**2. Problems intrinsic to traditional supply chains**

Supply chain management manages the flow of material, money, and information. In this chapter, we will concentrate only on the material and the information flows. Material usually flows from the origin of the raw material to the consumer (downstream) and information flows both upstream and downstream in the supply chain. A simple supply chain showing the flow of material is shown in **Figure 1**.

With the advent of computers, supply chain visibility [5] was introduced. Supply chain visibility means that the supply chain manager can see—on his or her computer screen—where the inbound or outbound material is located at the very moment, whether stocks are getting low and need to be reordered, and where any problems exist. Airfreight shipments or seafreight containers can be tracked on the Internet, and warehouse and inventory management systems can be accessed remotely.

The following problems can be identified in current supply chains:


#### **2.1 Origin of the raw material or the product**

While the consumers in the past century often chose a product based on the price and the perceived quality—using the brand name and the retailer's brand image as references—today the consumer wants to know the origin of the goods. For example, *Blockchain Technology in Supply Chain Management DOI: http://dx.doi.org/10.5772/intechopen.105761*

**Figure 1.** *A simple supply chain. Source: The author.*

organic food is becoming more and more popular and so is the desire of the consumers to be able to check that the goods are really organic [6, 7]. Foodstuff has been falsely declared as organic in order to achieve higher prices. Another example is that dolphins are believed to be accidentally killed when fishing for tuna (see e.g., [8]), clothes may have been produced in sweat shops or using child labor [9] or that a wedding ring could contain a "conflict diamond" or "blood diamond" [10]. A scandal in Europe in 2013 revealed that lasagna contained horse meat, which was unexpected and undesired by the consumers. Lack of traceability was blamed [11].

The current tracking systems cannot provide the visibility needed to ensure that the goods come from an approved source. While seafreight containers can be traced from the port of loading or an airfreight shipment from the airport of departure, it is unclear where the goods actually originated from. Trucks, for example within Europe, can be tracked with GPS systems, but the shipments themselves cannot.

Suppliers may even intentionally falsify the origin of goods. This happens when the origin is illicit (e.g., conflict diamonds), the manufacturer handled unethically and should not be revealed (e.g., using child labor and forced labor), or an importer wants to take advantage of reduced import duties under a Free Trade Agreement (FTA) even though the goods do not satisfy the rules of origin specified in the FTA.

## **2.2 Trust issues between seller and buyer**

Unless trust has already been established between seller and buyer, the seller needs to ensure that they will receive payment when they deliver the goods, while the buyer needs to ensure that they will receive the goods when they arrange for payment. The solution has been for centuries that the buyer opens am Irrevocable Documentary Letter of Credit with their bank, which the seller accepts. This method requires a number of documents and is rather complex and inefficient, as well as costly. In addition, it bears some risks [12].

If the buyer requires goods or components made in a certain country as they believe the quality is better, they will just have to believe that the seller does not source these items somewhere else for a lower price.
