**4. How blockchain technology can help solve the problems**

The problems identified with traditional supply chain at the beginning of this presentation were as follows:


When using blockchain technology in supply chain and logistics, each record in our blockchain contains a transaction and other data. This could be the bill of lading (B/L)—an electronic B/L or a scanned copy of a paper B/L—or just the fact that the

container has been loaded onto a vessel. Each time a transaction happens, a record is added to the block.

This chapter will show how blockchain technology can help solving these problems.

#### **4.1 The origin of the raw material or the product is not obvious**

This problem can be solved easily by tagging the raw material at origin. A real-life example can be found in a case study published by Provenance [17] in which they describe the supply chain from tuna fishing to cans of tuna in a supermarket and a tuna dish offered in a restaurant. The blockchain will be created once the fish is caught on still on the boat, and at every step in the supply chain—unloading from boat to truck at the port, delivery to the processing plant, processing (which requires integration with the plants ERP to know which catch is packed into which cans), delivery and distribution, and finally arrival at the retail outlet or restaurant. The can of tuna shows a QR code which the consumer can scan with an app that connects to the blockchain. The supply chain will be followed backward to the fisher, and the consumer will receive a result on their smartphone confirming that the fisher acted in an ethical way.

Diamonds can be identified with 40 metadata points and a high definition of the diamond. The diamond can then be traced along the supply chain [18, 19]. This way, the buyer can ensure that their wedding ring does not contain a conflict diamond.

In order for the blockchain to confirm to the consumer that the product came from an ethical source, this information needs to be entered into the dataset. In the case of the tuna fish, the fisher needs to be approved by an independent agency, for example, an NGO. In the case of the diamond, the mining company must be approved. The parameters can be set as desired: Does this market segment require the produce to originate at an organic farm, or do they want produce that are not genetically modified, or do they not want any growth hormones in their meat? The origin can be certified by a trusted body, and the consumer can verify that the origin satisfies their requirements.

For industrial products, the origin can also be of interest, not only for the consumers. A car manufacturer can ensure that the components are genuine, for example [20, 21].

Customs departments require the presentation of a Certificate of Origin (C/O) in order to apply special privileges, such as import duty reductions or exemptions, to importers of goods made in countries with which a Free Trade Agreement exists. These C/O's are traditionally paper documents that have been signed and stamped by the exporter and the exporting country's issuing authority, often the Foreign Trade Department of the Ministry of Commerce. These paper documents can be forged.

If the issuing authority confirms on the blockchain that this shipment conforms to the rule of origin, the customs department of the importing country can easily see this on the blockchain. Also, the customs department in the exporting country can add the customs entry to the blockchain so that the customs department of the importing country can verify the declared product and the value [22]. Due to transparency and immutability, the origin cannot be changed.

#### **4.2 Trust issues can exist between seller and buyer**

The buyer does not need to believe that the products or components originate in a certain country; they can easily check it on the blockchain.

Once the blockchain has been created, the buyer can request access to the blockchain. They can then track the goods. Are they delayed in production or on time? Has the container been loaded on board the vessel, and has it departed on time?

A smart contract can be included in the blockchain so that when the goods are in accordance with the order, they have been loaded into a container, which has been transported to the port, and the container has been loaded onto the ship, and payment is triggered by the bank—which will also be on the blockchain. Trust is not required.

#### **4.3 The supply chain execution is inefficient**

It has already been suggested that certain conditions, when met, can trigger payments. While automated payments are already reality without blockchain technology—the telephone bill is an example—the difference here is the number of entities involved and the number of conditions that have to be fulfilled across the entities. Blockchain technology allows a higher degree of complexity.

Combined with artificial intelligence (AI) that manages demand forecasting, sales and operations planning systems and master productions schedules (MPSs) can be updated along with the material requirement planning (MRP). While this is within the ERP system and a blockchain is not required, the purchase orders (POs) that are sent to the suppliers leave the company's computing environment. POs can be sent by electronic data interchange (EDI) and then trigger an update of the supplier's MPS and hence his/her MRP. The supplier's ERP can then send their PO to their supplier (i.e., the manufacturer's second-tier supplier), and onward, upstream in the supply chain.

This requires different systems to cooperate. There are many ERP systems in the market, requiring different interface to even connect. In addition, the ERP system of any member of the supply chain may not be fully integrated internally [23] so that gaps in data transfer can occur.

There will be no visibility for the manufacturer into the second- or even third-tier supplier. This goes beyond the mere knowledge of the origin of the components and their origin in turn; visibility and data flow are essential to prevent the Bullwhip Effect [24].

Blockchain technology will also be able to take advantage of the Internet of Things (IoT) [25]. When the manufacturer has the forecast that was generated by AI and the new MPS has been set, manufacturing can be automated. The components are in the automated warehouse and can be retrieved and moved to the assembly line; assembly can be done with robots.

As the orders from the customers will be in the system, the system can generate the invoices and packing list and also submit the documents to customs. Customs can check for the business registration with the appropriate government office, and if any export licenses are required, this can be checked accordingly.

Once the goods are loaded into the container on the truck for delivery by seafreight, the driverless truck can be programmed to a destination inside the port. Once the truck arrives there—can be verified with smart CCTV cameras or satellite tracking—an automated crane can unload the container from the truck and store it in the container yard. The container yard storage system will be on the blockchain, along with the shipping line that has the confirmed booking (and the container will be moved alongside ship for loading) as well as customs.

During the voyage, the vessel data are available on the blockchain *via* satellite data. At the port of discharge, the port authorities, customs, and all other public and private entities concerned with this shipment receive the data they require, as they are all connected to the blockchain for this shipment. Immutability of data means that they all have the same data, and there will be no discrepancies. Yuan and Yong proposed blockchain-based intelligent transport systems, including multimodal transport [26].

This will greatly improve efficiency and eliminate fraud [27].
