Evaluating blockchain technology for reducing supply chain risks

Abstract

With the rapid changes in the global business environment, enterprises face many risks for their supply chains. The development of blockchain technology (BCT), an emerging technology, could transform supply chain activities and provides an opportunity to mitigate supply chain risks (SCRs). However, there is a lack of guidance on this issue. Therefore, this study evaluates and prioritizes the impacts of BCT on reducing SCRs. By applying the analytic hierarchy process (AHP) approach, this study identifies and assesses the nineteen BCT adoption enablers for reducing SCRs in a hierarchical structure. Results show that the sourcing process is the essential enabler when enterprises consider adopting BCT for reducing risks, and the weight of the making process is ranked second. Among the sub-criteria, the top five items are clarity of supply sources, counterfeit and shoddy products, fraud in contract fulfillment, the flexibility of capacity, and sensitivity to demand change. This study's findings may guide practitioners considering the introduction of BCT to reduce SCRs and for scholars who are developing related theories.

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Appendix

Appendix

Evaluation criteria and description used in this study.

Criteria
Planning (P)
P1 Transparency of operational goals: Using blockchain could reduce opacity risks to company goals, including operational goals, strategies, and risks that affect business strategy
P2 Flexible capacity: Using blockchain could reduce the risks of poor capacity planning, such as overproduction or underutilization
P3 Sensitivity to demand change: Using blockchain could reduce the risks of low upstream and downstream demand forecasts and insensitivity to changes
Sourcing (S)
S1 Clarity of the supply source: Using blockchain could reduce the risk of unknown sources of supply
S2 Fraud or misunderstanding of contract fulfillment: Using the blockchain, e.g., smart contracts, could reduce the risk of contract fraud or misunderstandings among supply chain members
S3 Accounting audit and payment security: Using blockchain could reduce the risk of accounting audit and payment security
S4 Inter-vendor visibility: Using blockchain could reduce the risk of mistrust caused by poor information sharing between suppliers
Making (M)
M1 Disruption crisis identification: Using the blockchain's traceability could identify the source of a crisis or defect and reduce the risk of supply chain disruptions caused by natural disasters, human factors, political and economic instability
M2 The integration of production information: Using blockchain could reduce the risk of unintegrated production information
M3 Timeliness of production information: Using the blockchain could reduce the risk that product information cannot be updated in real-time
M4 Counterfeit and shoddy products: Using blockchain could reduce the risks of counterfeit and shoddy products
Delivery (D)
D1 Tampering with shipping labels or transaction records: Using blockchain could reduce the risk of tampering with shipping labels or transaction records
D2 Misplaced or lost goods: Using blockchain could reduce the risk of goods being misplaced or lost
D3 Verifiability of goods and services: Using the blockchain could reduce the risks arising from the inability to verify goods and services' correctness
D4 Transparency and efficiency of the order fulfillment process: Using blockchain could reduce the risk of opaque and inefficient order fulfillment processes
Return and others (R)
R1 Intervened or manipulated by middlemen: Using blockchain could reduce the risk of interference or manipulation by intermediaries such as governments, banks, and other intermediaries
R2 Cybercrime and Hacking: Using blockchain could reduce the risk of cybercrime and hacking
R3 Manual processing error: Using the blockchain's traceability could reduce the risk of manual input or validation errors
R4 Paper documents processing error: Use blockchain-verifiable digital records could reduce the risks associated with processing paper documents

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Lai, JY., Wang, J. & Chiu, YH. Evaluating blockchain technology for reducing supply chain risks. Inf Syst E-Bus Manage (2021). https://doi.org/10.1007/s10257-021-00533-4

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Keywords

  • Analytical hierarchy process
  • Blockchain
  • Supply chain risk