesised to define or identify an

emerging problem in SCM. Objectives for a solution is then inferred for the
defined problem in order to propose a new design.

4. Synthesis and Tentative Design Proposal

The objectives for the solution identified and synthesis into a new design
proposal. The tentative design proposal is explained and illustrated along with
its limitations.

5. Evaluation with case studies

The design proposal is evaluated by two identified companies to validate the

concept. The methodology for the selection of the company and the findings
are presented.

6. Conclusion and Recommendations

The main findings in the research paper are summarized, evaluated and
conclusions is provided. The author gives recommendations and suggestions
for future research areas.

10
Figure 5: Visualization of thesis flow

11
2. Literature Review

In this section, the author underlines the methodology for the literature review
and delves deep into the topics of sustainable SCM, blockchain technology and
smart contracts.

2.1 Methodology

According to Fink, literature review is defined as: ‘‘A literature review is a

systematic, explicit, and reproducible design for identifying, evaluating, and
interpreting the existing body of recorded documents’’ (Fink, 1998). As the
literature review lays down the foundation for this thesis, the idea is to
systematically review and evaluate the relevant literature in the following domains:
Supply chain management (SCM) (keywords: performance, frameworks,
sustainability, information technology, risks, transparency), blockchain technology
(keywords: SCM, applications, transparency, infrastructure, ICT, IoT), smart
contracts (keywords: smart contracts, ICT, blockchain technology, IoT). The main
sources for the literature review were the following databases (Emerald,
ScienceDirect, EBSCO, JSTOR and Google scholar) as they include most of the
top academic journals. Special attention was given to peer reviewed papers and
recently published papers to narrow down the search. Blockchain technology is a
relatively new concept in the space of supply chain management, hence there is
limited academic literature and research. Due to the novel and exploratory nature
of this topic, recent conferences, keynotes, and major non-academic publications
is also analysed.

The research approach for this thesis is modelled around design science. As the
nature of research is exploratory and the topic is in the field of information
systems, Design Science Research (DSR) methodology will be incorporated to
support the findings.

12
 Figure 6: Research Method Process
Source: Illustration compiled by Author based on DSR in information Systems

DSR, can be seen as constituting a third major form of science, in addition to the
natural sciences and the human sciences (Gregor 2009). DSR provides a set of
synthetic and analytical techniques and perspectives for performing research
(Kuechler & Petter, 2017). Figure 6 illustrates the inflows of knowledge for this
research paper and illustrates the DSR process to create new knowledge. The
research methodology is further explained in the evaluation phase of the research
paper.

13
 Figure 7: Visualization of steps taken in research paper
Source: Illustration compiled by Author

2.2 Contribution

The purpose of this thesis is to identify and map major applications of blockchain
technology into supply chain management to improve the overall efficiency and
transparency. A board range of inefficiencies and unsustainable practices in the
supply chain systems is summarized and categorized. This paper aims to design
an effective process to implement blockchain technology into your SCM systems.
It will also serve as a guide to understanding the applications of smart contracts.
The aim of blockchain technology in SCM will be to improve the sustainability and
efficiency of the supply chain system. The applications and feasibility of
blockchain technology, which is a relatively new concept in supply chain

14
management, is thoroughly studied. A wide range of papers on blockchain
technology is systematically analysed; the range of applications and limitations of
this technology is explored and categorized. The thesis summarizes and
interprets the applications of blockchain technology in supply chain management
and thereby contributes to further substantiation of this field. Design science
research methodology serves as the guiding principle to translate the findings into
a process which can be applied to supply chain management.

2.3 Drivers for Supply Chain Management

“A significant paradigm shift of modern businesses is that they can no

longer compete as a sole autonomous entity but rather compete as supply
chains.” (D. Lambert & Cooper, 2000)

This shift directs towards a competitive environment where success depends on

the ability to manage your supply chain. A supply chain runs effectively as it
comprises various actors, rules, and systems which steer the direction of the
movement of value along the chain. The supply chain is only as strong as the
weakest link in the chain, in order to strengthen the supply chain system (SCS) it
is crucial for companies to have information and control on each link in the supply
chain (Christopher, 2011). Apart from the suppliers involved, logistics
management plays a big part in SCM. It is only recently that practitioners,
consultants and academia view SCM differently to logistics (Davis, 1993) (Lee &
Billington, 1995). SCM was initially introduced by consultants in early 1980s and
gained remarkable attention (Oliver & Webber, 1992).

SCM has evolved from integrating logistics across the supply chain to the current
understanding of integrating and managing key business processes across the
supply chain (Cooper, Lambert & Pagh, 1997). As supply chains get bigger it also
requires more resources to control them in an effective manner. In order to
improve the overall efficiency of the supply chain system (SCS), companies have
explored and incorporated the expertise from various other areas. Modern day

15
SCS’s have a wide range of mechanisms encompassed in them in order to run
efficiently. Research on SCM can be classified into three categories namely:
operational, design and strategic (Huan, Sheoran, & Wang, 2004). 1) Operational:
The areas focus on the operational aspects of the supply chain, such as inventory
management, production and planning. 2) Design: The design aspect of the
supply chain on objectives of the supply chain and where decision spots lie
(Mourits and Evers, 1995). 3) Strategic: Based on the dynamics and development
objectives of the supply chain, the managers make strategic decisions for the
whole chain (Gopal, 1992).

Figure 8: Supply chain network structure

Source: Illustration compiled by Author based on (Lambert, Cooper & Pagh, 1998)

The degree of complexity to manage a long supply chain is illustrated in Figure 8.

Figure 8 illustrates why companies like to control the supply chain until the end
where the product reaches the end-customer as power is more concentrated
there. Figure 8 also illustrates why managing the complete supply chain is an

16
extremely difficult task. With increasing tiers of suppliers, there tends to be an
exponential increase in number of suppliers linked to your process. In order to
manage these complex supply chains a normative framework is required. There
exists only two cross functional, cross firm, process based SCM frameworks, the
conceptual SCM framework and the Supply Chain Operating Reference (SCOR)
model (Lambert & Cooper, 2000).

2.3.1 Supply Chain Management Framework

In the paper “Issues in Supply Chain Management”, Lambert and Cooper describe
a conceptual framework of SCM. The conceptual framework accentuates the
interconnected nature of a supply chain and demonstrates the steps to design
and successfully manage a supply chain. Figure 9 explains the interaction of the
three interrelated elements of the framework: the supply chain network structure,
the supply chain business process, and the supply chain management
components.

Figure 9: Conceptual Framework of SCM, key decisions and elements

Source: Illustration compiled by Author (Lambert, Cooper & Pagh, 1997)

17
Supply Chain Network Structure

The supply chain network comprises of all the participants in the value chain.
Some of the important factors considered are the length of supply chain and the
number of suppliers and customers at various levels. To have more control over
the supply chain it is important to differentiate primary and supporting members
(D. Lambert & Cooper, 2000). According to Davenport, primary members can be
defined as the following:

“All those autonomous companies or strategic business units who carry

out value-adding activities (operational and/ or managerial) in the business
processes designed to produce a specific output for a particular customer
or market.” And supporting member are “companies that simply provide
resources, knowledge, utilities, or assets for the primary members of the
supply chain.” (Davenport, 1993).

For example, in a fashion company’s supply chain, logistic companies play the
role of supporting member. The same primary member can also play the role of
supporting member in the supply chain network. Differentiating member along the
network enables us to point at the origin and point where no more value is added
to the supply chain.

The supply chain network can also be defined across three dimensions:
Horizontal Structure: Number of tiers across the supply chain. Long supply chains
has more tier of suppliers. Vertical Structure: It refers to the number of suppliers
within each tier. The third dimension is horizontal position: which defines the
position of the company, checks if the company is close to the primary source or
the end customer (D. Lambert & Cooper, 2000). Based on where the company is
positioned along these three dimensions, it will have a unique perspective on the
business process.

18
Supply Chain Business Processes

Business processes serve the role of linking companies in a supply chain.

Successful SCM requires integrating activities into key supply chain processes
(D. Lambert & Cooper, 2000). The Global Supply Chain Forum (GSCF), a group
of non-competing firms and a team of academic researchers have published a
model to comprehensively analyse the supply chain (Croxton, K. et al (2001). The
model is composed of 8 main business processes which can be seen in Figure 10.
GSCF identifies customer relationship management (CRM) and supplier
relationship management as the key processes to manage coordination along the
supply chain. Also, each of the 8 processes identified is cross-functional and runs
across the whole supply chain. Another important business process which gives
companies an opportunity to achieve competitive advantage is return
management. It involves all activities related to reverse logistics (Rogers et al.,
2002).

The complexity of a large supply chain makes it impossible to manage business

process links between all suppliers. Each link in the supply chain is unique and
situational, hence the levels of integration should vary across the links making
some links more critical than the others (Håkansson & Snehota, 1995). The
empirical research by Håkansson and Snehota stressed that “the structure of
activities within and between companies is a critical cornerstone of creating
unique and superior supply chain performance” (Håkansson & Snehota, 1995).
The research by Cooper and Lambert show that four fundamentally different
business process links can be identified in a supply chain. They are managed,
monitored, not-managed and non-member process links (D. Lambert & Cooper,
2000). Classifying the business process links between firms in a supply chain
allows companies to focus on the key suppliers along the supply chain which
translates to a more efficiency.

19
Figure 10: SCM, integrating and managing business processes across the supply chain
Source: (Lambert, Cooper & Pagh, 1997)

Management Components of SCM

The management components is the third element of the SCM framework as

illustrated on Figure 11. Based on work-review of the literature and interviews with
over 90 managers Cooper and Lambert identified nine management components
for successful SCM. These 9 components can be further classified as Physical &
Technical management components and Managerial & Behavioural management
components. Figure 11 summaries the management components of SCM into the
two categories. The more management components you add to a business
process link, the higher the level of integration between the links (Ellram &
Cooper, 1990).

20
 Figure 11: SCM, fundamental management components
Source: Illustration compiled by Author (Lambert, Cooper & Pagh, 1998)

2.3.2 Supply Chain Operating Reference (SCOR) Model

The SCOR model has been developed by the supply chain council along with the
assistance of 70 leading manufacturing companies (Supply Chain Council, 2017).
The model is a management tool used to improve and communicate SCM
decisions with suppliers, customers and within the company (Supply Chain
Council, 2017). The model incorporates business concepts of process re-
engineering, benchmarking, and measurement into its framework (Huan et al.,
2004). Huan et al. described the SCOR model as the “most promising model for
supply chain strategic decision making (Huan et al., 2004).” Figure 12
schematically illustrates the SCOR model and the process spans from the
supplier’s supplier to the customer’s customer (Supply Chain Council, 2017).

21
 Figure 12: Processes of SCOR model
Source: Illustration compiled by APICS, Supply Chain Council

The SCOR model is not based on mathematical models or heuristics, instead it is

based on benchmarked indicators to analyse, compare and get improvement
strategies. SCOR model describes the business activities along the supply chain
by plan, source, make, deliver and return and illustrated in Figure 12. The SCOR
model is a combination of business process improvement, performance
benchmarking, best practice analysis and organisational design. The processes,
performance, practices and skills of people are measured and stored in a
repository. The supply chain configuration in the SCOR model is driven by:

 Plan: aggregation and information sources

 Source: products and locations
 Make: production methods and sites
 Deliver: products, channels, inventory deployment
 Return: methods and locations

The supply chain configuration impacts management practices and processes.

The SCOR model accurately reflects these impacts and each supply chain is a
chain of these five steps.

2.3.3 Sustainable Supply Chain Framework

Sustainable development is defined as ‘‘a development that meets the needs of

the present without compromising the ability of future generations to meet their
22
own needs” (WCED, 1987). While sustainability can be interpreted in various way,
a central concept to operationalize sustainability is the triple bottom line, where a
minimum performance must be achieved across environmental, social and
economic dimensions (Elkington, 1999). We take the definition of Seuring and
Muller on sustainable SCM as our starting point:

“Sustainable SCM is the management of material, information and capital

flows as well as cooperation among companies along the supply chain
while integrating goals from all three dimensions of sustainable
development, i.e., economic, environmental and social, which are derived
from customer and stakeholder requirements.” (Seuring & Müller, 2008)

In a sustainable supply chain (SSC), the member within the supply chain must
fulfil environmental and social criteria, while the competitiveness is maintained
through related economic criteria and meeting customer needs (Seuring & Müller,
2008). In order to understand what drives towards a SSC we look at Seuring and
Muller’s conceptualized SSCM framework which was based on three parts:

 Triggers for sustainable supply chain management

 Supplier management for risks and performance
 Supply chain management for sustainable products

Figure 13 illustrates the initial triggers towards a SSC. The external pressure which
is felt by the focal company originates from all the stakeholders involved around
them.

23
 Figure 13: Triggers for sustainable supply chain management
Source: Illustration compiled by Author based on (Seuring & Müller, 2008)

The two most important stakeholders are the customers who define the product
and service they would like to receive, and the government which sets up
regulations and control. In the recent years, there is increasing pressure from
NGO’s which try to hold the focal company responsible for all the environmental
and social problems along their supply chain. This pressure which is passed on
to the focal company is then transferred onto their suppliers. Focal companies
shift the pressure on their suppliers with two distinctive strategies according to
Seuring and Muller:

 Supplier management for risks and performance

While external pressure sets of triggers for a SSC, there are also internal factors
that play an important role. Seuring and Muller reviewed 191 papers relevant to
SSCM and identified three aspects that were mentioned as barriers for
implementing sustainable supply chains. (1) higher costs, (2) coordination effort
and complexity, and (3) insufficient or missing communication (Seuring & Müller,
2008). To ensure companies meet with laws and regulations, management plays

24
an important role. The role of environmental management systems such as ISO
14001, has emerged to ensure a minimum performance is normalized among all
suppliers of the focal companies (Corbett & Kirsch, 2001). As companies are
competing on a global level, these standards quickly evolve into industry
standards for suppliers. To meet environmental and social requirements,
companies extend their requirements and criteria to the suppliers, suppliers go
through evaluation schemes to ensure environmental and social factors are taken
into account. Self-evaluation, where suppliers declare how they deal with their
environmental and social issues (Trowbridge, 2001) has become a norm to give
suppliers competitive advantage. Companies understand that loss of reputation
will translate in reduced economic benefits, hence companies try to meet minimal
performance requirements in environmental and social areas to stay competitive
with their customers.

 SCM for sustainable products

The term sustainable products are aimed towards products which strive for
improved overall environmental and social quality. Although the ultimate goal is
to satisfy their customers and increase their competitive advantage (Bowen,
Cousins, Lamming & Farukt, 2009). Sustainable products normally consider the
entire lifecycle of the product, this translates into the company actively
participating along a bigger part of the supply chain. Close partnerships, training,
and sharing of information between the firm and its suppliers play a crucial role is
controlling a larger part of its supply chain.

Reducing wastage and resource use is the most basic way for companies to
employ sustainability in business, this results in increased productivity and
reduced costs. With effective mapping on the supply chain, benchmarking of
suppliers along the supply chain along with feedback systems in place,
companies to take preventive and corrective measure to ensure customer
demands are met (Carter, 2005). When companies have a clear corporate
strategy and understand their customers’ demands, it is easier for them to find

25
suppliers that comply with the required standards. In Seuring and Muller’s
conceptual framework for SSCM, three distinctive features of SSCM was
identified:

1) Sustainable supply chain management has to take into account a widеr

range of problems and, therefore, look at the extended part of the
supply chain.
2) Sustainable supply chain management deals with a broader set of
pеrformancе objеctivеs, thеrеby taking into account thе еnvironmеntal
and social dimеnsion of sustainability.
3) There is a much amplified necessity for cooperation among partnering
companies in SSCM (Seuring & Müller, 2008).

Carter and Roger’s based on comprehensive literature review, also

conceptualized a SSCM framework that is based on the triple bottom line and four
supporting facets of sustainability: risk management, transparency, strategy, and
culture (Carter & Rogers, 2008). Figure 14 below illustrates the basis for Carter
and Roger’s SSCM framework.

Figure 14: Triple bottom line and the supporting facets for SSCM
Source: Illustration compiled by Author based on (Carter & Rogers, 2008)

26
2.4 Technologies and Facilitators Overview

In this section, the author aims to understand and explore the underlying
technologies that facilitate an efficient SCS. It provides a technological framework
that will enable the application of blockchain technology in SCM. Figure 15
illustrates the framework used for analysis of technologies. The technology
infrastructure is the layer on which blockchain applications are built upon to
provide blockchain services for SCM.

Figure 15: Framework for analysis of technology

Source: Illustration compiled by Author

Inter-organizational information system (IOIS) which dates back to 1960s, it is the

computer networks potential to collaborate and coordinate between organizations
and has been rapidly improving ever since. These networks were initially used in
SCM for coordinating billings and payments. In 1980s Johnston and Vitale
expanded on IOIS as:

“An IOIS is built around information technology, that is, around

computer and communication technology that facilitates the creation,
storage, transformation and transmission of information. An IOS differs
from an internal distributed information system by allowing information to
be sent across organizational boundaries” (Johnston & Vitale, 1988).

27
IOIS facilitates the cooperation among network members by flow of information
between separately owned organizations to increase efficiency of the global
chain. These collaborations between organizations are made possible by a
technology layer and various network architectures. The role of Information and
Communications Technologies (ICT’s) have proven to have a positive impact on
companies which have implemented it, since it enables collaboration in relation to
procurement and improves overall quality of the information shared between
suppliers and buyers (Lee, Padmanabhan, & Whang, 1997). As sharing of
electronic data between companies or value-added service providers grew with
the internet age, big organizations lacked control and the capability to design
complete end-to-end information integration system (Lee et al., 1997) (Colin,
Galindo, & Hernández, 2015). This led to collaborative effort in order to accelerate
the information integration along the supply network under the concept of Digital
supply chain (DSC) (Korpela, Hallikas, & Dahlberg, 2017).

2.4.1 Digital Supply Chain

The SCM environment is rapidly progressing as many new technologies, activities

and outputs are continuously being introduced into the system, likewise this
growing ecosystem is not regulated properly to facilitate the introduction of
numerous new digital inputs. “A Digital supply chain (DSC) must define the future
of digital collaboration, risk management, supply chain flows, and so on.”
(Thatcher, 2016). The operative and strategic exchange of information between
suppliers, during various phases along the value chain to improve communication
between the actors are the main characteristics of DSC (Chen & Paulraj, 2004).
The sharing of information in a DSC is not limited to that directly involving the
business process, a vast amount of data collected from internet of things (IoT)
devices and social media are also vital for modern day DSC. The information
integration and service automation are identified as a major business driver
(Korpela, Mikkonen, Hallikas & Pynnonen, 2016). Figure 16 illustrates a digital
supply chain, where all suppliers and customers are interconnected by the
network. Decisions within a DSC can be further improved by making use of data

28
analytics, as large data sets are available within the DSC ecosystem, this opens
up new business opportunities and gives a deeper understanding about market
trends. Some of the direct areas of benefits for data analytics with the DSC are:
Sourcing (optimizes procurement using pricing, risk management, cost
ownership), Production: (improve product quality by optimizing manufacturing),
Fulfilment (improve flexibility and streamline network flows) and Service (linking
customer feedback to quality control)

Figure 16: Digital Supply Network of the future

Source: Accenture Report Analytics: Data-Driven and Analytics-Powered DSC

ICT’s and Big Data

Although big data has been trending in the recent years, it’s a relatively new
concept in SCM. The ability to develop on the vast data available from various

29
ICT’s has become an asset for organizations. According to Chen, Mao and Liu,
big data is defined as the following:

“Big data fundamentally mean datasets that could not be perceived,

acquired, managed and processed by traditional technologies within a
reasonable time, which indicates that efficient tools and platforms together
with suitable methods have to be developed to analyse and process big
data.” (Chen, Mao, & Liu, 2014).

Big data has been characterized by 5 Vs: volume, variety, velocity, veracity and
value (Wamba, Akter, Edwards, Chopin & Gnanzou, 2015).

 Volume: it refers to the magnitude of data being collected, with increasing

number data collection points, there is an exponential increase in the data
collected which can pose problems to the capacity of data storage.
 Variеty: Data is collected from a wide range of sourcе making the nature
of data heterogeneous, data from sensors are structured in format while
data from social media is unstructured.
 Vеlocity: The speed or data collеction along with the time required to
process the data.
 Vеracity: It is the quality of the data and the level of trust place on data.
For example, data from social media is gеnerally less rеliable than data
from a sensor.
 Value: It is the procеss of revеaling under exploited valuеs from big data
to support decision making (Oracle, 2012).

The cost of computational power to analyse big data is drastically reducing with
increasing computing capabilities, along with the availability of valuable data
collected across various business processes and sensors is giving rise to an era
where data analytics will truly power decision making in supply chain. Data
analytics techniques allows us to extract valuable knowledge from the vast data
collected to enable data-driven decision making (Tsai, Lai, Chao & Vasilakos,

30
2015). This can vastly reduce human errors, improve predictions and increase
overall efficiency.

Big data analytics can be applied in all intercepts where data in collected in the
supply chain system. Companies looking to benefit from data analytics should
build the required infrastructure in place in order to collect relevant data along
different processes. Data collection, storage and analytics requires high technical
expertise in order to exploit the data for better decision making.

When faced with the task of selecting from a number of alternatives constrained
by multiple conflicting criteria (quantitative and qualitative), multi-criteria decision
making is a branch of operations research that provides the tools to solve this
problem. Supplier selection is a common application of multi-criteria decision
making, with suppliers as the decision alternatives and KPIs as the decision
criteria. In a comprehensive literature review of 393 journal articles from 2000 to
2014 that employ multi-criteria decision making techniques and approaches, the
analytic hierarchy process (AHP) and its applications ranked first in terms of
frequency of use, followed by technique for order or preference by similarity to
ideal solution (TOPSIS), elimination and choice expressing reality (ELECTRE),
and analytic network process (ANP) (Mardani, Jusoh, Nor, Khalifah, Zakwan &
Valipour, 2015). These processes are based on the data feed and quality and can
benefit largely from big data and data analytics.

Digital supply networks where there is high collaboration between suppliers and
customers are also better poised to benefit from data analytics. Supply chain
collaboration includes transforming suboptimal solutions of individual links into a
comprehensive solution through sharing of customer and operational information
(Cannella & Ciancimino, 2010). Hence a collaborative supply chain is key to
maximize benefits from big data and analytics. Figure 17 is the survey results from
the responses from 342 respondents from the logistics and shipping sector. The
sample population for the survey was diverse in geography and sector of work.
The survey was carried out by Capgemini, PennState Smeal and Penske

31
Logistics in 2016 to understand the important factors in supply chain big data
management.

Most important factors in supply chain big data

management in 2016 for shippers
0 10 20 30 40 50 60 70
Improving integration accross the supply chain

Improving process quality and performance

Improving customer interaction and service

Expanding revenue streams from existing products

Share of respondents %
Improving customer segmentation and targeting…

Protecting customer data from third parties

Figure 17: Online survey results for most important factors for big data management
according to shippers, 3Pl and 4 PL providers.
Source: Capgemini; PennState Smeal (C. John Langley, Jr., Ph.D.); Penske Logistics.
(n.d.)

Another challenge associated to sharing of data is the security layer. Firms are
taking a big risk when data sharing is not secure or if they make decisions from
corrupted or manipulated data. Bad players in a digital network may manipulate
data to maximize their own outputs. The growth and implementation of blockchain
technology now enables us to solve some of the biggest challenges for
collaborative working with big data. Blockchain technology improves trust on data
due to its irreversible nature and removes centralized control of data. The
transparent nature of data within the network, increases the incentives for
companies to utilize the data for analysis.

2.5 Blockchain Technology and smart contracts

The aim of the section is to provide a clear definition of blockchain technology and
smart contracts by analysing the key blocks that compose it. Cryptography is a
practise used for the security of sensitive information, eithеr in storagе or

32
communication. Nowadays, cryptographic practises are used in other places.
Crypto-economics, is an economic system which is not demarcated by the
geographical location, political structure or lеgal system, but uses cryptographic
methods to constrain behaviour in place of using trusted third parties (Babbitt &
Dietz, 2014). Crypto economics involves protocols that oversee consumption,
production and distribution of goods and services in a decentralized digital
еconomy. Blockchain a relatively new technology which was only 9 years ago
(Nakamoto, 2008), enables a way of creating a robust, secure, transparent
distributed ledger. Blockchain is best known as the technology behind Bitcoin
(Swan, 2015).

Bitcoin was the first project which enabled the application of blockchain
technology to process digital transactions. Bitcoin works on an infrastructure
based on public and private key cryptography, which was invented to provide
secure information for systems more easily, securely and at a cheaper cost
(Kurosawa, 2011). Blockchain technology aims to construct a decentralized
environment, where no central power has authority yet transactions and data can
be shared. Blockchain is a distributed database, where data from transactions are
recorded in a public ledger, as data gets added into the chain, they get confirmed
by the nodes participating in it. All the information stored in the chain are shared
and made available to all participating nodes. The participating nodes are
anonymous which makes it more secure for the nodes to confirm transactions.
Bitcoin is a virtual currency which aims to revolutionize the worldwide payment
systems by solving the issue of “double spending”. It solves the problem of
retaining a copy of your digital currency while spending by implementing a
distributed ledger system which records every transaction carried out. Blockchain
technology which enables the functioning of Bitcoin was the first real application.
However, the applications of blockchain technology stretches far beyond.

33
2.5.1 How blockchain technology works?

Blockchain can be referred to a new form of decentralized data management. It

is a publically accessible distributed ledger that ensures integrity of all kinds of
transactions (Omran, Henke, Heines, & Hofmann, 2017). Like the internet,
blockchain is an open and global infrastructure. Blockchain technology can be
classified as the underlying infrastructure that works as the technical backbone of
its applications such as Bitcoin. Blockchain technology is a transactional database
that is distributed among nodes linked in a peer-to-peer (P2P) communication
network. Unique consensus and permission mechanisms then define the access
to these networks (Glaser, 2017).

Network Architecture

The distributed nature is a key feature of blockchain technology. A distributed

computing network system is where data and resources are spread out on various
hardware nodes. A distributed network is different to a centralized and
decentralized network (Figure 18). The most notable difference in a distributed
network is the absence of a central server which connects with other nodes. Each
node can be identified by its IP address, while the users address to each other
through their public key. Each node on the network represents a physical/virtual
machine that communicates with other machines in the network. Therefore,
transactions can be carried out between any two nodes on a network. Every node
on the network holds a copy of the ledger, but only users who hold a signature
has access to the information. Although a sharеd ledger, information is only
accessible to those who have pеrmission (Morabito, 2017).

34
 Figure 18: Different network architectures
Source: Illustration compiled by Author

The absence of cеntral servers strengthens the security of the system, it makes it
harder to attack the network. Also, altering transaction on the nеtwork requires
huge hash-recalculations for every block rеgistered after the modified block,
leading to improved sеcurity protection. This creates a consеnsus mеchanism
which providеs invisible trust-worthy authority (Xu, 2016). All nodes on the
network do not have the same power. Users can be classified into those who 1)
read data, 2) write data and 3) validate data.

Ledger Architecture

The blockchain ledger is a record of a detailed list of all transactions that is stored
as a string of blocks (Chuen, 2015). Each block on a blockchain ledger is
composed of a block-header and block-body. Figure 19 illustrates how a block
chain gets built up into a ledger. The block head contains the hashes of the
previous and the following blocks along with the time-stamp. The body of the block
contains all the transactions which have inputs and outputs. The nonce are
numbers added to the end of records in order to ensure the hash ends with
specific numbers such as 00. This makes the hash extremely difficult to forge,
hence increasing security.

35
 Figure 19: Visualization of blockchain
Source: Illustration compiled by Author based on (Zheng, Xie, Dia & Wang, 2016)

As pointed out before, each node on the network can send or receive transactions.
The address of a node is described by its public key. Let us consider Tom who
wants to send money to James. Tom and James are on the network, they have
public keys which serve as their address. The transaction process involves two
stages (Figure 20), in the signing phase, when Tom sends money to James, he
uses a private key to encrypt the transaction (Morabito, 2017). This digitally signed
data is then sent to James. James upon receiving data has to verify the data. The
verification phase involves decrypting the data using the signer’s public key.

36
 Figure 20: How simple digital signature is applied and verified
Source: Wikimedia Commons

Once the transaction is sent to the network, the miners then validate the pending
transactions by the consensus mechanism chosen by the blockchain platform to
create a block and add it to the blockchain. The updated blockchain is then
broadcasted to the whole network. Upon verification of the transaction, James
receives the money from Tom (Figure 21).

Security Configurations

A blockchain network can be configurеd in various way depеnding on how it is

intеnded to be utilized. The first blockchain configuration set up by Satoshi (2008)
was fully public and 100% de-centralised. The configurations of a blockchain can
be classified into the following: public/private and permissioned/permission-less.

37
 Private / Public: In a public platform, new users can join the nеtwork without a
third-party’s pеrmission. Whereas, on a private platform only a limited number
users with permission are in the nеtwork.
 Permissioned / Pеrmission-less: In a permissioned network only a limited
number of users on the platform can propose updates on the ledger and
participate in verification. In a permission-less nеtwork, evеry user on the
platform has еqual rights and can propose updates to the ledger and
participate in the vеrification of blocks.

Figure 21: How does blockchain work?

Source: Illustration by diceus.com

38
Consensus Mechanism

Consеnsus mеchanisms are used to ensure all the peers on the blockchain
network are agreeing on a single version of the blockchain. The consensus is a
distributed computing concept which enables the majority of nеtwork to come into
agreement. A consensus model is made by finding something that is hard to do,
easy to verify and imposes a linear history. These elements make up the criteria
for an effective consensus mechanism. Two of the main categories of consensus
mechanism are:

1) Byzantine fault tolеrance-based: The practical byzantinе fault tolerance

algorithm was first introduced by Miguel Castro and Barbara Liskov in
1999. This algorithm has then bеen fined tuned numerous times to improve
pеrformance and sеcurity. Its works based on rounds of votes on the
nodes.
2) Leader-based, Leader-based consensus elects a leader randomly for
every new block, the leader then decides on the final value of the block to
reach consensus.

Some on the most commonly used consensus protocols are Proof-of-Work (PoW)
and Proof-of-Stake (PoS) model. They work around the key elements of safety,
liveness (keep all the non-faulty nodes participating) and fault tolerance (Baliga,
2017).

Proof-of-Work Model

Bitcoin pioneered the concept of PoW. The network security of Bitcoin is

dependent on a PoW consensus protocol (Nakamoto, 2008). The concept is
based on carrying out mathematical computation to match the hash. The hash is
match to the transaction of the previously recorded block to verify the transaction.
The protocol operates in a manner to ensure physically scare resources assist
the network (Morabito, 2017). These scare resources are:

39
 1) Hardware / computing power required to solve these mathematical
computations
2) Energy required to run the hardware

Although the PoW protocol is highly secure, they are also highly demanding on
resources. As a result, other protocols which are not dependent on high
computational power has been developed such as the Proof-of-Stake protocol.

Proof-of-Stake Model

Unlike the PoW scheme, PoS does not depend on resource scarcity or costly
mathematical computing. The network security of this protocol is dependent on
the ownership of coins that are being placed at stake by the miner (Morabito,
2017). In other words it is proof-of-ownership which is also scare (Farell, 2015). A
miner who owns more coins have a higher probability of being successful in
adding a new block. In order to break this system, someone needs to own more
than 50% of coins that are being staked, which is extremely expensive (Farell,
2015). A general issue with PoS is that the nature of the decentralized system
starts shifting towards being centralised when single users start accumulating
large stake holdings. Although PoW and PoS are the most common consensus
protocol, a variety or hybrid protocols and other novel protocols have been
developed.

2.5.2 Blockchain applications: Smart Contracts

These unique properties of blockchain which allow nodes to identify as different

users, simultaneously working together to create and store encrypted sequence
of transactional records enable a wide range of characteristics which blockchain
can bring along to supply chain management:

 Transparency: Blockchains enables sharing a data across organizations

in a safe and secure way which can be shared based on pre-set
permissions.

40
  Traceability: Blockchain tracks, collects and timestamps every process of
different suppliers in the supply chain. These records are tamper proof
which increases the trust of the information and increasing traceability.
 Security: Each block on the blockchain which holds records of all the
transactions are hash and protected with cryptography and consensus
mechanism. Hacking into the block usually requires over 50% control of
the network, as the network is distributed, it makes these blocks highly
secure.
 Accessibility: Information sent across the blockchain can be accessed in
real time with the right authorization. This allows to real time flow of
information across the supply chain.

Blockchain technology also has a wide range of applications that can be build
atop the blockchain infrastructure and protocols. For example, request network
is an application built on the Ethereum platform which allows anyone, anywhere
to request a payment. It works by saving such requests on its authentic ledger
which serves as the unique source of truth for the application purposes.

Smart Contracts

Nick Szabo, an American computer scientist proposed the concept of ‘smart

contracts’ in 1994; they are computer protocols which execute the terms on the
contract automatically (Tapscott, 2016). This concept got further recognition in
1997 where Szabo published his paper “The Idea of Smart Contracts”, where he
illustrated the concept of smart contracts with a simple example of a vending
machine. A vending machine is a mechanism where the ownership of an item is
exchanged for a predetermined amount of money. The contract executes when
the predetermined amount of money is input. Today, with the initiation of
blockchain platforms such as Ethereum, smart contracts which are built on these
platforms open new possibilities.

As blockchain is an append only database, hence contracts built on blockchain

cannot be reversed and operates with agreement to the programmed set of
41
criteria. For smart contracts to execute themselves, the underlying preconditions
need to be programmed with logic and a reference frame. For example, two
friends Dan and Jon are betting against each other on their football team, the
team with the most points at the end of the season wins the bet, each of them
place a fixed sum and the winner takes all. The following (Figure 22) would be the
smart contract to execute the bet.

Figure 22: Representation of smart contract logic

Source: Illustration complied by Author

Here once the bet is placed between the friends, no third party such as a betting
organization needs to get involved. The smart contract executes itself within the
framework of the logic and transfers the money to the winner. Although smart
contract as a concept has been around since the 90s, the infrastructure such as
blockchain technology has emerged only recently to build more complex smart
contracts. There is no need for trust since we can verify all the transactions using
the distributed ledger of the blockchain. Smart contracts have the potential to
replace any contract as long as it is placed in a blockchain. Since smart contracts
do not involve the use human, they significantly reduce the risk of human error
and cases of fraud, but they also improve privacy, efficiency and improve overall
trustworthiness. The application of smart contracts and smart licensing depends
on the nature of the contract to be agreed between the entities and how the
contracts is conformably programmed into a blockchain (Morabito, 2017).

42
The first use of blockchain technology was Bitcoin, a digital currency which
triggers payments between parties based on computer programs which execute
them. Unlike Bitcoin, the Ethereum blockchain platform is more advanced with
“Turing-complete” coding system embedded within. The Ethereum platform is the
most widely used platform to build smart contracts. The founder Vitalik Buterin
states, Ethereum is a platform that is designed to build and deploy trustworthy
and decentralized applications (DApps). Smart contracts have a wide range of
applications but the usage remains to be challenged by the current legal system.

2.5.3 Smart Contracts and IoTs

IoTs are becoming increasingly popular in the enterprise and consumer world. In
the paper The Internet of Things, Atzori, Antonio and Giacomo describe IoT as:

“The basic idea of this concept is the pervasive presence around us

of a variety of things or objects – such as Radio-Frequency Identification
(RFID) tags, sensors, actuators, mobile phones, etc. – which, through
unique addressing schemes, are able to interact with each other and
cooperate with their neighbours to reach common goals” (Atzori, Iera, &
Morabito, 2010).

As IoT is a very broad term, numerous visions has led to various definitions of the
term but it is fundamentally composed of a sensor that is connected to the
network. Atzori et al. combined the broad visions to IoTs create a general
overview as shown on Figure 23. As the overall size, weight, cost and energy
consumption of IoTs go down, there is going to be an exponential increase in
number of IoTs in the market. According to Zhou, RFID technologies is the leading
information tracing technology in SCM with its inherent ability to reveal item level
product details (Zhou, 2009). A RFID is composed of a tag (microchip and
antenna) with a unique ID which can be attached to various items, the RFID
reader triggers information as the radio signals comes across the RFID chip.
Since RFID systems work on radio signals, the object does not require to be in

43
the line of sight of the reader. This enables for creating virtual worlds based on
information in real time (Atzori et al., 2010).

Figure 23: “Internet of Things” as convergence of different visions

Source: (Atzori et al., 2010)

The projected spending on IoTs has moved from 156.8 billion US dollars in 2014
to 284.8 billion US dollars in 2017 (Source: Gartner, Statista 2018). As more IoT
devices are added into ecosystems, there is a larger flow of data, congesting the
network lines in networks. As the devices need to exchange information among
themselves autonomously, a centralized model where a hub controls interactions
between devices may be infeasible. This has led to the development of numerous
decentralized IoT platforms to reduce congestion. Also, with the increase in
deployment of IoTs, there is a fragmentation of communication protocols between
them and lack of privacy issues. Blockchain technology plays a vital role in
providing a vast platform with trust in data exchange and record keeping between
the IoTs. IOTA is a Berlin based start-up pioneering in the field of distributed

44
ledger technologies. They are building a blockchain ecosystem to enable a true
internet of things economy where devices can communicate among themselves
at zero transaction fees. IoT devices can be managed using such blockchain
platforms. Ethereum is a public blockchain based distributed computing system
developed my Vatalik Buterin in 2013 (“Ethereum Whitepaper,” n.d.). Ethereum
can be seen as a massive shared computer system (Huh, Cho, & Kim, 2017).
Unlike Bitcoin, developers can write and compile code on Ethereum using its own
language such as Solidity. Ethereum combines computing system with
blockchain. Smart contracts can be written with Ethereum connecting the data
from IoT devices to the blockchain. When such smart contracts are running on
Ethereum, it interprets the data from these sensors in real time and interacts with
these devices according to the logic in the smart contract.

A large network of IoT devices can be managed using smart contracts depending
on the blockchain platform capabilities. Blockchain provides the resilient,
distributed P2P systems and the ability to interact with other devices in a trustless,
auditable manner (Christidis & Devetsikiotis, 2016). On the other hand, smart
contracts allow us to automate complex multistep processes. The IoT ecosystem
interacts with the physical world, when combined with smart contracts, we get to
automate work flows in unique ways which are auditable and contribute to
significant time sand cost savings in this process(Christidis & Devetsikiotis, 2016).
Such applications can be extended to various scenarios.

45
3. Analysis
In this section, the author identifies the problem and motivation to justify the
value of the solution. The knowledge of the state of the problem and the
importance of the solution is derived from the analysis of the literature review.

3.1 Combined analysis of supply chain frameworks

The SCM framework is mainly focused on relationship management while the

SCOR model focuses on transactional efficiency. The processes that form the
linkage between two firms in the supply chain are different in both the frameworks.
A perceived strength of the SCOR model is the performance and process
benchmarking tools, but this may also lead to lack of creativity (D. M. Lambert &
Enz, 2017). On the other hand the strength of SCM framework is that the
corporate strategy and the related functional strategies serve as the starting point.
While the SCOR model focuses on resource efficiency and cost reductions in its
benchmarking, the SCM framework considers the revenues and cost saving
aspects of the suppliers. Focusing on revenue enhancements in the long run will
help the business (D. M. Lambert & Enz, 2017). On the other end, SSCM
framework places its emphases on the triple bottom line and the life cycle
assessment of the products. As we seek to identify applications for blockchain
technology, the role of management has not been completely taken into
consideration. The role of strategy in SCM is also not given complete
consideration. Based on the literature review, Table 1 presents the classification
of the key identified driver and issues within the supply chain categorized by the
framework.

46
 Framework Key identified drivers and issues from literature review
SCM The supply chain network must comprise of all the participants in
Framework the value chain and differentiated as primary and supporting
1. members (D. Lambert & Cooper, 2000)
2. Global Supply Chain Forum identifies customer relationship
management (CRM) and supplier relationship management as the
key processes to manage coordination along the supply chain.
3. “the structure of activities within and between companies is a
critical cornerstone of creating unique and superior supply chain
performance” (Håkansson & Snehota, 1995).
4. The research by Cooper and Lambert show that four
fundamentally different business process links can be identified in
a supply chain. They are managed, monitored, not-managed and
non-member process links (D. Lambert & Cooper, 2000).
SCOR Model Huan et al. described the SCAR model as the “most promising
1. model for supply chain strategic decision making (Huan et al.,
2004).”
SSCM Barriers for implementing sustainable supply chains. (1) higher
Framework costs, (2) coordination effort and complexity, and (3) insufficient or
1. missing communication (Seuring & Müller, 2008)
2. Sustainable products normally consider the entire lifecycle of the
product, this translates into the company actively participating
along a bigger part of the supply chain. (Seuring & Müller, 2008)
3. With effective mapping on the supply chain, benchmarking of
suppliers along the supply chain along with feedback systems in
place, companies to take preventive and corrective measure to
ensure customer demands are met (Carter, 2005)
4. SSCM framework that is based on the triple bottom line and four
supporting facets of sustainability: risk management,
transparency, strategy, and culture (Carter & Rogers, 2008)

Table 1: Key identified drivers and issues in SCM from literature review

As the identified drivers make up for the fundamental and major mechanisms in
supply chain management, improvements will have ripple effects on all the layers

47
connected to the underlying layer. Some of the advantages of tackling the
identified issues and drivers are the following:

 Improved overall efficiency in supply chain process

 Better record keeping and reduced time spent on administrative work
 Improved data sharing capabilities and enhanced security
 High levels of traceability along very long supply chains
 Benchmarking and better referencing systems

3.2 Objectives of a solution

From the analysis of the literature and identified problems, we infer objectives for
the solution from the defined problem. The objectives are defined in a rational
manner with the current state of difficulties and solutions and their effectiveness
in consideration. For each of the identified drivers and issues from the literature,
we define a conceptual technology facilitator from the literature in order to capture
the problems complexity and move towards solution identification. The
importance of identifying facilitators in order to improve on the identified driver and
issues can fundamentally improve how supply chain are managed.

Framework Identified objectives of the solution (refer Table 1 for the

identified problem)
SCM Ability to link all suppliers within the ecosystem into a common
Framework platform where each focal company have the ability to define each
1. of the members/nodes on the network. Each focal company must
have the ability to change authorization and settings for each of
the nodes according to their needs.
2. Facilitate and enhance all aspects that are important to customer
relationship management (CRM). The ability to track the
performance of your customer interactions and retaining them can
be the key to delivering superior CRM (Wang & Lo, 2004).
Facilitating CRM includes the ability of easy and sure data sharing.
A strong IT infrastructure also plays a big role.

48
 3. Ability to structure and automate activities in a highly efficient and
organised way between various interconnected companies in a
supply chain network.
4. Depending on how the focal company prioritizes each business
process, they must have the ability to identify and label business
processes, and assign how resources are spent of each of these
business processes.
SCOR Model Enable the underlying principles of the SCOR model in an
1. effective way within SCM. The SCOR model incorporates
business concepts of process re-engineering, benchmarking, and
measurement into its framework (Huan et al., 2004). Ability to
continuously monitor and record data from all business processes.
Methods to benchmark recorded datasets from all processes.
SSCM Facilitate coordination efforts and reduce complexity by offering a
Framework platform where the real world is virtualized. Improve
1. communication channels by setting up a network where all tiers of
suppliers are present and flow of information is constant.
2. Facilitate the process of tracking a product over its complete
lifecycle.
3. A secure, tamper proof way to map and record data along with
CRM systems which has quick feedback loops.
4. Risk can be managed by continues tracking, data recording and
automation along supply chain. Transparency is improved by
enabling data sharing and recording data from sensors all along
various business processes. Smart contracts which has an upper
or lower boundary for data from each sensor can reduce overall
risk and enhance transparency in the overall process.

Table 2: Identified objectives for the solution to defined problem in Table 1.

Table 1 refers to the identified problems we seek a solution for from the
literature review. Table 2 is the objectives of the solutions for the identified
problems. We wanted to understand the underlying problems and develop a
method that would facilitate the improvement in SCM from the identified
problems.

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4. Synthesis and Tentative Design Proposal
In this section, the author lays out the objectives of the solution. A synthesis of
the identified solutions is demonstrated as a design proposal. We use the
literature review to provide the conceptual bases for the design proposal. We
address the problems identified earlier and fulfil the objectives of the solution in
order to propose a new tentative design.

4.1 Conceptual Design Proposal

Based on the literature review, we identify components, frameworks, technologies

and protocols that will facilitate the objectives for the solution. We breakdown each
of the identified objectives from Table 2, group them and categorize them in order
to conceptualize a new proposal. The following were the identified elements for
the design proposal from the identified objectives for the solution:

 Ecosystem / Digital network:

The ecosystem incorporates all the suppliers and customers within a
supply chain. The ecosystem must have a strong IT infrastructure where
each of the firm within the ecosystem are strongly interconnected and can
exchange information and data in real time. This digitalized ecosystem
forms the basis for the rest of the infrastructure to enhance SCM.

 Permissions and authorizations:

All firms within the digital ecosystem must be able to control the information
and data shared with other firms with permissions and authorizations. This
enables a network where data and information can be shared at the right
time with the right vendors. This also enhances the security. Such
permissions

 Automation of inter-organization business processes:

50
 Each business process along the supply chain must be virtualized. Once
virtualized these processes can be automated based to orders placed,
authorization or any other pre-conditions set in place. Smart contracts fills
this gap to automate such processes.

 Secure, fast, cheap and easy transactions:

All transactions within the ecosystem must happen in real time, yet be
extremely cheap. As the number of transaction and extremely high due to
the number of devices and firms connected within the ecosystem, it is
important that each of these transactions are secure, cheap and fast to
make them highly scalable
.
 Tamper proof data storage and data analytics:
As more devices and firms are connected in the ecosystem, more data and
information starts flowing between these nodes. To ensure reliability of this
data it needs to be tamper proof. To maximize the benefits from the flow of
information data analytics can play and important role to give each firm its
competitive advantage.

 Range of tracking tools along business processes:

Each machine, device, product within the supply chain should be
connected to the virtual world with its own unique ID. This enables the
tracking of various processes, performance, products in real time.

 Programmable tools to set rules, define boundaries and automate

processes:
Each of the connected device, firm, product within the ecosystem must be
programmable independently. The platform must offer a way to uniquely
identifying each point on the ecosystem and program each node according
to the firms need.

51
Based on the above elements a new conceptual framework is proposed.

Figure 24: Proposed conceptual design for SCM

Source: Illustration compiled by Author

52
 Figure 25: Zoom in view of Figure 24 of the conceptual design for SCM
Source: Illustration compiled by Author

Figure 24 and Figure 25 illustrate the proposed conceptual design. The main
elements of the proposed conceptual design are further explained.

4.2 Main Elements of proposed conceptual design

Blockchain technology

Blockchain technology serves are the base on which the digital ecosystem is built
upon. This is done for numerous reasons as explored in the literature review.
Blockchain technology ensure for tamperproof data storage which serve as a
layer of trust within the ecosystem. Permission and authorization within the
network can also be control with blockchain technology. This enables the flow of
information within the ecosystem. Blockchain also enables low cost for
transactions of digital assets. It also serves as the truth layer on which smart

53
contracts can be programmed upon. Blockchain technology plays a vital role in
enabling the proposed conceptual design.

Smart Contracts

With the blockchain based ecosystem in place, smart contracts play a vital role in
adding the next layer of functionality within the ecosystem. The capabilities of the
ecosystem is increased to the imagination of the firm with smart contracts. Smart
contracts rely on a strong underlying infrastructure in order to be effective. The
underlying infrastructure consists of IoT solutions, internet connectivity and data
analytics.

Digital Infrastructure

The proposed design is built on a very advanced digital infrastructure. In order to

create a virtual world of the supply chain ecosystem, every supplier, customer,
business process, product and people must be uniquely identified and tracked.
This is only possible by setting up a wide range of IoT solutions in place. Setting
and maintaining such digital infrastructure will be expensive and required high
technical expertise.

54
4.3 Limitations of proposed conceptual design

The proposed design concept does not take the following elements into
consideration:

 Culture: The unique culture and identity of each of the firms within the
ecosystem is not taken into consideration.
 Strategy: Each firm in the ecosystem will have its own strategy on
business processes, management and sales and marketing. These
elements were not taken into consideration.
 Costs: The costs for setting up such infrastructure was not taken into
consideration. Such an ecosystem will benefit certain entities more than
others, which reduces the incentives for such firms to participate.
 Reliability of network: It is assumed that the proposed ecosystem will
work effortlessly, that may not be the case as it is extremely hard to ensure
all IoT devices and products are connected to the network in real time.

55
5. Evaluation with case studies

The section is designed to closely examine the data from relevant case studies
within the specific context of blockchain technology and smart contracts in SCM.
The case study is carefully designed to reflect on the research questions,
proposed design and further provide insight into these topics.

5.1 Methodology

In order to gain insight of expert opinions on this domain, the Statista database is
used to gather survey information about our research topics. Surveys on the
following keywords (Blockchain technology, big data in supply chain, technology
in supply chain) are searched to gather information of industry trends,
requirements and opinions. These survey serve as the basis for evaluation for the
potential companies to conduct the case study on. The case study is carried out
to realize the current development in blockchain platform solutions for SCM. We
want to be able to test the proposed design concept against functioning
companies to evaluate the proposal. Companies that commit to building complete
blockchain solutions for supply chain management are the main target group. Two
specific surveys were considered to understand where the supply chain industry
stands regarding blockchain technology. The survey results by eft (Table 3)
reveals the current impacts blockchain technology has on supply chain according
to the respondents.

Biggest impact of blockchain in Supply

Chain Management Share of respondents (%)
Data interchange 36.25
Visibility and tracking 17.50
Not familiar 15.63
Building trust 8.75
Smart contracting 8.13

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 No impact 5.00
Payments 5.00
Table 3: Survey result of biggest impact of blockchain in Supply Chain
Source: eft Supply Chain & Logistics Business Intelligence. (n.d.)

The second survey results on (Table 4) reveal where companies see maximum
benefits of blockchain technology. We use this insight along with our
understanding of blockchain technology in SCM to select companies to study.

Leading benefits of blockchain technology

worldwide, as of 2016 Share of respondents (%)
Reduce operational costs 73
Shorten settlement time 69
Reduce risk 57
Create revenue opportunities 51
Reduce cost of capital 46
Other 10
None 2
Table 4: Survey result of top benefits of blockchain technology (2016)
Source: Credit Suisse. (n.d.).
5.1.1 Selection Criteria

We consider all the blockchain platforms currently in market as our sample. From
the sample of blockchain platforms we select the platforms to study for our case
study based on two criteria:

1. The blockchain platform must enable IoT solutions and smart contracts
2. The blockchain platform must have pilot projects or real world projects
facilitating SCM.

These selection criteria will be used to screen the 60 largest blockchain platforms
to pick the ideal platforms to study for our case study.

57
5.1.2 Selection Process

The biggest blockchain platform are first studied and ranked according to market
capitalization. 60 of the largest blockchain platform that is being publically traded
was studied to identify which projects match our required criteria. Among the 60
blockchain platforms, we identified only two blockchain platforms meet our
selection criteria. The table containing the platforms studied is attached in the
appendix.

Name Market-Cap Smart Contracts IoT Solutions Supply chain

(Millions) USD projects

VeChain 1938.35 ✔ ✔ ✔
Waltonchain 396.63 ✔ ✔ ✔

Figure 26: Table of blockchain platforms for case study

5.1.3 Limitations

Since blockchain is a relatively new concept, companies are yet to deeply

integrate this technology into their operations. There is a general lack of
understanding in the effectiveness of such solutions as they have not been fully
tested. Companies that are working on closed network blockchain projects are
not within the scope of study as such projects are not accessible. The study of
these platforms only serve as an indicator of the early applications of blockchain
technology in SCM.

5.2 Case study: VeChain

The source of information for the case study is VeChain website and the
VeChain development plan published by their team.

Introduction

VeChain is an early blockchain technology company that successfully

implemented blockchain technology solutions in various industries such as luxury

58
goods, liquor and agriculture. The vision of VeChain is to build a trust free and
distributed business ecosystem based on blockchain technology. VeChain’s
ideology is based on the belief that blockchain technology can continuously break
information asymmetry and allow for data to return to the owner eventually. For
example, the data of a car’s maintenance history will belong to the owner no
matter if the owner is the second or third hand buyer. VeChain is built on
Ethereum’s platform. Their solutions are designed to enhance supply chain
management. VeChain’s platform has already been launched globally and
provide their clients with tools to determine the quality and authenticity of their
products. VeChain starts off by digitalizing all elements in a supply chain such as
people, money and objects. Digitalization is carried out in a common way where
a unified VID (VeChain’s unique identify) is used to identify objects. This also
helps IoT technology to be part of the ecosystem. VeChain’s ecosystem allows
for business models to communicate and merge together to build a distributed
business ecosystem. VeChain believe IoTs and blockchain technology cannot be
split regarding applications. VeChain has managed to partner with a wide range
of reputed companies such as China Unicorn, Microsoft, PwC and Renault.

Identified range of solution offered

Blockchain based ecosystem for Interoperability:

 Ecosystem where information is relatively transparent and symmetrical
to derive true value of products.
 Reduce potential trust issues between suppliers by making cooperation
simpler, more efficient and low cost.
 Reduce potential trust issues between suppliers by making cooperation
simpler, more efficient and low cost.
 The value is stored in an expanding closed loop

Unified VeChain ID
 Integrate all objects and people in a unified way into the ecosystem

59
 Smart Contracts
 Build relationships between objects in the ecosystem
 Cooperate relevant authorizations to composite modelling and
customization

Digital asset
 Digital payment options integrated in smart contracts

IoT solutions
 Blockchain as a service for self-management and maintenance of
equipment
 Unique ID for IoTs linked with smart contracts and digital payments
 Provide a logic language for IoTs. Enabling various IoTs to
communicate
 Encrypted chip tags, security and authorization module
 Offline – Online integration mechanisms

API Gateways
 API offering to customize interaction of devices with the user.

Table 5: Range of solutions offered by VeChain

Real world applications

Food Safety: VeChain has built a liquor tracking platform in Waigaoqiao free
trade zone. Every detail about the liquor bottle is recorded at the beginning of the
process. The companies can use smart contracts and microchips to then track
the whole life period of the liquor bottle until it reaches sales channels and stores.
Customers can also identify and track the life cycle of the product using a smart
phone. These liquor bottles are equipped with IoT chips. Such information
transparency increases the trust on the product. VeChain believes a similar
approach can be applied to the dairy industry.

60
Supply Chain Industry: A supply chain includes material suppliers,
manufacturers, warehousing, customs, etc. across various geographic locations.
VeChain provided K+N a freight forwarding company Baas (Blockchain-as-a-
service) to track and manage products across the world. To ensure data
protection and privacy, VeChain managed to connect various customers through
a common service platform. They plan to extend this ecosystem to cooperative
partners, service provider and regulators.

Agriculture Industry: VeChain is cooperating with PwC, China Unicom and

Liaoning academy of agricultural sciences to develop a blockchain cloud project
that is exclusive for verification of green organic agriculture (Vechain
Development plan, n.d.). Every greenhouse of the farm was registered on a
blockchain to record the functional data of every greenhouse. The datasets
recorded were: 1) The production and operation data which were recorded from
the farmers 2) The data from the IoT sensors in the greenhouse. With the
combination of this data and risk assurance service from PwC, they establish a
foundation for trustworthy data for organic agriculture verification.

Car Industry: VeChain partnered with Renault and developed solutions to

improve sharing of “user data” to relevant parties. They built a system to ensure
every car can built its own digital record. The user can then control the
authorization given to maintenance suppliers, etc. Every maintenance is also
recorded in the blockchain. Such digital records will help bank and insurance
companies to give better value assessment to the car, hence improving the overall
efficiency. Users can also record here driving and upload them to the computer to
compute their carbon emissions and individual creditability.

Other projects have been carried out in the field of cold-chain logistics, luxury
goods and retail.

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5.3 Case study: Waltonchain

The source of information for the case study is from the whitepaper published by
Waltonchain and the website.

Introduction

Waltonchain is a blockchain based company which puts forward the idea of “Value
Internet of Things (VIoT)”. They integrate blockchain technology with IoTs. VIoT
is connecting IoTs through blockchain technology to deliver value and embed
trust. Waltonchain offering are based on their hardware and software provided
(Waltonchain Team, 2018). Their proprietary hardware includes RFID tags as the
interface of the object and combine it with their software system, protocol and
Waltoncoin, their digital asset. Waltonchain is named after the founder of RFID
technology, Charlie Walton. Waltonchain has developed their own RFID beacon
chip which aims to achieve perfect combination of IoTs with blockchain. Their
vision is: “to create a genuine, believable, traceable business model with totally
shared data and transparent information, depending on the combination of RFID
technology and Waltonchain.”

Identified range of solution offered

Value Internet of things (VIoT) ecosystem

 Ecosystem where information is relatively transparent and symmetrical to
derive true value of products.
 Reduce potential trust issues between suppliers by making cooperation
simpler, more efficient and low cost.
 Reduce potential trust issues between suppliers by making cooperation
simpler, more efficient and low cost.
 Transparent sharing of information between IoTs and business processes.

Advanced RFID solutions

 RFID tags specially made to be suitable for blockchain technology

62
 Smart Contracts
 Build relationships between objects in the ecosystem
 Cooperate relevant authorizations to composite modelling and customization

Digital asset
 Waltoncoin as a digital payment asset within the ecosystem and integration
with smart contracts

IoT solutions
 Blockchain as a service for self-management and maintenance of equipment
 Unique ID for IoTs linked with smart contracts and digital payments
 Offline – Online integration mechanisms

Table 6: Range of solution offered by Waltonchain

Real world applications

Clothing and apparel Industry: Waltonchain partnered with big Chinese clothing
retailers to develop integrated solution based on RFID technology. These
solutions were piloted on few retailers such as Tries, SMEN and Kaltendin. They
solutions work on existing problems such as storage, retail shops and after-sale
service.

5.4 Evaluation

In this section, we want to compare the proposed design with the 2 case studies
and make an evaluation.

Trends

From the 2 case studies we notice a trend in how blockchain technology is used
as a platform to enable IoT solutions. Both VeChain and Waltonchain relied on
IoT solutions to enable a range of SCM solutions. The main theme of these
blockchain companies are to facilitate on boarding of the focal company and its

63
suppliers in their blockchain platform. These platforms are built on a blockchain
infrastructure which enables smart contracts and combine them with IoT
solutions.

Proposed VeChain Waltonchain

Design
Framework
Blockchain Strong emphasis Emphasis on Emphasis on
platform on building the bringing multiple bringing products
complete digital actors in the and IoT devices
network on a supply chain into into the
blockchain the blockchain blockchain
platform. platform platform.
Smart Contracts Smart contracts Smart contracts Smart contract
used in all incorporated for functions are used
aspects of SCM to managing IoT to interact with
automate as devices and various contract
many processes digital payments addresses such
as possible. into processes. as IoT devices
Smart contract and payment
interacts with all transfers.
business
processes, IoT
devices and
external firms.
IoT Solutions IoT solutions IoT solutions IoT solutions are
bridge the real serves as the core the main offering
world and the component to from this platform.
virtual world to enable various
make smart advanced SCM
contracts an solutions.

64
 effective
mechanism to
automate
business
transactions and
processes.

Table 7: Comparison between proposed design, VeChain platform and

Waltonchain platform

From the case study we can validate the importance of blockchain technology to
truly enable the applications of IoT solutions. Smart contracts, one of the major
applications of blockchain technology serves as a bridge between IoT solutions
and SCM. The study also validates the tentative design proposal regarding the
importance of on boarding all suppliers and customers to benefit from the flow of
information. As more suppliers and customers are included in the data, the value
of the information in the network increases. We have also seen early adoption of
these blockchain platform in various industries for SCM. This is an early indicator
of what is to come in the future.

Limitations

Since both these blockchain platforms were founded in 2015 and 2016
respectively, we do not have enough evidence of the advantages gained from
adopting a blockchain platform in SCM. We also do not understand the difficulties
of scaling such solutions to a very long supply chain. The transactions costs and
pricing of adopting such supply chain frameworks are also not clear, since most
projects are in their pilot phase.

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6. Conclusions and Recommendations

In this section of the research paper, the author summarises the findings of his
research by answering the research questions. Important findings and
implications are highlighted in the process. Further recommendations and future
research areas are also presented.

Despite exploding interest in blockchain technology during the recent years, there
has been very limited applications of blockchain technology in SCM. Furthermore
there has been limited literature regarding blockchain technology in SCM. The
research starts with exploring the supply chain frameworks to identify drivers and
issues within. This research projects then explores the potential areas in SCM
where blockchain has a role to play. This study further investigates smart
contracts which is a major application of blockchain technology in the context of
SCM along with IoT solutions.

6.1 Findings

To achieve the objectives for this research project, we set up three research
questions to drive the research paper. We will analyse our findings by answering
the three research questions we started with.

RQ1: What are the major drivers and issues in supply chain frameworks?

From the systematic analysis of literature review within the domain of our research
paper, the main drivers and issues in supply chain framework where blockchain
technology can have an impact are summarized below:

 All players within a supply chain must participate together to create a digital
network. Each participant within the network must then be able to
differentiate their supplier and customers based on priority.

66
  Customer relationship management and supplier relationship
management enhances coordination within SCM, such relationships can
be enhanced by facilitating information sharing.
 Poor coordination efforts, insufficient communication, lack of transparency
and inability to track products through the life cycle are major issues for
SSCM.
 Operational benchmarking and good feedback cycles, along with effective
mapping of the supply chain enables risk management and meeting
customer demands.

RQ2: What are the capabilities of a smart contract?

Smart contracts is the most important application of blockchain technology. In the

context of SCM, smart contracts play a vital role in bridge the gap between the
physical world and virtual world. It enables a whole range of possibilities which is
limited only by the imagination of the firms within the supply chain network. A
smart contract executes itself within the frameworks of its logic. The blockchain
platform serves as the layer of truth on top on which the logic of the smart contract
functions. In the case studies, we saw a clear trend of combining smart contracts
with IoT solutions as a means to automate processes within the supply chain.
Since smart contracts are self-executing, the can automate any processes, act
when rules are broken, authorize permissions and facilitate flow of information
based on requirements.

RQ3: Which mechanisms of a blockchain technology add real value to

sustainable SCM?

At the core of blockchain technology, it is a distributed ledger that enables a large

number of parties to share resources and information without have to trust each
other or any central broker. This is extremely effective for creating a digital supply
chain network. Blockchain also enables a wide range of applications which can
facilitate SSCM. Firstly, it provides a secure tamper proof method to store data
which improves the reliability of information. Secondly, blockchain technology
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enables smart contracts which enables a range of applications as explain in RQ2.
Finally, blockchain technology provides a vast platform with trust in data exchange
and record keeping between the IoTs. Blockchain technology enables a new array
of applications for IoT solutions for SCM. These are the key mechanisms of
blockchain technology that add value to SSCM.

6.2 Discussions

The finding in this research paper is based on literature review with the context of
SCM and blockchain technology in mind. This research has been exploratory in
nature where the literature review forms the foundation for the development of the
design proposal. To validate the research proposal, desk research and case
studies on related companies were carried out. Due to the novel nature of
blockchain technology, literature on the applications have been limited. Most
literature about blockchain technology is with reference to Bitcoin. In general only
pilot programs for the applications of blockchain technology in SCM has been
identified. The general interest in blockchain technology may not truly reflect on
the applications in SCM.

Although applications have been identified in this research paper to optimize

SCM, there is no literature or data to back up these claims. The research also did
not account for costs of implementation and the ease of scaling such
technologies. Applications of blockchain technology also requires a very
advanced IT infrastructure and technical expertise, since supply chains are long
and expand to remote geographic locations, the application may not be feasible
and cost optimized. Moving all elements into the blockchain is expensive and can
slow down the overall process, good blockchain design implementation involves
a good balance between off-chain and on chain capacity to enhance security while
keeping costs low and maintaining high processing speeds.

Finally, although blockchain technology facilitates secure information sharing, the

owner of information must be willing to share it in the first place. Also, even if the

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data in the blockchain is tamper proof, false information or corrupted or hacked
IoT devices can still upload incorrect data into the blockchain. Hence the data is
still not completely reliable.

6.3 Recommendations

This research paper explore the potential for blockchain technology in SCM.
There is clear evidence from the conceptual design and case studies for deep
integration of blockchain technology in SCM. A huge collaborative effort among
the participants of a supply chain is required to truly benefit from its applications.
As more and more IoTs are integrated into SCM, blockchain will play a particularly
important role to facilitate IoT solutions. Case study evidence points towards
blockchain bridging the gap between IoT solutions and SCM. A good starting point
to implement blockchain technology would be to use blockchain technology as
the platform to facilitate the role of IoTs within business processes. For managers
interested in implementing blockchain platforms for SCM, it is important to set up
the required digital infrastructure to enable real time flow of information and
continuous functioning of smart contracts.

6.4 Suggested areas for future Research

From a research perspective, there are numerous areas within the supply chain
domain where blockchain technology can be further explored. A multitude of
research directions arises from this topic. Some of the most important ones
identified are the following:

Quantitative evaluation of the impact of blockchain technology

Blockchain business use cases must be evaluated against traditional cases in a

quantitative manner to evaluate the effectiveness of blockchain based solutions.
Particular interest must be taken to study the costs of implementation, scalability
and the long term aspects for blockchain implementation.

69
Exploring further applications of blockchain technology in SCM

This research paper does not provide an exhaustive list of application for
blockchain technology in SCM. A limited set of applications has been explored.
Further research on the financial aspects, insurances aspects, logistics aspects
and other domains within SCM can be explored.

Does implementing a blockchain platform increase information sharing?

Throughout the research paper, we state blockchain technology facilitates

information sharing by proving a safe and secure environment, but this does not
necessarily translate to firms wanting to share information. The perception of
information sharing among suppliers participating in blockchain platform can be
further researched.

Blockchain technology to enable reverse-logistics

The opportunity to explore the applications in reverse-logistics is an unexplored

research topic. Since blockchain technology enable tracking the product back to
each supplier, there is enormous potential to innovate reverse-logistics.

70
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