**2.2 Problems with today's supply chain**

Evolving customer requirements, challenges from competition, geographically separated operations, and the adoption of new business models (such as

**59**

*Deploying Blockchain Technology in the Supply Chain DOI: http://dx.doi.org/10.5772/intechopen.86530*

challenges in current supply chains here:

throughout the entire lifecycle of products.

supply chain network [17].

efficiency.

e-commerce) make the current supply chain a highly complex system. Over the past decade, e-commerce and hand-held digital devices have substantially changed the daily lives of people, especially in the ways they shop. There is an ever-increasing demand for customized products, a simplified and efficient shopping experience, and transparency about the value and provenance of goods. These needs bring new opportunities to businesses but impose significant challenges to current supply chains. These outdated supply chains struggle to improve demand management, to provide data visibility for the entire flow, or to track goods from raw material to end consumer—all of which are tremendously complex. Furthermore, the old technology of today's supply chain fails to provide adequate risk management, to reduce costs, or to meet rapidly changing market requirements. We summarize the main

**Lack of traceability**: In the last few years, traceability has become crucial for supply chains to address, especially in regard to customer service and planning and forecasting in business operations. However, it is difficult to deploy a centralized system in an interconnected network, especially where trust among participants is limited. Instead, there are several discrete systems among involved parties that consist of various databases that impede product tracking throughout the entire

**Stakeholder distrust**: Trust is an essential factor in supply chain management, and an effective supply chain network must be built on a solid foundation of it [18]. However, distrust among participants is the single greatest obstacle to improving supply chain networks [19]. Consequently, most stakeholders in the network primarily rely on third-party intermediaries to serve as agents of trust and to verify transactions, which dramatically increase operational cost and reduce process

**Limited transparency**: The term "transparency" in the supply chain refers to the extent to which all stakeholders own a shared understanding of and access to accurate and adequate information about products [20, 21]. A transparent supply chain network improves trust among stakeholders and guarantees the integrity of products and associated data. However, the discrete databases in current supply chain networks offer minimal transparency, and most of the useful information in them is lost when products and data are transferred from one stakeholder to another. Furthermore, there are issues with inconsistent data sharing, relying on paper documentation, and inadequate interoperability. These critical challenges remain despite years of significant research investment. The crisis of Chipotle Mexican Grill outlets [7] is an important and sad example of how the current supply chain system is inefficient at, and possibly incapable of, offering transparency

**Outdated means of data sharing**: In current supply chain networks, data are shared between many organizations using paper-based documentation.

in ports when the paperwork does not match the carried goods [22].

Oftentimes, important documents, such as bills of lading, letters of credit, invoices, insurance policies, and various certificates, must travel with their associated goods around the world [22]. For example, about 200 communications were needed for Maersk, a global transport and logistics company, to complete a single shipment of frozen goods from Mombasa to Europe in 2014 [23]. These communications created a stack of documents about 25 centimeters in height [24]. Constrained by this outdated and inefficient data sharing method, ships and airplanes are often delayed

**Compliance challenges**: Currently, businesses have to meet increasingly strict regulatory standards to provide safe products and services to customers. Recently, the U.S. Food and Drug Administration and Federal Trade Commission adopted several standards to increase food safety and offer full visibility of food flows in the

**Figure 1.** *Supply chain and operations.*

#### *Deploying Blockchain Technology in the Supply Chain DOI: http://dx.doi.org/10.5772/intechopen.86530*

*Computer Security Threats*

**2. Supply chain**

**2.1 Overview**

technology [5]. Although blockchain-based applications in the supply chain are still in their early stages, we believe this technology will significantly remodel the supply chain system [6–8]. Analysts forecast that blockchain technology can help supply chain management gain one-third improvement in most of its common processes [9]. A blockchain network is as a distributed ledger—transactions are contained in blocks that are linked together in chronological order to form a tamper-proof chain, which is usually stored in all network nodes [10, 11]. As such, blockchain technology provides a means to create tamper-proof logs of business activities and transactions [12]. Transaction data are immutable because they cannot be tampered with once they are distributed, accepted, and validated by network consensus and stored in the blocks [13]. By eliminating intermediaries to achieve trust among all stakeholders,

Despite the general acceptance that blockchain technology facilitates faster, more easily auditable interactions and allows for the exchange of immutable data among supply chain partners [14], it will take time for this technology to be adopted and to revolutionize the supply chain. Currently, most applications of blockchain are conceptual expositions, and empirical evidence on the implementation of it is limited [15]. Furthermore, few studies have been conducted on the challenges of deploying blockchain in the supply chain, such as organizational readiness, technical expertise, scalability, and compatibility with existing systems. Therefore, this study will provide a systematic analysis of how blockchain technology fits in the supply chain network and discuss potential challenges with its implementation.

Supply chain encompasses the end-to-end flow, including the physical and correlated data flow of raw material, products, information, and money. It plays a unique and critical role in businesses and determines the performance of organizations. Supply chain manages or is involved in sourcing, procurement, manufacturing, distribution, and logistics, and, thus, affects speed-to-market, the cost of a product, service perception, and capital requirements in businesses [16]. Supply chain integrates a set of fragmented and often geographically discrete processes into a cohesive system to deliver value to the customer. The core functions and opera-

Evolving customer requirements, challenges from competition, geographically separated operations, and the adoption of new business models (such as

tions of a typical supply chain network are illustrated in **Figure 1**.

**2.2 Problems with today's supply chain**

efficiency improves and cost is reduced for the entire supply chain.

**58**

**Figure 1.**

*Supply chain and operations.*

e-commerce) make the current supply chain a highly complex system. Over the past decade, e-commerce and hand-held digital devices have substantially changed the daily lives of people, especially in the ways they shop. There is an ever-increasing demand for customized products, a simplified and efficient shopping experience, and transparency about the value and provenance of goods. These needs bring new opportunities to businesses but impose significant challenges to current supply chains. These outdated supply chains struggle to improve demand management, to provide data visibility for the entire flow, or to track goods from raw material to end consumer—all of which are tremendously complex. Furthermore, the old technology of today's supply chain fails to provide adequate risk management, to reduce costs, or to meet rapidly changing market requirements. We summarize the main challenges in current supply chains here:

**Lack of traceability**: In the last few years, traceability has become crucial for supply chains to address, especially in regard to customer service and planning and forecasting in business operations. However, it is difficult to deploy a centralized system in an interconnected network, especially where trust among participants is limited. Instead, there are several discrete systems among involved parties that consist of various databases that impede product tracking throughout the entire supply chain network [17].

**Stakeholder distrust**: Trust is an essential factor in supply chain management, and an effective supply chain network must be built on a solid foundation of it [18]. However, distrust among participants is the single greatest obstacle to improving supply chain networks [19]. Consequently, most stakeholders in the network primarily rely on third-party intermediaries to serve as agents of trust and to verify transactions, which dramatically increase operational cost and reduce process efficiency.

**Limited transparency**: The term "transparency" in the supply chain refers to the extent to which all stakeholders own a shared understanding of and access to accurate and adequate information about products [20, 21]. A transparent supply chain network improves trust among stakeholders and guarantees the integrity of products and associated data. However, the discrete databases in current supply chain networks offer minimal transparency, and most of the useful information in them is lost when products and data are transferred from one stakeholder to another. Furthermore, there are issues with inconsistent data sharing, relying on paper documentation, and inadequate interoperability. These critical challenges remain despite years of significant research investment. The crisis of Chipotle Mexican Grill outlets [7] is an important and sad example of how the current supply chain system is inefficient at, and possibly incapable of, offering transparency throughout the entire lifecycle of products.

**Outdated means of data sharing**: In current supply chain networks, data are shared between many organizations using paper-based documentation. Oftentimes, important documents, such as bills of lading, letters of credit, invoices, insurance policies, and various certificates, must travel with their associated goods around the world [22]. For example, about 200 communications were needed for Maersk, a global transport and logistics company, to complete a single shipment of frozen goods from Mombasa to Europe in 2014 [23]. These communications created a stack of documents about 25 centimeters in height [24]. Constrained by this outdated and inefficient data sharing method, ships and airplanes are often delayed in ports when the paperwork does not match the carried goods [22].

**Compliance challenges**: Currently, businesses have to meet increasingly strict regulatory standards to provide safe products and services to customers. Recently, the U.S. Food and Drug Administration and Federal Trade Commission adopted several standards to increase food safety and offer full visibility of food flows in the supply chain. However, under current supply chain processes, it is difficult to obtain this information from a variety of stakeholders and to develop a database that complies with new standards.
