SAGAR DAS
APPLICATION OF BLOCKCHAIN IN
OUTBOUND LOGISTICS TRACK AND
TRACE
Faculty of Engineering and Natural Sciences
Master of Science Thesis
June 2020
i
ABSTRACT
SAGAR DAS: Application of Blockchain in Outbound Logistics Track and Trace
Master of Science Thesis
Tampere University
Master’s Degree Programme in Industrial Engineering and Management
June 2020
Examiner: Professor Jussi Heikkilä and Assistant Professor Mohammad Moshtari
Due to outdated practices, rising cost, low quality and poor customer service, the supply chain
process has become more complex than ever. The power of customers has risen, and they are
now considered to be the most important stakeholder. The ‘Amazon experience’ in retail sector
has created ripples in supply chain network across all industries and the delivery along with
visibility of products is of strategic importance for companies. Technology has also advanced to
solve these problems, but the challenge lies in the implementation part as it is expensive and a
cumbersome process. Digitalization of supply chain is a hot topic and various companies are have
started to implement it to break the existing barriers and create an integrated system with the
inclusion of all stakeholders. Appending to this, the introduction of blockchain has further
intensified the need to track and trace products across a entire supply chain platform. Trust,
immutability and transparency are the key properties of blockchain which is seen as a hyped as
well as a potential solution for the existing problems within supply chain management network.
The main objective of this research is to understand the need for track and trace solutions in
outbound logistics management and to develop a framework based on the proposal to create a
potential application of blockchain in outbound track and trace of a product and to identify the
challenges and opportunities in its implementation. To have a vivid understanding of the outbound
logistics processes and available track and trace solutions, a thorough literature review is
undertaken. Upon analysis of the case study, a blockchain framework is proposed with the aim
to understand the integration of physical flow and information flow in the outbound logistics.
Further, recent projects on the implementation of blockchain technology in the supply chain
network is studied to apprehend the necessity of this research. The challenges posing to the
implementation of blockchain are also discussed.
The research aims to understand the need of track and trace solutions and how blockchain
implementation is feasible to achieve this solution. As a result of this study, the feasibility of
blockchain technology to be used for tracking and tracing outbound logistics is proved. However,
the discussed implementation challenges have delayed the adoption rate of blockchain in supply
chain management and requires further research in this field.
Keywords: blockchain, outbound logistics, digitalization, tracking and tracing
The originality of this thesis has been checked using the Turnitin Originality Check service.
PREFACE
This thesis aims to understand the need for track and trace solutions in outbound
logistics. There are numerous solutions and technologies available to implement the
tracking and tracing of a product once it is in shipment phase. The implementation of
such technologies is beneficial to the stakeholders in the outbound logistics network,
most beneficial being the customer whose need to know the delivery schedule of their
product is attained in an instant. At this juncture, it is seen that blockchain can provide
groundbreaking solutions in this field. However, they are still in their early adoption stage
and the true potential of this technology is yet to be measured.
My interest in supply chain management and blockchain technology propelled me to
carry out this research. For his guidance , encouragement and advice during a master's
thesis, I would like to thank my thesis supervisor, Professor Jussi Heikkilä, Tampere
University of Technology. I would also like to thank my colleagues, who during my
academic career in Finland assisted me with critical insights and help.
Finally, I would specially like to thank my parents for constant support, guidance and
blessing in all phases of my life.
Tampere, 17, June 2020
Sagar Das
CONTENTS
1. INTRODUCTION .................................................................................................. 1
1.1
Research background .......................................................................... 1
1.2
Purpose of study and research questions ............................................ 2
1.3
Scope and limitations ........................................................................... 3
1.4
Structure of the thesis .......................................................................... 4
2. LITERATURE REVIEW......................................................................................... 5
2.1
Supply chain and outbound logistics .................................................... 5
2.2
Digital transformation of supply chain ................................................. 12
2.3
2.2.1 Track and trace solutions ............................................................ 13
2.2.2 Conclusion of the solutions ......................................................... 16
Blockchain Technology ...................................................................... 17
2.3.1 Smart contracts ........................................................................... 21
2.3.2 Properties and Benefits of blockchain ......................................... 22
3. RESEARCH METHODOLOGY ........................................................................... 25
3.1
Research purpose and importance .................................................... 25
3.2
Research philosophy and approach ................................................... 26
3.3
Research design ................................................................................ 27
3.4
Chosen research strategy .................................................................. 28
4. CASE ANALYSIS ................................................................................................ 31
4.1
Physical flow in outbound logistics ..................................................... 31
4.2
Information flow in outbound logistics ................................................. 32
4.3
Challenges ......................................................................................... 33
5. PROPOSING A BLOCKCHAIN FRAMEWORK................................................... 34
6. DISCUSSION...................................................................................................... 37
6.1
Applicability of blockchain in track and trace ...................................... 37
6.2
Challenges in implementation ............................................................ 39
7. CONCLUSIONS.................................................................................................. 43
REFERENCES....................................................................................................... 45
1
1. INTRODUCTION
This chapter will present the reader with the background and the research gap that exists
in the field. The research background will present the current scenario, which will be
followed by the purpose of the research and the critical research questions. The
limitations related associated with the research topic and the structure of the research
will also be explained.
1.1
Research background
Globalization along with recent trends such as shorter product life cycle and tightened
profit margins has caused the management of supply chain more complex than ever
(Hidjaja, 2018). These challenges in the field of supply chain have become priority for
organizations because they affect the overall efficiency, cost, quality of the business and
most importantly customer service. Recent studies reveal that transparency in the supply
chain creates more trust amongst the stakeholders and improves customer service,
thereby instilling trust and long-term relationship (He et al., 2008).
In-time delivery of products to the customer is increasingly becoming a strategic goal for
global companies. The age of digitalization and the ‘Amazon Experience’ from the retail
sector has prompted customers to have a tool at their disposal which can track and trace
their products at any given point of time (Wognum et al., 2010). Hence, companies have
started to take serious interest in the field of tracking and tracing of their products for two
main reasons: first is to improve the customer service and second is to keep track of their
valued products.
Pizzuti and Mirabelli (2015) emphasize on the need to have a product traceability system
in order to assure the linkage between the flow of product and the flow of information as
well as secure the complete history for future restoration. The use of traceability can
further provide metrics for evaluating quality and performance of the logistics system
(Allata et al., 2017). A continuous monitoring system also ensures faster detection of any
problems across the logistics process. (Narshimhalu et al., 2015). However, the cost and
changes required in implementing traceability is one of the main barriers for small scale
industries to venture in this field (Allata et al., 2017).
2
Sarkis et al. (2011) state that failures in establishing a robust communication channel is
affecting the trust between a company and its customers. Hence, the need for
information systems and technology to enhance the information exchange has become
important. At the same time the integrity of the information should not have any
uncertainties (Pizzuti and Mirabelli, 2015). This is where the blockchain technology
comes into play as it can promise transparency, traceability and trust in inefficient
business practices (Kim and Laskowski, 2017).
1.2
Purpose of study and research questions
The above section briefly outlines the current state and need of tracking and tracking in
the present day business environment. The aim of this paper is to explore the
technologies available to enable the tracking and tracing of products. In addition, the
application of blockchain technology to outbound logistics is also being studied and a
framework for implementation is being proposed.
Literature and case studies in the field of supply chain management are abundantly
available. However, in the case of blockchain technology, the same is limited. Blockchain
is considered to be a revolutionary technology and there is a need for a vivid picture of
how this technology can be implemented to improve the efficiency of the supply chain.
The Gartner Hype Cycle also supports the initial bold promises of blockchain and
projects it to be commercially viable in the next 5-10 years (Gartner, 2017). Figure 1
shows that blockchain has already crossed the ‘Peak of inflated expectations’ and
progressing toward the ‘Trough of disillusionment’.
3
Figure 1. Gartner Hype Cycle (Gartner, 2017)
The main objective of this paper is…
… to understand the need for track and trace solutions in outbound logistics
management and to develop a framework based proposing the potential application of
blockchain in outbound track and trace of a product and to identify the challenges and
opportunities in its implementation.
Furthermore, the research problem formulates the following research questions:
•
Research question 1: What is the need of tracking and tracing of a product in
outbound logistics?
•
Research question 2: Which are the available technologies in providing
solutions for tracking and tracing?
•
Research question 3: How does blockchain technology fits in providing
solutions in tracking and tracing?
•
Research question 4: What challenges can organizations face while
implementing blockchain technology in outbound logistics?
1.3
Scope and limitations
The study focuses on the potential application of blockchain in outbound logistics and
analyses the projects undertaken for tracking and tracing solutions in supply chain
4
management. The literature review is systematically narrowed down from the broader
topic of supply chain to the tracking and tracing in outbound logistics.
1.4
Structure of the thesis
This research paper is divided into seven broader parts. The first chapter provides a brief
background information on the subject and explains the purpose of the study, the scope
and limitations of the study. The second chapter examines the relevant literature on the
supply chain, outbound logistics and digital transformation in the supply chain. The
literature then focuses on the blockchain technology and the features it provides in the
context of research. The third chapter examines the research methodologies and sets
out the methodology chosen for this study. The fourth chapter analyzes the case study
and a brief summary is made. In the fifth chapter, the methodologies used in the case
study are proposed for the blockchain framework. The sixth chapter on the applicability
and challenges posed by the implementation of blockchain technology. Finally, the
seventh chapter concludes the research and discusses the key findings of the entire
process.
5
2. LITERATURE REVIEW
This section of the thesis analyzes the global outbound logistics and discusses new
studies and ideas within supply chain track and trace technologies. Finally , this chapter
will explain the blockchain technology concept, smart contracts and discuss the
advantages and challenges it faces.
2.1
Supply chain and outbound logistics
The basic principle of supply chain has remained the same throughout. Supply chain
mean a network established to distribute an product with different entities like producer,
suppliers and distributors as its stakeholders (Londe & Masters, 1994). Walters (2007)
notes that each company supplies its consumers with goods to match their needs.
Businesses need to look beyond to address this requirement and decide how to provide
an optimal supply of products and information to satisfy the consumer demands
(Christopher, 2005). Stadtler et al. (2014) adds that the supply chain consists of at least
two legally distinct organisations connected by flows of money, content and intelligence.
It ties together supply chain end-product companies, distribution infrastructure, suppliers
and end-customers (Stadtler et al., 2014).
The supply chain constitutes a network of partners responsible for the conversion of a
product (upstream) into a finished product (downstream) which is valued by the end user,
thereby, adding each partner to the value chain (Harrison, et al . 2008). Tyndall et al.
(1998) adds the process or work as the fourth flow in addition to the product, financial
and information flows, while Stank et al. (2001) notes that currency, information,
valuation of goods / services and customer accommodation constitute a supply chain.
The literature highlights a lack of understanding of the concept of supply chain
management (SCM); therefore, the definition proposed in this research for supply chain
management is the one proposed by Sim-Chi-Levi, et al . ( 2008), which states:
“Supply chain management is a set of approaches utilized to efficiently integrate
suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and
distributed at the right quantities, to the right locations, and at the right time, in order to
minimized systemwide cost while satisfying service level requirements”.
The definition includes all the functions (logistics, development, finance , marketing, etc.)
and takes into account the influence of suppliers and customers (Simchi-Levi, et al.,
6
2008). This approach regards the supply chain as a system and incorporates the supply
chain partners process (Simchi-Levi et al., 2008).
Figure 2 shows the complexity of supply chain management as it is pictururized as a
pipeline. Ballou (2004) defines the supply chain management as a synchronization of
different lateral flows (product, information, financial, forecast, etc.) through various
functional areas within an enterprise (logistics, marketing , distribution, manufacturing,
planning, etc.) and through external supply chain firms (Villalmanzo 2018). Mentzer et
al., (2001) adds further that this coordination includes a degree of trust, risk, commitment
and dependence on the viability of inter as well as intra-functional corporate sharing.
Hence, the supply chain management can not achieve its full potential without sufficient
teamwork (Villalmanzo, 2018).
Figure 2. Model of Supply Chain Management (Ballou, 2004)
In order to achieve the interaction and intra-coordination, the main elements include the
information exchange tools and the IT systems. Data flow is the interconnection
mechanism between the different supply chain systems, which tends to minimize
uncertainty by data on the actions of other participants by exchanging information
between the supply chain partners (Harrison et al., 2008). This model emphasizes the
value of the end customer. Harrison et al. (2008) notes that the activities of the supply
chain allow the information and currency to flow through which makes customer
satisfaction an important part of the the Supply Chain Management for the organization
(Mentzer et al., 2001).
However, in a strategic context, this suply chain management model focuses on
improving the efficiency and effectiveness of the system in order to gain necessary
competitive advantage that ultimately brings competitiveness (Ballou, 2004). Mentzer et
7
al., (2001) also notes that supply chain management’s main goals are to maximize
customer value and satisfaction, thereby, leading to an increased competitive advantage
for the supply chain, and more significantly for the company. Moreover, the rivalry
between the supply chains no longer exists as different firms can no longer contend
against each other (Waters, 2007). The incorporation and collaboration of intra- and
inter-organizations through a supply chain is thus not a primary aim of the supply chain
management, but instead a requirement to achieve an effective and productive system.
Hence, the key issues linked to a successful supply chain management are discussed
briefly.
•
Customer value and satisfaction: The current markets are customer-driven and
the perceived value in relation to the company becomes a critical factor for the
consumer (Simchi-Levi, et al., 2008). With more value added and reduced prices,
customers are increasingly demanding goods (Waters, 2007). Emmett and
Crocker (2007) claim that consumers mainly prioritize product consistency, lead
time order period, expense and level of service
•
Competitive advantage: The efficiency of the supply chain management is
improved by constant customer demand fulfillment and adding value added
services, thereby providing a sustainable source of competitive advantage
(Waters, 2007).
•
Integration: Upstream and downstream integration improves the performance of
the entire supply chain and requires the necessary support to coordinate supply
chain partners by establishing a common governance of materials and
information flows (Harrison, et al., 2008). A single integrated function is a means
by which companies manage the movement of material and information in a
coordinated manner (Waters, 2007).
According to a theory of a value chain from Micheal Porter, consideration is the best
approach to create a value chain at the business unit level rather than at the organization
or divisional level. With a commodity going through the value chain, its value increases.
Starting with manufacturers providing the necessary inputs for product creation and the
use of networks such as retailers to the end customers, all these processes include the
value chain or value system (Porter, 1985). Illustration 3 shows Porter 's proposed supply
chain value system.
8
Figure 3. Value chain and competitive advantage (Porter, 1985)
Porter (1985) lists the following activities in the model as principal activities:
•
Inbound logistics: covers all inbound operations needed to move raw materials
as well as inventories from manufacturers to factories.
•
Operation: includes all operations that is required in order to convert raw material,
labor and other accessory inputs into goods or services based outputs.
•
Outbound logistics: It includes all operations related to the storage and outbound
delivery to the end customers.
•
Marketing and sales: This deals with the promotion for the sale of products and
services.
•
Service: It covers all after-sales operations needed to retain an successful
product or service status for the customer.
And in Porter's paradigm, the support activities illustrated are:
•
Firm Infrastructure: It includes all key functional tasks that sustain the everyday
operations of a organization such as marketing, administration, finance and
accounting, etc.
•
Human Resource Management (HRM): includes all practices related to the
management of human capital and relations within a business.
•
Technology Development: This covers the technological expertise, applications,
processes and machinery used in the company's production process.
•
Procurement: includes all activities which serve a company's needs by acquiring
resources from the outside market.
Farahani et al. (2011) describes logistics as the handling of the movement of
commodities and associated information transference. He further states that logistics
includes several different processes, such as shipping procurement, warehousing,
9
terminal management , distribution, and packaging. Logistic method requires a lot of
people - to - people contact and it can be concluded that half the logistics work is related
to an efficient comminication process (Farahani et al., 2011).
Karlsson and Reumark (2007) define outbound logistics as all logistics activities that
occur after the manufacturing stage. Such activities relate to the delivery, preparation
and material management of supplies to and from the customers (Karlsson and
Reumark, 2007). The logistics operations have changed from the conventional costeffectiveness approach to a shorter lead time and customer-oriented and strenghtened
support strategy. Logistics is not just "saving money" action; it is now an integral part of
customer-oriented service strategy (Farahani 2011, p.203).
Lai & Cheng (2009, p39) classifies the management of logistics into four broad sections.
•
Customer service addresses the core of supply chain management by bringing
the correct commodity in the correct amount to the right place at the lowest
possible rate, and in good shape. A satisfied customer is more likely to be going
back to the same supplier/producer and encouraging others to buy because of
the quality of the service they receives.
•
Order processing is one of the key components as it integrates operations
originating from distribution to order fulfillment before the consumer gets their
shipment. Burnson (2006) notes that the clients always demand uninterrupted
results when it comes to the fulfilment of their orders. It puts the buying manager
on the task of communicating with internal stakeholders (production team) and
external stakeholders (logistic service providers (LSPs), etc.) and providing the
client with an adequate lead time and related information.
•
Inventory control is a company's ability to anticipate market demand and future
growth as well as keep its stock rates as small as possible. With increasing
globalization and longer lead time in delivery, inventory management practice
has become even more important (Waters, 2002).
•
Transportation is a central factor in the distribution process, as it deals with
transferring content and finished goods from one end of the supply chain to
another (Lai & Cheng, 2009, p.39). Organizations determine what has to be
transported and what is the most effective method of transporting it, such as
determining the modes of travel, routing and lead time.
Transportation and is seen as the focal point of this analysis and more thorough study is
done. Transport management is described as the transportation of products from the
manufacturer's warehouse to the end user (Bhatnagar 2009, p133, Sarkisov 2001).
10
Transportation management consists of two types: inbound transportation referring to
the management of transportation from manufacturer to client and outbound
transportation referring to the management of transportation from business to consumer
(Lai & Cheng, 2009, p.133); Transport management usually involves at least three
participants: the shipper, the carrier and the consignee. The shipper is the one who
needs to transport the good; the courier is the one who lets the goods really transport
and the consignee gets the goods. The government and the public could also be
regarded as partners in the transport decisions in a broader spectrum. The shipper and
the consignee 's goal is the same which is to transport the products for the least amount
of time as quickly as possible. The carrier's goal, however, is to produce as many
shipments as possible with the minimal effort and more benefit. The government has
functionality like implementing rules, such as the length of time a truck driver can drive
on a carrier without break or tariff charges. On the other hand, the public is more
concerned about the impact of transport on their lives, such as safety issues, accidents
and pollution of the environment (Bhatnagar, 2009, p.135-137).
There are five modes of transport in Bhatnagar (2009, p.133-141): water, rail , road, air,
and pipeline. Companies decide the mode of transport, taking into account their needs
and their customers' needs (Blanchard, 2010, p.70). In addition, considering the current
competitive market, Teo and Shu's work states that a company can develop and
effectively network distribution to provide service at the lowest cost. A company must
consider two things when deciding on a distribution network; firstly, the method of
delivering goods to customers and secondly, the intermediaries involved in the flow to
the customer (Chopra, 2001). The distribution network and the design of channels pose
the biggest challenge for the current companies. The main problem is that the connection
points need to be installed with the supply chain network (Ballou, 2001). Figure 4 depicts
a typical, designable supply chain network.
11
•
Figure 4. A typical supply chain network (Ballou, 2001)
Choosing a suitable distribution channel is a significant decision for businesses who wish
to enter multiple market segments. Compatible channel connections help to structure
distribution channel management (Ballou, 2001). Etzel et al., (2004) provide some simple
and dominant channels of distribution from single to multiple levels, while Kotler and
Keller (2008, p.490) proposed a hybrid channel of distribution where the producer /
manufacturer uses multiple channels. Figure 5 illustrates the different channels of the
distribution.
Figure 5. Simple and multiple distribution channels
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Communication is another main factor in developing and sustaining relationships and
more open communication between the parties concerned results in more chance of
creating ideas and practices (Blanchard, 2010, p.85). In fact, customers have high
expectations that can be fulfilled with great service, and better communications
resources are a means of achieving them (Blanchard, 2010, p.134).
2.2
Digital transformation of supply chain
Digital transformation is one of the most significant business developments of our day
(GT Nexus, 2016). This transformation has been observed within or between
organizations and their clients. An organization's success now depends on the efficiency
of running a supply chain partners’ network to deliver goods and services that meet its
customers' needs. This process generates an impressive amount of data and is critical
for supply chain management due to the ability to manage data and information (Rushton
et al., 2007).
75 percent of respondents believe that digital supply chain transformation is 'really
necessary,' according to a survey conducted by GT Nexus (2016). The digital
transformation of all processes and information flows between each partner across the
supply chain is necessary in order to achieve a successful digital transition within an
enterprise. Waters (2007) encompasses telephone, networking, data collection , data
analysis, and information technology (IT) sharing. Enterprise Resource Planning ( ERP)
is a database that allows data capture from the entire business and plays an important
role in enterprise development (Rushton, et al., 2007). Advanced Planning and
Scheduling (APS) is a tool that uses real time information to support supply chain
decision-making and operational planning (Rushton, et al., 2007). APS along with other
information systems, such as Warehouse Management System ( WMS), Transport
Management System (TMS), etc., are process-oriented and can be built into the ERP
system (Rushton, et al., 2007).
Harrison et al. ( 2008) notes that they could be inconsistent with each other given the
common use of the above mentioned inter-organizational structures, thus having high
implementation and deployment costs. Internet-based platforms provide platformindependent messaging and can be used as a business-to - business gateway to
promote access to new customers and emerging business opportunities such as ecommerce and e-business. The key technologies currently revolutionizing the digitisation
cycle are listed briefly below:
13
•
Sensors and IoT: Data is automatically and in real time collected and documented
via sensors, installed in virtually all commodity components and manufacturing
equipment. The sensors are connected to the central systems via secure wireless
networks, providing online data which is stored with historical data in a single
information system (Villalmanzo, 2018).
•
Autonomous guided vehicle: This technology is still under development, but the
need for human drivers is reduced. Autonomous vehicles will be mainly used in
logistics by driverless trucks, where they will rely on short-range mapping and
radar software to assess the vehicle environment. They can also use cellular links
to other cars and on the road to collect information to speed up the flow of traffic
and minimize pollution and road injuries (Villalmanzo, 2018).
•
Cloud computing: Cloud computing is a distributed network that offers a central
commander hub linking end -to- end applications with DSN partners. As such,
this cloud-based platform enables collaboration and offers various personalized
delivery and network experiences (McKinsey & Company, 2015).
•
Big data: Big data refers to databases whose size exceeds the capability to
capture, store, manage , and analyze traditional data set software tools. Multiple
data sources, including historical and real-time data, are identified, combined and
managed by big data engines (Villalmanzo 2018). First, they define and link the
most relevant data, then synchronize and combine the fragmented data before
executing a cleanup operation and then bypass the missing information. The
findings are also used for data analytics, analyzing Big Data to make rational
decisions and to collect interest (Manyika, et al., 2011).
•
Blockchain: The blockchain is an encrypted, open data record in which
businesses can search physical assets and document all their transactions. It
also provides common access to the same information for all approved parties,
reducing the risk of contact or transmission of data errors. As a consequence,
testing of the results takes less time, so these services can be dedicated to quality
improvement , cost savings or both (Deloitte, 2018).
2.2.1 Track and trace solutions
Kunnari (2018) has carried out extensive research in the analysis of the various available
track and trace solutions and states that the use of these solutions has increased
significantly in recent years. Some of the main reasons for this are the evolution of new
technologies, falling prices and the wider global scope. To this end, the the battery life in
the smaller devices has made track and trace program implementation more common
14
than ever (Schrauf and Berttram 2016; Kunnari 2018). Techniques such as real-time
data management, which facilitates information, are now on dispense. Due to the
removal of barriers that allow the sharing and synchronization of valuable information
across the supply chain network, the motivation has increased in the supply chain
context (Kunnari, 2018). The track and trace solutions available help companies share
information to counteract the supply chain management bullwhip effect (Kouvelis et al .
2006; Kunnari, 2018). Lee et al., (1997) describes bullwhip effect as the deviation in
orders that may be greater than that of sales, and the variation usually increases as one
moves upstream in the supply chain. The following sections discuss the different
techniques and systems used in supply chain administration.
•
RFID: Radio Frequency Identification (RFID) was invented in 1948 but it took a
long time for the system to be inexpensive and accurate enough to be used on a
wide scale (Kunnari, 2018). In nature, RFID is wireless, and can be seen as the
simplest concept that uses bar coding. A standard RFID network consists of three
components: an RFID tracker that serves as a tag, a tag processor with an
antenna and transceiver and, last but not least, a host machine that interfaces to
the business system. The tag 's function is to gather and transmit data in real
time via radio waves. The specific inventory or shipping information is contained
in the sticker, which the reader then identifies and records (Kunnari, 2018).
Angeles (2005) further adds that RFID has been used to track products and
assets through the supply chain by transport in retail business. The reader portals
are installed at main areas of the chain, such as retailer loading ports,
consolidators, freight forwarders and delivery centres. The monitoring systems
are periodically updated as objects that have tags move through the readers
(Kunnari, 2018).
•
RFID and GPS: Although RFID has many advantages when implemented inside
warehouses for inventory and material handling purposes, tracking is often lost
once it leaves the warehouse until the next identification is made. The GPS
technology had its function here to track primarily freight and drug vehicles. (He
et al. 2009, pp. 2-3; 2018). When used together, the use of RFID and GPS
technology offers greater advantages as it assists in inbound and outbound
logistics preparation and eventual alignment to resource planning systems. The
benefits include flawless visibility, improved reliability, better decision-making of
inbound and outbound loading and unloading activities, dynamic routing of
goods, improved transport capacity and the automatic exception of reporting on
shipment decision support (Kunnari, 2018). When these techniques are
15
integrated, a full precision for the supply chain monitoring is obtained (Wang et
al . 2008, pp. 295-296, Kunnari 2018).
•
GPS and GSM: The key explanation for using GPS and GSM technology for
monitoring and tracing purposes is cost savings and reliability. Today, all
smartphones integrate these technology and this is used to help track cars. GPS
and GSM are used in car monitoring due to the variety of ways in which these
systems can be employed, along with ease of use. (Lee et al. 2014, p. 353; 2018).
Knowing the vehicle's location is one of the greatest problems in track and trace
programs and this device aims to have the vehicle's location at any point in time
and wherever on Earth. Price, accessibility and precision contribute to GPS use
as opposed to other technologies. Lee (2014 ) says that the most common
application is GSM and SMS technologies as wireless data transfer, like the use
of SMS, and accessing the vehicle location data (Kunnari 2018).
•
Fleet management system: Fleet management system (FMS) is a requirement
for tracking vehicles. This system manages an enterprise 's entire transportation
fleet. The fleet management system aims to improve the industry's efficiency and
quality by providing information about the major road obstructions and tracking
their fleet's real-time locations on a map. (Kunnari, 2018). The rising global oil
prices are one of the major reasons for the rise in the implementation of Fleet
management systems. This makes transport and logistics more effective,
improving vehicle routes which leads to cost savings, risk minimization and
increased fleet efficiency. Thong et al. (2007) argues that smart resource
allocation is the key element in creating effective management of the fleet. In
addition to improving the system, the Fleet Management System also improves
myopic issues such as fuel economy, utilization level and maintenance costs for
transports (Mohan et al. 2009). Fleet management system is a web-based
platform that can make many vehicle- and driver-related decisions and provides
metrics for companies to optimize their vehicle and driver distribution. Some of
the metrics cover vehicle mileage, fuel consumption, maintenance problems and
driver performance (Kunnari, 2018).
•
Internet of Things: Macaulay et al. (2015) note that IoT is taking the track and
trace system to the next-generation as it makes the operation quicker, more
efficient, more safe and more accurate. The system enables logistics companies
to have direct knowledge of product flow across their whole life cycle (Kunnari,
2018). The program would therefore ensure that the items arrive unharmed and
are shipped in time and to the right place. IoT also stresses the level of protection
and accessibility in transport (Macaulay et al. 2015; Kunnari, 2018) With the
16
combination of sensors and networking technologies, a product's evolving and
transportation status can be quickly monitored over the internet. The future is
moving towards a phase in which almost every electronic device around us is
connected to the internet, thereby creating cooperation, connection and
communication with individuals. He et al. (2014) continues that IoT is supposed
to provide an enabling approach for improving the entire transportation and
automotive infrastructure networks.
Simultaneously, taking care of data protection is a vital part for security concerns, as it
shows that only authorized individuals can view and edit the data (Kunnari, 2018).
Wireless networking plays an significant role in mitigating threats related to computer
protection. Kunnari (2018) further adds that sharing data using cellular networks
increases the risk of data misuse, since access to data becomes simpler for outsiders.
But protection is a clear and important issue to tackle for IoT to prevail (He et al. 2014).
Internet of Things software is considered a long-term track & trace approach, as it utilizes
much of the same technology and hardware (Kunnari, 2018).
2.2.2 Conclusion of the solutions
The solutions discussed in the previous section can offer possible solutions for the
organizations to implement a track and trace system. However, the decision to
incorporate what type of technology depends on the need and policy of the enterprise.
Usage of RFID systems will be a workaround in situations where the commodity or
consignment need not be monitored in real-time. Yet, based on IoT 's claims, its
deployment will provide organisations with long-term solutions. IoT has shown success
and will revolutionize the whole supply chain operation. Therefore, it is important that
companies analyze all emerging innovations in depth. The innovations mentioned have
their benefits and drawbacks that are listed in Table 1.
17
Table 1. Advantages and disadvantages of Track and Trace solutions (Kunnari, 2018)
Solution
Advantages
Disadvantages
Sources
RFID
Cheap, popular and
Not a sole real time
Keen & Mackinwell investigated
solution provider, old
tosh 2001; Lehto et
technology
al. 2009; Sun 2012.
RFID and
Provides real time
Requirement of a
Wang et al. 2008;
GPS
tracking solution
communication
He et al. 2009;
technology to transfer Deshmukh et al.
data
2016.
GPS and
Real time tracking
High deployment cost Thong et al. 2007;
GSM
solution, uses
unless existing
Chadil et al. 2008;
smartphones and
devices are at
Lee et al. 2014.
customized apps to
disposal
meet companies'
needs, easy
implementation
Fleet
Custom-tailored
Expensive, convenient Mohan et al. 2009;
Management technologies can be
if the transport
Aljaafreh et al.
System
integrated into IT
vehicles are company 2011.
systems of
owned, integrating
companies, provide
carriers is difficult
real-time solution
Internet of
Long-term investment Expensive, requires
Coetzee & Eksteen
things
with huge potential,
changes in systems,
2011; Speed &
benefits yet to be
lot of work
Shingleton 2012;
explored, uses
Palmquist & Leal
existing technologies,
2016.
provides real time
solutions
2.3
Blockchain Technology
Blockchain could be described in simple words as a way to store transaction information
between multiple parties but in a trustable manner. Blockchain's origin can be traced to
Bitcoin, which is a digital currency built on the works of previous innovations in finance,
computing, networking and security. Our existing monetary systems consist of actual
money such as bills and coins that are government-controlled and circulated. The
Bitcoin, on the other hand, is a digital asset. Bitcoin's advent can be traced back to
Satoshi 's paper "Bitcoin: A Peer - to - Peer Electronic Pay System," which laid the
foundation for the first cryptocurrency. The currency code was shared a year later on the
internet, which is known as blockchain technology (Cellabz, 2015).
18
The benefits of Bitcoin extended to the economic, humanitarian, and legal system,
thereby making it clear that blockchain technology is disruptive in nature and has the
potential to reconfigure the operations as well as the aspercts of society. The definition
of blockchain is connected to Bitcoin. Blockchain is the public ledger which contains all
executed Bitcoin transactions. The chain is growing as miners add new blocks to record
transactions from recent times. Blocks keep applying sequential and chronological order
to the blockchain. Every complete node, which is basically any Bitcoin-connected
computer, has a copy of the blockchain. Full information about the balances and
addresses will be stored in the blockchain. The blockchain's trustless proof mechanism
is due to the trusted public ledger system that is stored on various decentralized nodes
worldwide and maintained by miners (Swan, 2015).
Bashir (2017) also argues that the basic unit of a blockchain is a transaction, reflecting
a value transfer from one address to another. Each transmitter and recipient has a unique
identificator known as address for each transaction that is reusable or newly generated
(Villalmanzo, 2018). By using mining operation, a list of transactions is documented in a
block, which generates a ledger over a certain duration. Each blockchain has different
sizes, times, and triggers for blocks (Laurence, 2017).
In other words, Bashir (2017 ) defines blockchain as a distributed ledger mechanism that
may be interpreted like an authentication framework for the digital transactions and a
place where data on transactions between network users can be stored. Table 2
describes the different levels of access; namely ’private’, ’public’ and ’consortium’; and
Figure 6 shows distribution architectures such as ’centralized’, ’decentralized’ or
’distributed’.
Figure 6. Different network structures
A blockchain network member is commonly called a node. This block contains the
hatches from the previous block, thereby linking the blocks and storing data in sequential
form, which forms a block chain in the network (Tate and Daniel, 2017). Each block can
19
be defined as encrypted information with all transactions encrypted and referred to as
hacking. Hash is the product of all block content's hash function. The hash function is a
data-entering algorithm that can almost be reversed (Abeyratne & Monfared 2016;
Villalmanzo, 2018). A consensus protocol is used to perform the hash function, which
can be defined as a special procedure for confirming blockchain transactions.
Transaction confirmation is a major feature of the blockchain because of the hacking
risk.
A hypothesis called Byzantine fault theory deals with the risk of attack. The Byzantine
theory of fault arose from the Byzantine generals' issue, in which several different forces
could collectively destroy the city only if they all met at one particular moment and at the
same time decided on the attack. A similar issue can be found in the digital environment
where a hacking attachment will fail a node. So if a network of nodes is operating
together, then a database can be compromised (Lamport et al . 1982).
This issue can be resolved by adopting different approaches. Table 2 lists in greater
detail three consensus protocols: Proof of Job (PoW), Proof of Stake (PoS) and Conduct
Byzantine Fault Tolerance (PBFT). Moreover, for the purpose of a transaction, the nodes
provide a private key and a public key respectively, which are described in more detail
in Table 2 (Kairos Future 2017). Consensus protocols are usually used to encrypt
transactions but they take a lot of time and energy and are thus therefore made into
instruments to strengthen cooperative processes (Holmberg et al , 2018). A chain of
block is shown in Figure 7.
Figure 7. A chain of blocks (Tate and Daniel, 2017)
One main feature of blockchain technology is that information is stored in ways which
prevent other users from changing, deleting, adding information or blocks without being
detected (Villalmanzo, 2018). This ensures the transaction's origin and authenticity and
thus increases the overall integrity and trust related to a particular product. One of
blockchain's core advantages is that a blockchain network will enforce its own rules on
its non-party network (Abeyratne & Monfared 2016).
20
Blockchain's enthusiasm is focused on features that help to achieve and preserve
credibility and integrityin peer-to - peer networks that require intermediation (Drescher,
2017). The benefits envisaged for this system include decentralized trust, cost reduction,
accountability and transparency (Bashir 2017). The characteristics of the blockchain
technology are considered perfect for solving supply chain management issues, such as
lack of trust from SC partners, proof of archiving authentication, inefficient process, etc.
(Villalmanzo, 2018).
Table 2. Terms related to blockchain
Function
Type
Description
Access
Private
A private blockchain is centralized and controlled by
one organisation, while members meet certain
requirements and get various authorities assigned.
Public
It can be accessed by anyone anonymously.
Functionality lies in taking part in records and engaging
in the consensus process (Lin et al . 2017).
Consortium
A consortium model is a platform based upon the
advantages of the public blockchain, but it has the main
feature of the private blockchain with renowned players
known as the approved actors (Gramoli 2017). In
certain instances it can be called a hybrid type of
blockchain.
Keys
Private
A private key is only identified, available and used for
network access, nodes and transaction confirmations
in the owner 's key node (Kairos Future 2017).
Public
For other nodes within the network to interact with
that specific node (Kairos Future 2017) there is a public
key to the certain node.
Distribution Centralized
This outlines all data to be collected and stored in one
architecture
single point (Larsson & Korsfeldt n.d; Lin et al. 2017).
Decentralized A decentralized network outlines by the data to be
spread out globally to several local databases. The
ledger content is agreed upon by all member nodes by
using a consensus protocol
Distributed
A distributed network outlines by a number of copies of
data that is held by several nodes in the network. In the
case of Bitcoin all nodes hold a copy of all transactions.
Consensus Proof of Work PoW is the consensus protocol used by e.g. the Bitcoin
protocols
(PoW)
blockchain network. The confirmation process of
transaction is made by performing a work-intensive
task using information from the existing blockchain,
called “mining”. (Investopedia 2018b).
21
of PoS outlines by validators that “mints” or “forges”. The
chances of being the one validator to create and
validate a block is linear with the amount of coins in
their crypto wallet- the more coins in the wallet the
higher the chance to validate. (Zheng et al. 2017).
Merkel tree
Merkle Tree is a data structure used to more efficiently
and
securely
encode
blockchain
data
in
cryptocurrencies such as Bitcoin. Installed via the hash
function of an entire block of transaction data, all
transactions in a block are hashed, coupled and the
hashed together, and so on, until one hash for each
block is called the Root of the Merkle (Investopedia
2018a). Throughout the transactions made in one
block, see Figure 4, the Merkle Root is the result of all
hashes. Each time a new transaction is accepted, the
root of Merkle is updated (Bitcoinwiki 2015). Merkle
Trees are helpful since verification for a particular
transaction is feasible without the entire blockchain
having to download, but only the associated hashes for
each of the branches and Merkle Root can be checked
(Investopedia 2018a).
Proof
Stake
Optimizing
2.3.1 Smart contracts
For blockchain, smart contracts mean blockchain transactions which go beyond
simple transactions for buying or selling currencies, and which may include broader
instructions. A traditional contract is an arrangement between two or more parties for
doing something else or not. To fulfill its obligation, each party must trust the other party.
Smart contracts show the same type of agreement, but do eliminate the need of the
parties to have a single type of trust. This is because smart contracts are defined by code
and run (or enforced) by code, without any knowledge or wisdom. Indeed, autonomy,
self-sufficiency and decentralization are the three smart contract elements that make
them different. Autonomy means that the contract and the initiating agent do not have to
connect further after launching and operation. Second, the ability of Smart Contracts to
collect resources, namely to collect funds through services or equity and expend on
resources necessary, such as processing or storage power, is independent. Third, smart
contracts are decentralized because they are not distributed on one centralized server,
and are executed on all network nodes (Swan, 2015).
22
2.3.2 Properties and Benefits of blockchain
Whereas blockchain technology was originally associated with Bitcoin, it can be used in
a range of industries like banking to medical care to supply chain management.
Blockchain can be applied in virtually any industry in which assets are managed and
transactions are made. It can provide a secure chain of custody for digital and physical
assets through its functional features that facilitate transactions through trust,
consensus, security and smart contracts. These aspects of blockchains are explored in
the following sections (Sultan et al., 2018).
•
Consensus: In order for a transaction to be received and recorded on the
blockchain, all participants must agree to follow the same rules. This is
consensus. If a transaction violates one of the rules approved by the network, the
transaction will be considered invalid. The consensus allows each participant to
trust the network because they know that each transaction will follow the rules
they ratified when launching the network.
•
Provenance: Participants know where the assets are coming from and how their
property has evolved over time. The origin of each asset (whatever it may be,
material, intangible, digital) must be traceable. If we have a blockchain designed
to follow the route from a sea fish to a restaurant, one must be able to know where
it was caught, by whom and when. One also need to know how many middlemen
have been involved during the fish trip. Until the moment when the restaurant
bought the same fish.
•
Immutability: No participant can change the transaction after it is recorded in the
ledger. It doesn't matter who you are, you just don't have the power to do that. If
an error occurs, a new transaction must be used to reverse the error. At that time,
the two transactions will be seen in the ledger. The first transaction, considered
an error, will always be seen after being recorded.
•
Truth: In a blockchain network, there is only one source of truth which is the
ledger for the entire network. To find out who owns what, or study certain
transactions, there is only one place to visit.
Blockchain offers several advantages and opportunities and researchers have backed
this statement. Until the discovery of the blockchain, the most practical way to achieve
transparency and data security was through a centralized supply chain. One concern
with a centralized structure is the possibility of an entity being the weak link and become
the cause for the sole point of failure (Abeyrate & Monfared, 2016). Supply chain
members rely on a single Information Provider to store, transfer, and share all information
23
in a centralized supply chain traceability system. This centralized approach to the system
poses problems because it is a monopolistic, asymmetric and non-transparent approach
to the system that can lead to confidence, fraud, manipulation and falsification of
information between actors in the custody chain (Tian, 2016). However, the introduction
of hash functions in a distributed network make the architecture resistant to hacking
attacks. For data safely backed up, a blockchain provides the right to retain unchanging
inventory records, supplying consumers for accurate knowledge to behave in a more
efficient manner (Saberi et al., 2018).
But, if a decentralized network defines the framework with only a few players facilitating
the system, then the solution becomes vulnerable to hacker attacks that may target a
few members (Kshetri 2018). The technology is still in its infancy, however, and faces
problems of scalability in terms of performance, latency and efficiency (Lu & Xu, 2017,
Tian, 2017). The platform allows for multinational partnerships that include compliance
with global legislation, rules, and market laws, which makes the application of blockchain
a complicated process. Moreover, there will always be a distance between the physical
environment and the virtual environment, which will allow the reliability to be deceived
by allowing an actor not to perform the actual and physical action as promised in a digital
contract (Kshetri 2018, Lin et al 2017).
Smart contracts could be implemented and integrated into the system to provide the
blockchain with incentives to control the progress of a business process and streamline
and automate supply chain processes further. By reducing the number of individuals
involved in running a contract, smart contracts will decrease costs and improve
insurances (Abeyratne & Monfared, 2016). All parties must come to an agreement for
the blockchain to work effectively, which can be a challenging task to handle. Not only
do supply chain participants decide on a shared approach, but also retailer suppliers are
also based in developed countries, which is a step closer to entry into the blockchain
(Kshetri 2018).
This technology achieves high levels of supply chain immutability, integrity of the
processes and transparency. Even, when attached to IoT devices, it is able to provide
high support for efficient operation of a traceability system. To the degree that the system
provides greater connectivity from one business to another by allowing a high level of
knowledge exchange, it enables companies to achieve a deeper understanding of the
value chain of which they are part, thereby enhancing marketing, distribution , logistics
and product quality practices (Abeyratne & Monfared, 2016; Kshetri, 2018; Khan &
Salah, 2018; Tian, 2017). Such practices allow for better resource-saving prognoses,
24
thus maintaining social responsibility and thereby saving resources on systems and
promoting more environmental action (Saberi et al. 2018).
This would also save expenses by saving time, as blockchain technology increases
performance, for example, by being able to remove paper records and replacing them
with real-time data (Abeyratne & Monfared, 2016). As with the blockchain deployed in a
distributed network, this can eliminate third-party participation, such as banking financial
services or validation services (Korpela et al., 2017). At the other hand, the use of
blockchain can require third parties to carry out data checks, such as governments and
certification bodies, and thereby control their certifications (Tian, 2017). While the data
must be obtained by IoT devices and connected to the blockchain, no external
infrastructure, such as hardware tools, is needed by the blockchain itself to archive and
preserve the data (Saberi 2018). Even in complex foods, the Blockchain can store unitlevel data which tracks the origin of each ingredient (O'Marah, 2017). Additionally,
blockchain technology requires some IT infrastructure in the supply chain, such as
Internet access, which may currently be impractical for some remote suppliers of
commodities. Manual or automatic processes, such as clear tags or RFIDs, will keep
digital identities up-to - date (Abeyratne & Monfared, 2016).
By providing dignified and authorized registration and ownership, as well as proper
monitoring and reporting, blockchain should have the opportunity to resolve some of the
proprietary and identity-related issues of IoT devices used in the industrial sector, goods
and services industry and innventory tracking. (Khan & Salah, 2018). Blockchain
technology also has benefits for customers because they can obtain precise and reliable
commodity data (Abeyratne & Monfared, 2016).
25
3. RESEARCH METHODOLOGY
The main objective of doing research is to establish new knowledge or enhance existing
knowledge using systematic methodology. Here, “systematic” refers to doing research
based on logical relationships rather than belief (Saunders, et al., 2009).
By focusing on business and management research, new knowledge can be gained that
can not be obtained separately for these disciplines through the use of expertise from a
variety of disciplines. Furthermore, research into business and management must not
only provide results that promote knowledge and understanding, but also address
business and practical issues. Research may be used as a management model, with an
emphasis on transitioning from concepts to action (Saunders et al. 2009).
In general, research methodology describes the process of how any research is
undertaken. Research methodology not only elaborates the methods used for
conducting the research, but also explains the logic used in every research approach or
technique (Saunders, et al., 2009). Moreover, research methodology enables us to
understand as to why researchers select certain tools over others, and also provides the
means to compare the research results of one researcher over others (Ponomarjovs,
2013).
Here, the different methods and approaches for conducting business and managerial
research are examined. The research purpose and context, not only provide the basis
for analyzing the existing research designs, but also provide the tools to establish
reliability and validity in the study. In the end, this leads us to the actual research strategy
that is selected for this study, which entails the methodology, philosophy and data
collection methods used (Ponomarjovs, 2013).
3.1
Research purpose and importance
By focusing on business and management research, new knowledge can be gained that
can not be obtained separately for these disciplines through the use of expertise from a
variety of disciplines. Furthermore, research into business and management must not
only provide results that promote knowledge and understanding, but also address
business and practical issues. Research may be used as a management model, with an
emphasis on transitioning from concepts to action.
26
The purpose and context of a research project can be very different in the business and
management related research. In order for researchers to generally establish new
theories or to test current theories, research has to be conducted within the limits of the
development of science, to solve market and management problems (Saunders et al .
2009, Ponomarjovs 2013).
This thesis seeks to some extent to resolve current management problems by building
and testing a new theory. The aim of this thesis is to develop a framework to use
blockchain technology to overcome or mitigate the outbound logistical problems. A case
study is first analyzed in order to understand the current state and use of outbound
logistical track and track technology.
The significance of the research target lies in the fact that an applicable analysis
recognizes how this technology can also be used to address today's outbound logistics
problems and the entire supply chain. Limited information on this matter includes the
need for studies aimed at producing realistic outcomes for corporate administrators and
making track and trace technologies feasible. The findings of this study aim to provide
insight on potential applications of this technology in outgoing logistics and how this can
be a way to enhance inventory management and monitoring between the storage
facilities and the end-users.
3.2
Research philosophy and approach
Each layer of the research onion is defined, according to Saunders et al . (2009), by a
broader investigation process , which results in an effective progression in the
methodology to be developed for the research process (Figure 8).
27
Figure 8. The research onion (Onion Derby, 2019)
The outermost layer is the philosophy of research which includes the assumptions used
by the scientist in viewing the world. This is the basis for choosing research strategies
and research methods (Saunders , et al. 2009).
In addition , the research methodology affects reasoning, data usage, generality and
theory analysis. Deductive and inductive methodologies are the major approaches to
market research analysis. The first approach includes the development of a theory and
hypothesis and the development of research designs to test the developed
hypothesis.The latter relates to data collection and analysis and then to data analytical
theory development (Saunders et al., 2009).
3.3
Research design
The design of research is about how research questions can be answered. It is essential
that research strategies, choices and time horizons be developed during the research
design process (Saunders , et al., 2009).
The research questions and priorities, the extent of established expertise, needed time
and other available resources will guide the selection of a special research strategy. The
following are briefly introduced the main research strategies widely used in research on
business and management.
28
•
Experiment: An experiment is structured to investigate causal connections. In
other words, when an independent variable is changed, a different dependent
variable is changed. In more complex experiments we take into account the
magnitude of changes and the relative value of two or more independent
variables (Saunders et al., 2009).
•
Survey: Surveys are structured questionnaires that make for an simple
comparison. In the surveys, who, what, where, how many questions and how
many are answered. In addition , it allows vast volumes of data to be obtained in
a very economical way from a limited population (Saunders et al. 2009).
•
Case Study: The case study is the empirical analysis of a current trend in its
actual context, according to Saunders et al . ( 2009), using many evidence-based
sources.
•
Action Research: Action and learning from experience is the best way to enhance
comprehension by undertaking action research.That is why an action is taken to
consider situations by modifying them and learning and reflecting on the effects
of the action before taking a new action again (Fisher, et al., 2004).
It should be calculated by combination or selection of qualitative / quantitative techniques
and data collection procedures and further data analysis, as soon as the research
strategy has been established. Every data collection analysis approach has its own data
analytical process (Saunders , et al., 2009).
•
Questionnaires
•
Panels, with focus groups included
•
Comments, including observation of the participant
•
Existing Documentation
•
Databases
Finally , research design considers the time horizon of the study that does not depend
on research strategy or methodology choices. Cross-sectional research is being used at
all times for research based on the study of specific phenomena. The longitudinal
research is called Saunders, etc., if the study is focused on a trend which persists over
a period of time.
3.4
Chosen research strategy
The objective of this study is to select the most effective research strategy. After review
of various research methods and methodologies and taking into account the validity and
29
reliability, the research strategy for this master thesis is selected and presented in Figure
9.
Figure 9: Research design
A deductive research approach will be used to answer precisely the research question.
Deductive analysis is the simplest to address the research question as the key concept
is to explain blockchain technology in the monitoring/tracking and tracing of outbound
logistics solutions by establishing a system. Thus, a theoretical framework will be
developed to determine this reality, provided the hypothesis of this research is deductive.
This approach will be based on a literature review concentrating on the issues relating
to how the supply chain management and the foundations of blockchain technology can
be digitized.
Through evaluating the case studies using an explanatory approach, the deductive
argument can be further explained. This approach has been chosen to establish the
basis for research using proven case studies to demonstrate current research status
(Saunders , et al., 2009). The lack of information on this subject further influenced the
decision to discuss a variety of pilot projects briefly.
The starting point of the study begins with various readings on the topic of digitalization
in supply chain management, tracking and tracing technologies used, blockchain and its
proposed applications in the fields of finance, supply chains, and others. This led to
research on certain cases of pilot project in the track and trace solutions for products in
30
a supply chain network. Then, the proposed research questions mention in chapter 1
were formulated. Based on these questions a literature review was carried out on topics
essential for building a framework. Then a case study was chosen and analyzed to
understand its potential applicability in the proposed framework. The case was carefully
selected and the scope of the framework was limited to tracking and tracing in outbound
logistics.
The research tries to present an alternative method for the implementation of a track and
trace solution, using a blockchain system, after analyzing the event. Instead the study
analyzes the used cases of blockchain deployment and addresses the issues of
blockchain technology implementation in supply chain management. The research
strategy adopted in the study is shown in Figure 10.
Figure 10. Thesis analysis
All focus was placed on validity and reliability in science when designing the research.
For each case study, a variety of sources of knowledge are used to ensure internal
validity. On the other hand, external validity is maintained as other organisations can
easily implement the findings of the analysis. This analysis is also reliable as most
sources of information come from the companies studied.
31
4. CASE ANALYSIS
This chapter aims to present the setup for an outbound logistics tracking of a product.
The configuration includes the physical and information flow, as well as devices and
software setup used by the members. The case study is carried out by Shamsuzzoha et
al . ( 2015) where the recording and monitoring of a commodity by a Finnish corporation
is carried out as a pilot experiment. The goal of the pilot project was to use existing multichannel supply network technologies.
4.1
Physical flow in outbound logistics
The scope of the case study starts when the product is ready for shipment at the end of
the producer. It began its journey from Vaasa by truck to the port of Mäntyluoto in Finland,
for storage, then by truck to the port of Turku in Finland and then by boat to Singapore.
The physical movement of the supply chain is shown in Figure 11.
Figure 11. The case supply chain
Different trackers available in the market were analyzed and the following three were
selected and used;
•
TINO: These are the extended-battery trackers used to transmit positioning and
tracking data. The lifetime exceeds more than a month which makes it a viable
option for international tracking. In addition to its positioning functions, TINO
trackers send conditional data, considered as important criteria for product quality
and customer satisfaction (humidity, temperature, dew point temperature,
vibration etc.), for the products on the shipment.
32
•
GPS trackers: These are navigation devices which are normally carried by a
moving vehicle. It uses the Global Positioning System (GPS) to track and locate
the device’s position.
•
AIS system: This system provides the tracking data of a ship when in the sea.
The receiving range of AIS antenna is 70 kilometers and it does not transmit when
data sharing stations are too far.
4.2
Information flow in outbound logistics
The case company has an ERP (SAP) setup for managing their information flow in their
everyday business and uses emails for communication with transport companies. When
the product is ready for shipment at the manufacturer’s end, the information is updated
in the ERP. The logistics team gets confirmed and contacts the transporter for carrying
out the shipment from the company’s warehouse. The subsequent tracking information
is collected by the transport company and available for display.
Upon implementation of the pilot project, an online platform was created, which displayed
the overall information related to the tracking of the product. The portal was customized
to include various tabs like customers, purchase orders, projects, shipments, handling
unit, etc., which are essential to enable the tracking process. Information received at
each point of the journey of the product was readily accessible to the related
stakeholders. The process is shown in Figure 12.
Figure 12. Information flow after implementation of pilot project
Data (P1, P2,…Pn), which in this case is primarily location and time details, is generated
and uploaded onto the online platform. The information on the online portal is accessible
to the concerned actors at the manufacturer’s and transporter’s end. This enables faster
33
and accurate information sharing with the customer, thereby enabling better customer
service.
4.3
Challenges
The available tracking technology was tested on the basis of its functionalities and the
principle as well as supply chain and logistics network tracking requirements. In today's
difficult logistic climate, the pilot project is an online approach to collect and distribute
tracking information. The project also provides a recipe for overcoming the current lack
of tracking systems in a short-term multi-company network.
This case study as well as other similar pilot projects in different industries encounter
certain challenges when implementing this solution across the entire supply chain
network. Complying to regulations, paradigmatic change in shop floor, change in IT
structure like interfacing of ERP with other portals, cost of implementation and data
security are some of the challenges to the implementation of track and trace solutions in
outbound logistics (Bonardi, 2017).
34
5. PROPOSING A BLOCKCHAIN FRAMEWORK
This chapter is intended to address the research question 3, as it offers an alternate
framework by using the blockchain technology. It examines and visualizes the creation
of different blocks and the interaction between different layers.
This section provides an alternative view of how a product described in the previous
chapter is to be tracked and traced. The framework is based on the theory findings. As
described in chapter 2.3 and in Table 2, actors (manufacturers, transporters, customers)
can register in a network using their own private key and use the public key to identify
and authorize. The actors can enter data manually or automatically into the network, the
outbound logistics flow in this case, by authorship of their private key on the hardware
devices that are connected to the software application and thus provide an interface for
new data entry. The blockchain is selected depending on the level of security. While a
public blockchain is better than a private one, a collection of a private blockchain is made,
which allows you to choose which individuals can have input and can control the chain.
Figure 13 shows the proposed framework for blockchain application in outbound
logistics.
Figure 13. Proposed framework for blockchain supported traceability system in
outbound logistics
The framework offers a blockchain layer connected to the online platform. In addition to
the current blocks, the new blocks gather, bind and handle information on the commodity
35
during the outgoing logistics. A unique digital summary is provided to each product which
gets updated throughout its journey. The information related to the product can be
visualized by the concerned stakeholders. The reason for considering blockchain for
confirmation of such transactions is due to its secure nature and the layer of database
included offers secure backups with permissioned access. Figure 14 goes a step forward
to includes the entire supply chain.
Figure 14. Modified blockchain framework for entire supply chain
The pertinence of blockchain is more important in this situation. Specific supply chain
stakeholders are included in the Master Program and all supply chain operations can be
performed and monitored in a secure manner.
The framework proposed in Figure 13 must be logically sequenced and smart contracts
are the means for achieving it. The process flow of an intelligent contract applied to the
case study is illustrated in Figure 15.
Each block has a smart contract connected with the specifications which must be met,
such as product arrival time stamps or current location, to complete a block and cause
the formation of the next block in the chain. Figure 15 also shows the new data and data
from previous blocks used to create a new block while constructing a new block.
36
Figure 15. Proposal for interaction with smart contracts in a blockchain
As described in the previous section, a smart contract can be a software which has the
attribute to automatically trigger a certain function to take place when a predetermined
event occurs. For example, in Figure 14, when the transportation company completes
the transfer of the product from one point to another, the hardware technology (RFID,
TINO, GPS) transmit the information which is updated in the online portal. This fulfills the
condition in the smart contract and the information is added to the block, which in turn is
added to the blockchain and the information is secured.
37
6. DISCUSSION
This chapter seeks to address research question 4 and a debate is being conducted
using blockchain technologies on the practical aspects of the track and trace approach.
It then addresses the possible problems of incorporating blockchain technologies in track
and trace solutions.
6.1
Applicability of blockchain in track and trace
The proposed blockchain framework in chapter 5 provides for the possibility of tracking
and tracing a product from the warehouse of the manufacturer to the end customer. In
order to implement such a framework, investment in both hardware and software is
required, and it has been observed that the costs incurred will be significantly low due to
the constantly falling price of IoT devices (Mattila, et al . , 2016). Companies also face
difficulties in incorporating track and trace approaches given the reduced cost
consequences. Some of the reasons point to the inefficient scanning, recording and
sharing of data between the stakeholders. Added to that, the lack of standardized
processes, the use of various technologies and the information system further makes the
process of tracking and tracing more complex. Nevertheless, some global as well as
localized firms realized the importance and efficiency of the track and trace solution and
started pilot projects using blockchain technology. Table 3 enlists the uses blockchain
technology in some successful pilot Track and Trace solution projects.
38
Table 3. Used case studies
Case
Case
No.
1
BASF, Ahrma,
Quantoz
2
Provenance
and COOP
3
Provenance
and Fairfood
4
Walmart and
IBM
5
Marine
transport
international
IBM and AOS
6
Description
Status
Sources
Smart pallets tracking
system
Real-time data to
demonstrate and track the
fresh product journey
Use blockchain technology
to track ethical claims and
anddigitally prove fair
trading practice
Using blockchain
technology for collecting
information on origin,
protection, and food
authenticity and to track
the entire supply chain in
real time
Container streams system
Pilot project
completed
Pilot project
completed
Press
release
Webpage
Pilot project
completed
Webpage
Pilot project
completed
Press
release
Brochure
PoC
completed
Press
release
Truch tracking solutions
Prototype
Press
release
BASF is the biggest chemical manufacturer in the world and, in 2017, along with the
start-up, Ahrma is undertaking pilot studies to test the applicability of the smart pallet of
Ahrma (case study 1). The smart pallets use IoT sensors that capture information
relevant to the transported goods' location and orientation, and offer additional
information on metrics such as temperature variations, load and some kind of impacts
on the products. A blockchain network is used to collect information, and approved
partners are granted access to pallet movement analysis (BASF, 2017).
Provenance is a blockchain solution provider that partners with companies from different
sectors and offers track and trace solutions. Provenance and a co-operative piloted a
project in 2017 (case 2) to track fresh produce from producer to supermarket. Data was
collected along the entire supply chain and information was stored in the blockchain
regarding the supplier, product location and environmental and social impacts, thus
providing a real-time product journey (The Provenance Team, 2017).
In addition, Provenance piloted the use of blockchain technology to track ethical claims
and the digital poof of fair trade practices in case 3. The pilot study was to show a decent
pay for 1000 coconuts to farm workers. The payment and product of 55 farmers was
39
registered in the blockchain, and the proof of payment and the product's journey from
Indonesia to Europe was shown on a platform using a certification approach (The
Provenance Team, 2017).
In 2016 Walmart began a track and trace pilot in the agri-food industry along with IBM
(case 4). Digitally tracked pork products from a single farm into different stores in China.
Supply chain members were able to visualize the product 's journey, such as farm details,
batch number, factory data and expiry date (IBM, 2016).
Sea Transport International (MTI) finished its Container Streams pilot in 2017 (case 5).
This case is similar to the case study analyzed in chapter 4, however a blockchain
platform was used to share data on suppliers, shippers, customs, load details and
terminal and all supply chain stakeholders were able to access the information
(PRNewswire, 2017).
In 2017, IBM along with AOS developed a blockchain and IoT solution for Columbia
logistics activities (case 6). Cargo-related transactions were digitized, and sensorgenerated information was registered in the blockchain. For tracking purposes
information on truck location, goods shipped, movement variables and vehicle load was
available. This application helped improve the process of tracking and tracing and
provided a better estimate to predict the delivery time for the customers. The IoT further
helped capture external information such as weather, temperature , and humidity that
shortened the lead delivery time.
6.2
Challenges in implementation
Within this section, the key obstacles faced by businesses when integrating blockchain
technologies within their supply chain and more generally in track and trace solutions are
highlighted.
•
Scalability: The use of the blockchain on the supply chain is not a particular
concern, but it is also the main problem for the entire architecture of the
blockchain. Scalability is not an problem for the supply chain network, but it is
also a major obstacle for the entire blockchain ecosystem. The term "scalability"
refers to a system's capacity in terms of both user and transaction capacity to
cope and work in an increased or expanding way (Villalmanzo 2018). If it is
evaluated for greater operating needs, a device that progresses well will sustain
or improve its level of success or productivity (Investopedia, 2018). The disparity
between wider use of the blockchain and restricted private use (Bashir, 2017) is
therefore of interest to blockchain technology.
40
The use of blockchain in supply chains was evaluated for realistic applications
mentioned in the previous section, while scalability was a problem in actual
implementation. The majority are still pilot projects in the PoC or small scale,
without
addressing
large-scale
projects.
The
blockchain
should
be
technologically and socially progressive to achieve widespread implementation.
Technology scalability is based on number of nodes, data quantity and
transaction numbers, and social scalability is related to user numbers and types
(Ge et al . 2017; Villalmanzo, 2018).
Bashir (2017 ) notes that in recent years the scalability issue has been the focus
of considerable conversation and media interest, proposing multiple approaches
to the scalability problem of the blockchain. In Case Study 4, IBM's report
highlighted the importance of blockchain approval for all SC partners in
addressing
the
issue
of
social
scalability
and
in
developing
policy
recommendations (Ge, et al . 2017).
At the other hand, technological scalability is difficult to introduce in the face of
workload and without sacrifice in decentralization, as blockchain requires to meet
the goal rate and latence (Gencer, 2017). Any solutions to the solution refer to
using alternative consensus structures and alternative function algorithms
because they do not match the number of transactions well (Swan, 2015).
•
Privacy concerns: Although blockchain technology offers a seamless and
transparent records database, any transaction can be seen in all blockchain
nodes (Cagnazzo, 2017). In digital transactions and sharing of data through SC
's collaborators this feature causes several privacy concerns (Villalmanzo, 2018).
All transactions are open and transparent by default in public blockchain
networks. Therefore, anyone can follow a transaction path, including its interest,
and its source and destination addresses (Mougayar, 2016).
For blockchain applications requiring a higher degree of privacy and secrecy,
such as in the financial or health industries, this transaction view is not feasible
but is important to the supply chain (Bashir, 2017). Cryptographic technology
allow the authentication of transactions without exposing the owner's identity, in
order to protect user confidentiality (Mougayar, 2016). Therefore while the
transactions can be seen in the blockchain, the off chains are not bound to virtual
addresses, so that a pseudo-anonymity property is provided (Mercer, 2016).
Although confidentiality is secured, cryptographic keys linked to off-line identities
may be stolen or exposed if the confidentiality problem is to be fixed (Villalmanzo,
2018).
41
•
Interoperability: As a solution for the interoperability of data and structures in the
new SCs, blockchain technology is evolving. To order to connect, transfer data
and knowledge across organizational borders, interoperability requires the ability
of knowledge system managers to interact and exchange data and information
within and across organizational borders (Gray 2017). In several current SCM
applications, interoperability also remains a requirement for internal hardware or
in private cloud environments. Failure to interoperate is related to hierarchical
procedures, lack of consistency, auditability and control, causes difficulties in
covering a whole product's CS and is sometimes unable to capture the first
kilometer (Provence 2016).
It aims to provide a shared database for all members in the SC in which all parties
can view, read and archive information without central control (Ge et al, 2017)
(Switzerland, 2016). This technical obstacle can be solved with the adoption of
blockchain. The data is thus interoperable across the whole SC. On the other
hand , it is important to tackle the interoperability between blockchain and legacy
SC systems. In order to remove interoperability hurdles, supply chains are
essential to the availability of standards which allow connected systems to
communicate using the same language, architectures and identifiers (Bashir,
2017).
Finally, interoperability between blockchain systems must be taken into account
in a increasing blockchain environment (Villalmanzo, 2018). The existing
restriction on blockchain interoperability contributes to the development of many
protocols that can work across various blockchains, as well as a range of
organizations' efforts to establish blockchain interoperability standards (Bashir,
2017, Ge et al., 2017).
•
Adoption: It is a known truth that the blockchain technology still remains fairly
immature and far away from conventional supply chain acceptance (Villalmanzo
2018). Although innovation in small scale projects in real companies is growing
to show that supply chain processes have a blockchain viability, however a gap
persists between the technology and the investment (Luu, 2018). Early adoption
will only be possible if the deployment engines are solid, the technology tools are
ready and solutions are found to the problems (Mougayar, 2016).
The introduction of blockchain technology in the supply chain area of industry
leaders could speed up the dissemination process. Moreover, businesses will
gain substantial advantage over their slower competitors by the rapid introduction
42
of this technology now, before being commonly adopted (Curtis, 2018;
Villalmanzo, 2018). Failure to recognize the possible utility of blockchain
technologies or upcoming challenges stops market leaders from implementing
big pilot programs in their supply chains, reducing the broader diffusion.
Many questionnaires have been conducted by several organizations, in order to
better understand the key challenges and concerns of the industry leaders in
incorporating this technology in their operations (Villalmanzo, 2018). A survey
was carried out in April 2017 by Chain Company In-Sights to address these
questions. This is the first in a series of ongoing studies on blockchain creation
and usage in the supply chain area (DeCovny, 2017).
The questionnaire was intended for international supply chain experts, including
consultants, travel companies, technology providers and advisors (Villanmanzo
2018). Consequently, the survey indicates that businesses are fairly wellinformed about blockchain, with over a third of respondents adopting this
platform. SC technical use cases primarily concentrate on SC stock monitoring,
knowledge sharing, payment processing and buying, all targeted at increased SC
transparency and traceability (DeCovny, 2017; Villanmanzo, 2018).
The key advantages alluded to by the respondents are transparency, reduced
processing costs, trust between the SC partners and security. While the
blockchain in SCs could theoretically be applied, the blockchain implementation
is already met with many obstacles. Budget, inter-operability and lack of
requirements, a lack of understanding / consciousness, a lack of value
production, lack of industrial support and regulatory concerns were the key
obstacles found by the companies surveyed (DeCov-Ny, 2017).
Finally, businesses were asked about the prospects of potential of the blockchain
connectivity and the complementary technologies available. As to be predicted,
Big Data, Scientific Analytics, IoT and Cloud Computing are the innovations most
likely to influence the decision making of the company (Villalmanzo, 2018). The
findings of the study underline the competitive value of blockchain technologies
in the field of supply chain. The initial process of implementation is still in progress
(DeCovny, 2017).
43
7. CONCLUSIONS
The aim of this chapter is to present the research findings and the contributions to the
theory. In accordance with the research goal, the findings of the analysis are discussed
and some recommendations for future studies are made.
The study started with the reviewing of the theory in order to find relevance to the
research and set grounds for qualitative data collection and further literature review. The
research utilizes a case study which was done to navigate the success of track and trace
of a product in outbound logistics and understand the technologies used in the process.
Additionally, an understanding was developed on the working practicalities of the
process along with the correlation between the information flow and physical flow of the
product’s journey. The literature review on the technologies were iterated with practicality
in the case study.
Since blockchain technology has the potential to provide similar solutions with better
efficient process, a framework was proposed based on the case study. The reason to
carry out research on blockchain technology was largely due to its traits like
transparency, security and trust. The proposed framework is neither tested nor
investigated in the course of the study. However, the proposed framework is user-friendly
and is welcomed to supply chain role players to further investigate.
The research is now able to answer the questions formulated in the beginning. The
reader can get to know the current scenario of the digitalized supply chain and especially
in outbound logistics. Further, the case study assists the reader to have idea on the
various technologies available in the tracking and tracing of a product and understand
the practical implementation in real life. Based on this understanding, the concept of
blockchain is introduced and the reader is presented with a framework which implements
the blockchain technology in outbound logistics tracking and tracing solution. At this
juncture, the reader is introduced to some of the pilot test done in tracking and tracing of
a product/pallet/container using blockchain technology. The idea behind this to make the
reader aware of the development undertaken in this field and validate the usability of the
framework.
The study makes an attempt to address the issues raised by Saberi et al., (2018)
regarding the development of frameworks to that can make the supply chain
management more efficient. The research also projects the application of blockchain
technology in supply chain as a value adding entity. However, the greatest constraint is
44
the lack of knowledge and research in this field. The proposed framework in this research
is limited to the tracking and tracing of products in outbound logistics only.
With the recent outbreak of Covid19 and its potential connection to wet markets, this
paper can provide a basic understanding of the use of blockchain in tracking and tracing
of items, especially food items. This outbreak has also changed the buying nature as the
dependency on e-commerce has increased. This provides an opportunity for companies
to test the track and trace functionality of blockchain in order to gain customer
confidence. There is no doubt that the application of blockchain in the supply chain
industry has immense potential and the benefits can be shared accross the supply chain
network.
45
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