Blockchain in Supply

Chain and Logistics

Blockchain in Supply Chain and
Logistics Management
(TUTA3300)

AHM SHAMSUZZOHA, PHD

[email protected]
 Lecture Outline

Introduction
Verification of authenticity
Agreement and contracts
Blockchain regulations and ethics
Impact of blockchain on SC transparency
Perspective of blockchain in logistics visibility
Barriers to adopt BC in SC

2
 Introduction: Why BC in SC?
Due to several issues, blockchain is useful in the supply chain. These are:
 Provenance tracking: In a blockchain-based supply chain management, record keeping and
provenance tracking is made easier as product information is accessed by embedding
sensors and RFID tags.
 Cost reduction - Real-time tracking of a product in the supply chain through the help of
blockchain can reduce the overall cost of moving items in a supply chain (Azzi et al., 2019).
 Establishing trust - Developing trust in complex supply chains with large numbers of
participants is key to smooth operations (Kouhizadeh et al., 2021).
 Replacing slow, manual processes.
 Strengthening traceability.

 Reducing supply-chain IT transaction costs.

3
BC Transforms Supply Chain (Raman, 2019)

4
 Applications of BC in Various SC

(Verny et al., 2020)

5
 BC: Verification of Authenticity

 The term authenticity refer to protect against tampering.

 In case of supply chain, a product authentication solution enables
each stakeholder to authenticate products easily and securely.
 It improves distribution channel integrity through providing end-
to-end protection against counterfeit products.
 Conventional solutions for product authentication are unable to
provide efficient protection against fraudulent activities.
(Gautham, 2021).
 Blockchain technology has the capacity to provide solutions that
efficiently authenticate products in the supply chain.

6
 BC: Verification of Authenticity

 The supply chain management industry is struggling with inadequate resources

for efficient authenticity verification.
 Technologies like QR codes, 2D codes, and serial numbers are simple and
cost-effective, however, it is easy to copy and use the codes and numbers for
producing counterfeit products.
 Technologies like RFID tags have emerged as standard logistic solutions with
sophisticated capabilities but, the barriers of high cost and lack of a common
platform for mobile verification inhibit the widespread use of RFID tags.
 Blockchain technology and smart contracts can overcome such conventional
limitations to authenticate products in an easy, economical and secure manner
(Gautham, 2021).

7
 Agreement and Contracts
 An agreement can be defined as any understanding or arrangement
reached between two or more parties.
 A contract can be defined as a specific type of agreement that is legally
binding and enforceable in a court of law.

8
Requirements for Agreement and Contracts

Requirements for an agreement Requirements for a contract

 Mutual assent  Offer and acceptance
 Expressed by a valid offer and acceptance  Mutual Consent
 Adequate consideration  Consideration

 Capacity  Competence

 Legality  Legal purpose

 Termination conditions  Duration of the contract
 Special conditions  Complaints and dispute resolution
process

9
 Blockchain: Regulations
Blockchain technology is encountering lots of legal questions. Some of the critical issues
facing the community include (IB 2020):
 Jurisdiction: In a decentralized environment, where nodes exist around the planet,
how do we establish the correct set of rules and laws to apply? Different countries have
very different approaches to titles, ownership, contracts, and liabilities.
 Decentralized Autonomous Organizations (DAOs): Consider a typical legal system,
where both individuals and organizations participate.
 Contract enforceability: Much has been made of smart contracts’ ability to cut out the
middleman, thus slashing costs and increasing security when undertaking complex
legal processes.
 Leaving a blockchain: There needs to be provisions and processes in place that ensure
the vendor hands over all your information.
10
 Blockchain: Regulations
The structure of blockchain records could generate legal
issues.
 TheEuropean Parliament voted to adopt a smart
regulatory hands-off approach to regulate blockchain
technology (European Parliament, 2014).
 The EU Parliament’s initiative combines two different
initiatives:
 the creation of a Virtual Currency Task Force and
 the inclusion of virtual currency exchanges within the ambit
of the European Anti-Money Laundering Directive.

11
 Blockchain: Regulations
 Regulatory thinking on blockchain in the USA is mainly
shaped by
 the Federal Reserve,
 the Securities Exchange Commission,
 the Treasury Department and
 relevant state regulators.
 As blockchain applications span regulatory jurisdictions.
 A considerable amount of coordination among regulators
would be required to effectively identify and address
risks involved.

12
 Blockchain: Ethical Issues
Blockchain technology raises some ethical issues, with the two most prominent problems
being:
 Firstly, the environment:
 Bitcoin is now responsible for 0.31 percent of the world’s entire electricity usage.
 Developers need to find a way to verify transactions much more efficiently.
 Secondly, cybercrime:
 Cryptocurrency’s price increases were driven almost exclusively by criminal activity.
 Using dark web websites, cybercriminals could sell drugs, weapons, and other banned
items safely and anonymously with Bitcoin
 Not to mention the obvious benefits that untraceable financial transactions offer to
money launderers (IB, 2020).
 Cryptocurrencies are still the payment method of choice for anyone acting illegally.
13
 Blockchain: Impact on SC Transparency
 Blockchain can enable supply chain stakeholders to overcome the
challenges of data transfer, ownership verification, and privacy.
 Thetechnology enables provenance validation with greater certainty by
simplifying the process of data transfer and transaction reconciliations.
 Blockchain and distributed ledgers store immutable records of products
like quantity, location, and movement to secure each information.
 Moreover, it is possible to create verifiable information with smart
contracts to enhance data transparency for the benefit of all
stakeholders (Gautham, 2021).
 Blockchain requires accurate initial data of the product to counter the
issues of fraud and inaccurate labeling.
14
Blockchain: Impact on SC Transparency
 The capability of blockchain to store immutable records
of every transaction is the basis of efficient authenticity
verification in SCM.
 A blockchain can maintain chronological records of
transactions for easy identification of fraudulent or
erroneous activities.
 It stores the records of transactions by encoding them
cryptographically (Gautham, 2021).
 Replication of data on the entire network makes the
record available for any supply chain participant.
 The technology establishes trust in multiple data sources
by providing visibility over the origin of the data related
to the supply chain product.
15
 Supply and Logistics Chain Visibility:
Goals
 The goal of supply and logistics chain visibility is to improve and
strengthen the supply chain
 The visibility can be ensured by making data readily available to
all stakeholders, including the customer.
 Inaddition to providing an accurate, real-time picture of supplier
inventory levels, manufacturers are using visibility to help meet
compliance directives related to trade practices, environmental
mandates and upcoming serialization and track-and-trace laws.
 In
many industries, supply chain visibility programs are aligned
with disaster recovery plans.

16
 Blockchain: Perspective in Logistics
Visibility

 One of the biggest problems in supply and

logistics chains is the lack of visibility
 When a shipment leaves from its point of
origin, the information that is available is
scarce even when the company rely on
ground tracking tools (Garcia, P. 2021).
 With Blockchain technology, collaboration
between the different stakeholders in the
chain is much more fluid and secure.

17
 Blockchain: Perspective in Logistics
Visibility
 Blockchain can greatly improve supply and logistics
chains visibility by
 Enabling faster and more cost-efficient delivery of products,
 Enhancing products' traceability,
 Improving coordination between partners, and
 Aiding access to financing.
 A clear example is the linking of sensors in the containers to
the blockchain (Garcia, P. 2021).
 If, for example, the damaged goods arrived in a shipment of perishable
products, it would be easier to identify when the container lost the
acceptable refrigeration parameters through blockchian technology.

18
Blockchain: Beneficiaries in SC & Logistics
(Hackius and Petersen, 2017)

19
 Barriers to Adopt BC in SC

 The biggest blockchain barrier: who would give permission?

 A bias for privacy
 Blockchain technology may ultimately be a good solution
for some types of supply chains, but it is not yet ready for
mass adoption
 Blockchain pilots run to date have not proven the
technology's unique value to the supply-chain sector
 Blockchain technology is not yet able to capture data across
a high number of untrusted parties

20
 Barriers to Adopt BC in SC

 Delivering full transparency or traceability can be

solved in other ways, not just by blockchain
 The cost of developing and running a blockchain is
not yet clear, with few standards now in place
 The gap between blockchain's current capacity and
the capacity that supply chains will need is enormous
 It's
too early to estimate the costs of operating
blockchain technology in the supply-chain world,
and compare them with other technologies.

21
 Barriers to BC Adoption in SC
(Hackius and Petersen, 2017)

22
 Conclusions

 Blockchain becomes technology hype in SC&L due

to several successful pilot projects.
 BCoffers benefits to SC&L by eliminating extensive
paper work in shipping.
 However, recent studies find that logistics providers,
especially, SMEs still have little knowledge on BC
(Moritz et al., 2018).
 Blockchain research is still in its fancy but growing
rapidly.

23
 References
 https://blocksdecoded.com/blockchain-issues-security-privacy-legal-regulatory-ethical/
 Verny, J., Oulmakki, O., Cabo, X. and Roussel, D. (2020), Blockchain & supply chain: towards an
innovative supply chain design, Projectics / Proyéctica / Projectique 2020/2 (n°26), pages 115 à 130.
 Hackius and Petersen (2017), “Blockchain in Logistics and Supply Chain: Trick or Treat?”, October 2017,
DOI:10.15480/882.1444, Conference: Hamburg International Conference of Logistics, At: Hamburg,
Germany, Volume: Digitalization in Supply Chain Management and Logistics, Project: Blockchains in
Logistics and Supply Chain Management.
 Azzi, R., Chamoun, R.K. and Sokhn, M. (2019), The power of a blockchain-based supply chain, Computers
& Industrial Engineering, Volume 135, 2019, Pages 582-592, https://doi.org/10.1016/j.cie.2019.06.042.
 Kouhizadeh, M., Saberi, S. and Sarkis, J. (2021), Blockchain technology and the sustainable supply chain:
Theoretically exploring adoption barriers, International Journal of Production Economics, Volume 231,
2021, 107831, ISSN 0925-5273, https://doi.org/10.1016/j.ijpe.2020.107831.
 Petersen, Moritz, Hackius, Niels and von See, Birgit. "Mapping the sea of opportunities: Blockchain in
supply chain and logistics" it - Information Technology, vol. 60, no. 5-6, 2018, pp. 263-
271. https://doi.org/10.1515/itit-2017-0031

24
THANKS A LOT!
AHSH@UWAS A .FI