S

Blockchain-Based Traceability Solution for Supply Chain Management

Submitted To: Professor Jie Xiang

Submitted By: Pradeep Joshi
Student ID: 2021521081034
Date: 2023/06/20
Introduction

In recent years, supply chain management has become increasingly complex due to the
globalization of markets and increased demand for transparency and accountability.
Consumers are becoming more concerned about the origin and quality of products, and
companies are under pressure to ensure traceability throughout their supply chains.
Blockchain technology is emerging as a promising solution for addressing these challenges.
This research proposes a blockchain-based traceability solution for supply chain
management. Increased globalization as well as changes in the global markets have made
supply chain management more challenging than ever (Gomez-Mejia et al., 2021). The
majority of products that we consume nowadays are sourced and manufactured in
geographically distant locations. To properly manage these complex global supply
chains efficiently while optimizing the use of resources, digital (Kumar et al., 2018, Sanders
and Ganeshan, 2018, Dreyfus et al., 2020) and disruptive technologies (Choi et al., 2022) are
key (Perera et al., 2020). Additionally, to resolve the complexities of modern supply
networks, all the stakeholders must have better supply chain visibility and a shared view of
the actual situation (Koufteros et al., 2012, Üster and Hwang, 2017, Balci and Surucu-Balci,
2021).
The globalization of markets and increased consumer awareness have led to heightened
demands for transparency and traceability in the supply chain. Consumers want to know
where their products come from, how they are produced, and whether they meet ethical and
environmental standards. In response to this demand, companies have been investing in
supply chain management solutions that can provide transparency and traceability.
Blockchain technology has emerged as a promising solution for achieving these goals
because it provides a transparent and secure way of tracking products from their source to
their destination. Blockchain technology (BCT) is the technological solution that can help in
maintaining trust and systems security (Lu et al., 2019, Mangla et al., 2021), which is a
necessity for companies wishing to increase the transparency of their supply chains (Luo and
Choi, 2022, Shen et al., 2021, Xu et al., 2022). Blockchain improves security while at the
same time increasing trust (Choi, 2020a, Choi and Siqin, 2022). BCT uses distributed ledgers
which can ensure transparency, accuracy, and immutability across the supply chain (Rao et
al., 2021). Technology is essential to the supply chain because it helps in tracking the
movement of goods across the world in the global supply chain (Schmidt and Wagner,
2019, Cao and Shen, 2022). The topic of Blockchain-Based Traceability Solution for Supply
Chain Management combines practical and theoretical concepts from several fields, including
blockchain technology, supply chain management, cryptography, and distributed systems.
BCT allows multiple parties to access and maintain the same data in real-time, without the
need for a central authority. This technology provides a tamper-proof and immutable record
of all transactions, making it ideal for supply chain management. In terms of supply chain
management, traceability is the ability to track a product's journey from its origin to its final
destination. It is essential for businesses to ensure the safety and quality of their products,
comply with regulations, and reduce waste and fraud. Blockchain-based traceability solutions
provide a way to achieve this through a transparent and auditable system that can track each
step of the supply chain. Cryptography plays an important role in blockchain technology by
ensuring the privacy and security of transactions. Distributed systems are also crucial in
blockchain technology since they allow multiple nodes to participate in the network and
validate transactions.
Overall, a Blockchain-Based Traceability Solution for Supply Chain Management combines
these concepts to provide a secure, transparent, and efficient system for tracking products
throughout the supply chain. Blockchain-based traceability solutions for supply chain
management involve the use of blockchain technology to enhance transparency,
accountability, and efficiency in tracking and tracing products as they move through the
supply chain. This research proposal aims to investigate and develop a blockchain-based
traceability solution for supply chain management. The proposed solution leverages the
unique features of blockchain technology to enhance transparency, trust, and traceability in
supply chain operations. This proposal outlines the objectives, methodology, and expected
outcomes of the research project.

Literature Review
Blockchain-based traceability solutions have emerged as a promising technology for supply
chain management due to their ability to provide transparency, increase accountability, and
improve efficiency. The use of blockchain technology in supply chain traceability has been
explored in numerous studies with varying scopes, ranging from specific industries such as
food safety and pharmaceuticals to broader analyses of the challenges and opportunities of
implementing blockchain technology in supply chain management. Blockchain technology
has been implemented in many areas, such as commerce, judiciary, finance, banking, health
care, and education (Apte & Petrovsky, 2016; Chen et al., 2018; Esposito et al., 2018).
Blockchain is being implemented in several areas because it offers unique features, which can
be summarized in the following dimensions; real-time information sharing, cyber-security,
transparency, reliability, traceability, and visibility. These features can improve the scope of
the SCM and operational performance (Banerjee, 2019; Morkunas et al., 2019), and can help
the transition from traditional to modernized supply chains.
For example, in complex supply-chain networks, different vendors participate in the supply-
chain processes, and a shared database is required to maintain all transactions. Therefore,
digital infrastructure is required that shares secure and real-time information. Piramuthu et al.
(2013) study the allocation of liability among the different players in the perishable supply
network based on the accuracy of traceability, where there is no strategic pricing and
noncontractible effort involved. One study by Xu et al. (2020) focused on the implementation
of a blockchain-based traceability system for food safety in China. The study found that the
use of blockchain technology significantly improved the efficiency and accuracy of data
collection, sharing, and tracking throughout the supply chain. The authors noted that the
decentralized nature of blockchain technology helped to reduce the risk of data tampering or
manipulation by any single entity, which can be particularly important in industries where
safety and quality are critical factors. Azzi et al. (2019) conducted a study to explore the
potential benefits of using blockchain technology to track pharmaceuticals in the supply
chain. The authors highlighted the importance of ensuring the integrity of the supply chain in
the pharmaceutical industry, given the significant risks associated with counterfeit drugs.
They found that blockchain-based traceability solutions can reduce the risk of counterfeit
drugs entering the market, improve patient safety, and increase trust between stakeholders.
The authors also noted that blockchain technology can help to ensure compliance with
regulatory requirements by providing an immutable record of all transactions in the supply
chain. Blockchain is one of the most effective solutions for that problem (Helo & Hao, 2019).
Many researchers have shared their opinions about the implementation of Blockchain into
supply chains (Casado-Vara et al., 2018; Madhwal & Panfilov, 2017; Treiblmaier, 2018), how
the concept of Blockchain theoretically fits into the supply chain (Wang et al., 2019), and
how the Blockchain is going to change supply-chain networks (Helo & Hao, 2019). In a
review article by Li et al. (2020), the authors provided a comprehensive overview of the
challenges and opportunities of implementing blockchain technology in supply chain
management. They noted that one of the main challenges is the lack of standardization across
different blockchain platforms, which can hinder interoperability and limit the potential
benefits of adopting blockchain technology. The authors suggested that developing
interoperable blockchain systems that can integrate with existing supply chain technologies is
essential to facilitate adoption. Blockchain can be defined as “a digital, decentralized, and
distributed ledger in which transactions are logged and added in chronological order with the
goal of creating permanent and tamper-proof records” (Treiblmaier, 2018, p. 547). This
technology did not come out of the blue but rather builds on previous work related to linked
timestamping, digital cash, proof of work, byzantine fault tolerance, asymmetric
cryptography, and smart contracts (Narayanan & Clark, 2017).
Furthermore, Li et al. (2020) highlighted the importance of addressing technical challenges
such as scalability, security, and privacy when implementing blockchain-based traceability
solutions. The authors noted that while blockchain technology provides a high degree of
security due to its decentralized and tamper-evident nature, there are still vulnerabilities that
need to be addressed, such as the risk of 51% attacks and the potential for data breaches.
They also noted that scalability remains a challenge, particularly for public blockchain
platforms, which can struggle to handle large volumes of transactions. According to the
Council of Supply Chain Management Professionals (CSCMP), SCM is based on two
fundamental approaches; (i) planning, implementing, and controlling the primary activities
and delivering value for the ultimate customers, and (ii) the integration and coordination of
corresponding business processes within as well as across the companies. The integration of
the supply chain can be considered to be a force trying to uplift the relationships between all
the segment in the supply chain to enable better decision-making by providing visibility and
highlighting the bottlenecks (Cole et al., 2019; Feyissa et al., 2019; Sadraoui & Mchirgui,
2014). Blockchain for supply chain management is a digital innovation an emergent enabling
technology and it provides distinctive features such as real-time information sharing, cyber-
security, transparency, reliability, traceability, and visibility which improve the efficiency of
the supply chain (Behnke & Janssen, 2020; Cole et al., 2019; Helo & Hao, 2019; Phadnis,
2018). Böhme et al. (2015) conducted a study that emphasized the need to address technical
challenges in the implementation of blockchain-based traceability solutions. The authors
noted that scalability and privacy concerns can be particularly challenging, given the large
amounts of data that need to be processed and the need to protect sensitive information. They
suggested that a hybrid approach combining blockchain with other technologies, such as off-
chain storage systems, may be necessary to overcome these challenges. The SCM practices
have widely received importance from consultants, academicians, and managers because it
played a vital role for firms to maintain competitive advantages by enhancing profitability
and improve the operational performance in the global marketplace (Hasan, 2013; Truong et
al., 2017). In addition to technical challenges, there are also practical challenges associated
with implementing blockchain-based traceability solutions in supply chain management. For
example, there may be resistance from certain stakeholders who are wary of new
technologies or who have invested heavily in existing systems. There may also be regulatory
barriers that need to be addressed before blockchain-based solutions can be widely adopted.
Despite these challenges, the literature suggests that blockchain-based traceability solutions
have the potential to greatly benefit supply chain management by improving transparency,
accountability, and efficiency. By providing an immutable record of all transactions in the
supply chain, blockchain technology can help to reduce the risk of fraud, increase trust
between stakeholders, and improve the overall quality and safety of products. However, there
is still much work to be done in terms of developing interoperable and scalable blockchain
systems that can meet the needs of different industries and stakeholders.

Research Design

The main objectives of the research project are as follows:

a. Understand the potential benefits of blockchain technology in improving traceability and
transparency within the supply chain.
b. Identify key challenges and limitations in implementing blockchain-based traceability
solutions.
c. Develop a conceptual framework for a blockchain-based traceability solution tailored to
supply chain management.
d. Design and implement a prototype of the proposed solution to demonstrate its feasibility
and effectiveness.
e. Evaluate the impact of the blockchain-based traceability solution on supply chain
performance, efficiency, and risk mitigation.
The proposed research will contribute to the field of supply chain management by providing a
blockchain-based solution for traceability. The solution will enhance the transparency,
security, and efficiency of supply chains and enable companies to meet the growing demand
for product traceability. The research will also provide insights into the benefits of using
blockchain technology in supply chain management. For primary data collection the research
conducts In-depth interviews with key stakeholders, such as supply chain managers,
blockchain experts, and industry analysts, can provide valuable insights into the potential
uses of blockchain technology in supply chain management.
The research also conducts a case study analysis of a company that has implemented a
blockchain-based traceability solution in their supply chain. The evaluation examines the
impact of the solution on the company's supply chain operations and its ability to enhance
transparency, security, and efficiency. The findings indicate that the blockchain-based
traceability solution significantly improves the transparency and accountability of the supply
chain while providing a secure and efficient method of tracing products from their origin to
their destination. Also, analyze the results and assess the impact of the blockchain-based
traceability solution on key performance indicators such as transparency, traceability, and
supply chain efficiency.
From the research question and objectives following outcomes can be expected:
a. A comprehensive understanding of the benefits and limitations of blockchain technology in
supply chain traceability.
b. A conceptual framework for a blockchain-based traceability solution customized for supply
chain management.
c. A functional prototype demonstrating the feasibility and potential of the proposed solution.
d. Evaluation results indicating the impact of the solution on supply chain performance, risk
mitigation, and operational efficiency.
e. Recommendations for implementing and scaling the blockchain-based traceability solution
in real-world supply chains.

Theoretical contribution and practical implication

The use of blockchain technology for supply chain management has gained significant
attention in recent years due to its potential to address issues related to transparency,
traceability, and security. There are several theoretical contributions and practical
implications of implementing a blockchain-based traceability solution for supply chain
management.
Theoretical Contributions:
Decentralization and Trust: Blockchain-based traceability solutions contribute to the
theoretical understanding of decentralized systems and trust mechanisms. By removing the
need for a central authority and distributing the ledger among multiple participants,
blockchain enables trust to be established through consensus mechanisms and cryptographic
techniques. This decentralized nature enhances transparency and reduces the reliance on
intermediaries, fostering a more trustworthy and efficient supply chain ecosystem.
Immutable Audit Trail: The immutability of blockchain creates an indisputable and
transparent record of transactions. This theoretical contribution helps establish a reliable audit
trail for supply chain activities. Every transaction recorded on the blockchain is timestamped
and cryptographically secured, making it nearly impossible to alter or tamper with the data.
This property ensures the integrity and provenance of products throughout the supply chain,
which is crucial for traceability and accountability.
Smart Contracts and Automation: The use of smart contracts in blockchain-based traceability
solutions contributes to the theoretical understanding of automated agreements and digital
governance. Smart contracts enable the automation of business rules, such as payment terms,
quality standards, and compliance requirements, within the supply chain. This theoretical
contribution promotes efficiency, reduces human error, and establishes a new paradigm for
self-executing and self-enforcing agreements.

Practical Implications:
Enhanced Transparency: Blockchain-based traceability solutions provide real-time visibility
into supply chain activities, allowing stakeholders to track and verify the movement and
status of products. This enhanced transparency enables better decision-making, proactive
issue resolution, and improved collaboration among supply chain participants.
Supply Chain Efficiency: By automating processes, reducing manual paperwork, and
streamlining verification and validation procedures, blockchain-based traceability solutions
contribute to increased supply chain efficiency. The elimination of intermediaries and the
reduction of redundant tasks lead to cost savings, shorter lead times, and improved overall
operational performance.
Fraud Prevention and Counterfeit Detection: Blockchain's immutable and transparent nature
helps prevent fraud and counterfeiting within the supply chain. The ability to trace and verify
the authenticity and provenance of products at each stage reduces the risk of counterfeit items
entering the market. This practical implication fosters consumer trust, protects brand
reputation, and ensures compliance with regulatory requirements.
Improved Quality Control and Recall Management: Blockchain-based traceability solutions
enable real-time monitoring of product quality parameters and adherence to standards. In the
event of quality issues or recalls, the traceability provided by blockchain facilitates swift and
targeted actions, minimizing the impact on consumers and reducing costs associated with
widespread recalls.
Sustainability and Ethical Sourcing: Blockchain-based traceability solutions can contribute to
sustainability and ethical sourcing practices. By recording information about the origin,
certifications, and environmental impact of products on the blockchain, supply chain
participants can make informed decisions and demonstrate their commitment to sustainability
and responsible sourcing.

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