Supply Chain Transparency Using Blockchain:

Benefits, Challenges, and Examples

Yao Cui, Vishal Gaur
Cornell SC Johnson College of Business, Cornell University
Sage Hall, Ithaca NY 14853
Email: yao.cui@cornell.edu, vg77@cornell.edu

August 19, 2021

To appear as Chapter 16 in the edited book Global Logistics and Supply Chain Strategies for the 2020s:
Vital Skills for the Next Generation, Editors Rico Merkert, Kai Hoberg. Springer Series in Supply Chain
Management.

Abstract
This chapter studies the emergence of blockchain technology as an effective tool for providing
transparency in supply chains. We first discuss how supply chain applications of this technology differ
from cryptocurrency networks, and identify why this technology is useful in supply chains. We then
classify its applications into three types: improvement of process efficiency, supply chain optimization,
and creation of new and innovative use cases. These three types of applications are differentiated by their
ease of implementation and scope of benefits. For each type of application, we select recent successful
examples and use both interviews with the companies and secondary publications to examine the value
generation potential.

1. Introduction
The importance of transparency in supply chains has never been higher. There are many factors that
contribute towards a growing need for transparency across industries. Perhaps the most prominent of these
is the periodic occurrence of costly supply chain disruptions and shortages due to both natural and man-
made causes. Just in the past 15 months, the COVID-19 pandemic, the semiconductor chip shortage, and
the Suez Canal blockage have reminded companies of the need for greater transparency and visibility in
their supply chains (see, for example, Berger (2021), Boston et al. (2020), and Yaffe-Bellany et al. (2020)
for news coverage of these topics). Another factor is the need for environmental and social responsibility
driven by both consumers and regulatory policies. Companies increasingly need to measure the

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environmental footprint of their products, take steps towards sustainable sourcing, and ensure that there are
no animal or human rights abuses in the areas where they operate their supply chains. Thus, they need to
know how their products are manufactured, transported, and consumed. Further, recent regulations enacted
in developed countries now require drugs and food product manufacturers to provide traceability in order
to improve safety and reduce illnesses.
Blockchain technology, introduced in 2008 for the bitcoin cryptocurrency platform, provides a
method to improve transparency in supply chains. In the last few years, successful proofs of concept of this
technology have been demonstrated for many applications, some of which have gone into production at
scale. Previously, companies had faced technological hurdles in adapting blockchain from cryptocurrency
to supply chain applications. However, these hurdles are gradually being overcome. Indeed, companies
today have templates available to implement blockchain-based solutions through platforms such as
Ethereum and Hyperledger and cloud-computing providers such as Amazon AWS and Microsoft Azure.
Thus, supply chains have emerged as one of the most promising areas of application of blockchain. Annual
surveys published by Ripple provide a glimpse into these trends (see Table 1). Although these surveys are
focused on payment systems, they are useful because payments are an integral part of supply chain
management. The surveys show a steady increase in the number of companies developing and deploying
blockchain for payments and a growing interest in other applications of blockchain, especially in supply
chains (Ripple 2018, 2019a, 2020).

Table 1: Summary data on blockchain adoption in payment systems and other industrial applications from
annual surveys published by Ripple
Survey Year 2018 2019 2020
Number of 676; 21 countries 1053; 21 countries 854; 22 countries
respondents and
countries
% of respondents in 18% in or near 35% in or near 59% in or near production
payments related use production production
cases of blockchain
% of respondents 33% interested in 33% interested in 98% deployed in other areas,
running at least a expanding scope to or seeking to supply chain is the most
payments blockchain other areas expand scope to common (62% in
POC who are other areas production), followed by
exploring other trade finance (51% in
applications production)
Growth stage of Proving value and Moving to Expediting move to
blockchain in feasibility production “go live”
payments

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 In this chapter, we examine evidence of successful applications of blockchain technology in supply
chains in the light of recent developments. The chapter is based on our research in blockchain technology,
a review of industry publications and websites of blockchain firms, and interviews with two companies,
DLT Labs and Dibiz, to understand the status and value proposition of applications. We classify supply
chain applications of blockchain into three stages: the simplest are those focused on cost efficiency and
process improvements, the next layer of applications use blockchain data to improve supply chain
optimization, and the third layer of applications are related to new and innovative use cases. We describe
these developments as follows. We first provide a brief introduction of this technology and highlight
differences between cryptocurrency and supply chain applications in Section 2. Then in Section 3, we
discuss potential benefits of blockchain in supply chain management and challenges associated with its
implementation. In Section 4, we use examples from practice to discuss the three types of applications that
have emerged, the evidence of value and success that is available thus far, and how the use case for
blockchain technology in supply chains is expected to evolve in the future. We conclude with a discussion
of the academic literature and future trends in Section 5.

2. Blockchain
Blockchain is a protocol for users in a peer-to-peer network to conduct secure, tamper-proof transactions
with each other without the need for a trusted third party. This technology was first proposed for the bitcoin
cryptocurrency platform in Nakamoto’s famous 2008 paper, but has gained widespread interest for
applications in other areas including supply chains, banking and finance, real estate, international trade, and
even art. In this section, we discuss the key elements of blockchain technology in the context of
cryptocurrency networks and identify distinguishing aspects that would be needed to adapt this technology
for supply chains. This distinction arises because cryptocurrency networks are entirely digital, whereas
supply chains have both digital and physical components. Moreover, the use cases in supply chains differ
from those in cryptocurrency networks.
We define the elements of blockchain as follows. For detailed definitions, we refer the reader to
Nakamoto (2008) and Antonopoulos (2017).
Digital token: Transactions between participants in a cryptocurrency network are conducted in
digital currencies such as bitcoin. Each bitcoin is a digital token with a unique identifier and value, similar
to the unique number on each dollar bill. Similarly, each participant in a cryptocurrency network has a
unique public key-private key pair, which it uses to transact securely on the network. Encryption provides
anonymity and security, so that no one else can hijack a user’s account.
To adopt this architecture in supply chains, each unit of inventory is tagged with a unique identifier,
which is the digital token associated with that unit of inventory. Inventory can represent a single item or it

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can represent batches of different sizes --- a case, a pallet, a truckload, or a container. Moreover, not only
product inventory, but also documents, such as purchase orders, bills of lading, invoices, and certifications
can be assigned digital tokens and represented on the blockchain. Further, each participant in a supply chain
blockchain network has a unique identifier. Note that a firm that seeks to capture all its supply chain
activities would need to record the movement of inventory in different stages of its operations, including
production, handling, and transportation. Thus, a firm may have thousands of ‘participants’ on the
blockchain corresponding to different workers, machines, sensors, and locations in its network.
Digital transaction: A digital transaction is the transfer of ownership of a digital token from one
participant to another. In a supply chain, every movement or transformation of inventory can be represented
as a digital transaction that is generated when the tag associated with that unit of inventory is scanned by a
participant. For example, when a carton of milk passes through a temperature sensor, this activity can be
represented as a transaction conducted by that sensor. The data associated with this activity would include
the time stamp, the digital token of the milk carton, the identifier of the temperature sensor, and the
temperature reading. Similarly, when two components are assembled together by a worker to create a
finished product, this activity results in a digital transaction containing the identifiers of the components,
the finished product, and the worker. Thus, note that to represent supply chain activities on a blockchain
requires a broad interpretation of ‘transaction’ since actual goods may not change ownership in every supply
chain activity.
Managers need to decide which of the data components associated with a transaction or event to
store on the blockchain. One approach is to store the data components in a database record and include a
hash or encrypted signature of that data record on the blockchain. This approach ensures that the data are
readily available for management tasks, while the blockchain ensures that the data are secure from the risk
of getting modified in the future. Another approach is to store the data directly on a blockchain. This
approach can be useful when only a limited amount of data is captured, such as regarding the movement of
inventory in the supply chain.
Components of a block: A digital transaction is stored on the blockchain as follows. Suppose there
is a transfer of a digital token from Owner 1 to Owner 2. Then, Owner 1 creates the digital transaction by
putting together Owner 2’s public key, the identifier of the digital token, and a hash of the bits in this
transaction and the previous transaction, and then signing this record with her private key. The same method
is used to construct a block of several transactions, i.e., a hash of the current block and the previous block
is created, and then the block is signed by its creator. Hashing a block with the previous block makes it
impossible to overwrite a block in the middle of the blockchain without rewriting all subsequent blocks.
This design, when combined with distributed consensus, makes the data entered on a blockchain

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irrevocable or immutable. As noted above, this method can also be modified to secure the companion data
associated with a transaction without having to store the entire data on the blockchain.
Note that the blockchain, constructed in this fashion, necessarily maintains a complete history of
the transactions among the participants. This storage of transaction data is necessary to demonstrate proof
of ownership in cryptocurrency networks. In supply chains, this same approach helps construct an audit
trail for mitigating risk and ensuring compliance. As a result, the blockchain entails considerable burden on
storage space. However, the blockchain protocol allows methods to reduce the length of the chain by
pruning previous blocks using Merkle Trees.
Distributed consensus: A cryptocurrency blockchain needs a mechanism for a user to know that
the digital token that it is receiving has not already been transferred by the payer to some other user. This
is called the double-spend problem. A blockchain platform uses distributed consensus as a mechanism to
establish proof of ownership and conduct transactions without the need for a trusted third party, such as a
central bank or a financial institution. In this method, each participant maintains her own copy of the
blockchain, so that the blockchain is referred to as a distributed ledger. Participants compete with each
other to add new blocks to the chain by solving a computationally hard puzzle. The participant who solves
the puzzle first publishes her proof of work for verification and adds a new block to the chain. Other
participants update their own chains to the longest chain and the cycle repeats. Distributed consensus is
achieved when more than 51% of the participants confirm a block.
The proof-of-work protocol is permissionless, i.e., it allows the blockchain to be public and the
participants to enter or exit the platform freely. Thus, a blockchain network operating in this manner
provides proof of ownership in a decentralized world consisting of anonymous participants without the
need for a central authority. The robustness of the proof-of-work protocol to different types of attacks is an
active research topic in computer science, see for example, Pass et al. (2017).
In contrast to the needs served by the proof-of-work protocol, supply chains require participants to
have known identities in order to meet the goals of transparency and traceability. Therefore, instead of
allowing unlimited entry and exit, blockchain systems designed for supply chains should be permissioned
and limited to known entities.
Smart contracts: When the data required for a transaction have been codified and secured on a
blockchain, it can be applied to automate decision-making. This is done through smart contracts, which are
computer programs that verify the completion of tasks and take pre-determined actions, such as making
automatic payments. Although smart contracts have been of limited use in cryptocurrencies, they can be
quite useful in industrial applications. We discuss examples of such applications in Sections 3 and 4 below.

3. Benefits and Challenges in Supply Chains

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The main benefit of blockchain for supply chain management is that it can provide a detailed and
irrevocable audit trail of supply chain activities. Since all widgets and all participants on the platform are
given digital identities, the blockchain enables participants to track and trace the transactions associated
with each widget. Although the construction of an audit trail is theoretically possible in the non-blockchain
world, it is practically difficult and costly to record all the material, information, and financial flows
associated with each transaction for future retrieval. A blockchain provides this facility with accuracy and
reliability. However, despite these benefits, the adoption of blockchain technology in supply chains is not
straightforward. In this section, we describe the benefits and challenges in the adoption of blockchain in
supply chains.

3.1 Benefits
Consider an example of a packaged food products manufacturer that produces and supplies baked croissants
to a network of retail stores. Through a blockchain, it is possible to trace the movement of a batch of
croissants through the various stages of the supply chain from raw material procurement to retail sales. This
data is beneficial in many ways:
• Inventory management involves the complex task of keeping track of multiple purchase orders,
shipments, and invoices. Many errors can creep into this process, such as delayed or incorrect
shipments and missed payments. Suppose the firm has a dispute with a buyer firm regarding an
erroneous shipment. Normally, such disputes are resolved manually, which is costly and time
consuming. With traceability of purchase orders, shipments, and invoices, it becomes possible to
resolve disputes much more easily in an automated fashion.
• Suppose the firm needs to execute a product recall. It will be able to quickly and accurately identify
other products in the same batch that might have been contaminated and will also be able to locate
them in the network.
• The traceability data can be applicable in supply chain financing. To see this, suppose the firm
needs to obtain a working capital loan from a bank against an order. The firm will be able to
demonstrate the receipt and fulfillment of the order to the bank. Since the data on a blockchain is
immutable, it provides reliability for contracting with the bank. It can enable the firm to access loan
funds more readily and can also reduce the lending risk borne by the bank.
• Finally, the blockchain data can provide an infrastructure backbone for supply chain optimization.
From this data, the firm would be able to track the remaining shelf life of each batch of inventory.
Thus, the firm can reduce food waste by identifying batches that are closer to expiration and
allocating them to high volume stores or potentially selling them at a markdown. Sophisticated

6
 perishable inventory models can benefit from such information, which is currently hard to obtain
in most supply chains in practice.

Integration with new sources of data: The above benefits are based directly on supply chain
transaction data. Additionally, supply chains now have the ability to collect not only transaction data but
also supplementary data regarding the condition of inventory and processes. Agricultural sensors are used
to monitor soil quality and irrigation, and IoT devices in manufacturing and logistics can monitor the
running condition of machines, worker parameters, inventory storage conditions, greenhouse gas emissions,
and quality attributes of products. Moreover, at a macro-level, supply chain network data on certifications,
disruptions, and regulatory disclosures is becoming more readily available. For example, the European
Space Agency collects and disseminates satellite data on a wide range of metrics including land
management, marine environment, and climate change (European Space Agency 2015). Similarly, the
World Wildlife has set up its own blockchain platform, titled OpenSC, to track the sourcing of products
from illegal fisheries and areas with animal rights and human rights abuses (World Wildlife Fund 2019).
When such new sources of data are incorporated into a supply chain traceability system, they can be
beneficial in both downstream and upstream operations. This can enable companies to achieve societal
sustainability goals as well as commercial objectives such as improving agricultural yield or manufacturing
quality.
Comparison with alternative technologies: A common question is whether a blockchain is
necessary for traceability in supply chains or if centralized databases in a non-blockchain world can provide
the same benefits. In our view, centralized databases are indeed capable of providing these benefits, but
there are practical challenges. Different companies and agencies use different means to store data, ranging
from Excel spreadsheets to paper trails to ERP systems. The definition and storage of data across these
methods is often not standardized, which makes it difficult to achieve traceability across systems. For
example, even within the same organization, there often are multiple instances of Enterprise Resource
Planning (ERP) systems (Gaur and Gaiha 2020). Further, small scale farmers and producers at the source
of a supply chain may have no means to store data. In such a situation, constructing a trace of a product to
its source is extremely difficult. A blockchain system can make it possible to gather and record data from
different systems without requiring changes to those systems.
Moreover, since a blockchain provides a distributed and immutable record of events, it can help
validate the accuracy of data and generate trust among supply chain partners. This feature is especially
useful in applications that deal with regulatory subjects such as certification, dispute resolution, or
contracting. For example, a bank can participate on a supply chain platform to verify transactions before it
issues new collateralized loans to a firm.

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3.2 Challenges
Many industry experts and academic scholars have remarked on the hype associated with blockchain (e.g.,
Higginson 2018, Iansiti and Lakhani 2017). Iansiti and Lakhani (2017) describe blockchain as a
foundational technology rather than a disruptive technology, and predict that the industrial adoption of this
technology could take decades. They compare it to TCP/IP (Transmission Control Protocol/Internet
Protocol), which laid the foundation of the internet and underlies most of the internet services we use today.
By drawing this parallel, they propose that the industrial adoption of blockchain could be classified into
four types of applications: single-use, localized, substitute, and transformative. Bitcoin payments are an
example of single-use applications, whereas self-executing smart contracts would be transformative. Gaur
and Gaiha (2020) further studied supply chain pilot projects across a cross-section of companies and found
that blockchain could solve long-standing supply chain problems but its successful adoption would require
addressing challenges related to governance, consensus protocol, and security. Such challenges are
important for firms to overcome to successfully adopt blockchain in their supply chains. Thus, we discuss
them in this section.
Consensus protocol: The capacity of a blockchain network depends on the number of transactions
in a block and the rate at which new blocks can be added. The latter is limited by the consensus protocol to
improve reliability under risk of attack. The puzzle-based proof-of-work protocol to achieve distributed
consensus is not only not suited to permissioned blockchains, but is also too slow for the volume and rate
of transactions in a supply chain. To illustrate this, Figure 1 shows the historical number of confirmed
transactions per day over a three-year period from July 2019 to July 2021 on bitcoin, which is the largest
cryptocurrency network. The highest number of transactions per day was 500,000, which translates to 5.8
transactions per second. In contrast, the pharmaceutical industry conducts 33-55 million supply chain
transactions per day on average. Therefore, a proof-of-work protocol may not fit the requirements of supply
chains, and may have to be replaced with simpler protocols that can provide a faster transaction rate without
sacrificing security and can also avoid the energy consumption of a proof-of-work protocol.

Figure 1: Total Number of Confirmed Bitcoin Transactions Per Day During July 2019-July 2021 (Data
Source: https://www.blockchain.com/explorer)

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 Data governance: Implementing a blockchain does not absolve a firm of the need to maintain the
security of the physical (real) supply chain. Although a blockchain provides an immutable digital record,
participating firms still have to ensure that malicious products or components are not introduced into the
supply chain and that the data entered on the blockchain accurately mirrors the activities in the real supply
chain. This requires a system of checks and balances to verify the accuracy of the blockchain data compared
to the physical supply chain. For instance, data reliability could be improved by replacing manual data entry
with ‘internet of things’ (IoT) devices that are tamper-proof and automatically record data.
Data access control: Besides improving governance and reliability, supply chain managers would
also have to make other design decisions to construct a blockchain for their businesses. They have to decide
what data to include on the blockchain, what databases to associate with the blockchain to store
supplemental information, and with whom to share access to the blockchain and associated data across the
supply chain. Answering these questions would require creating and testing new data coding standards and
access protocols.
Data integration: Consider the previous example of a manufacturer of baked croissants. To assess
the remaining shelf life of each unit of inventory in the warehouse, the manufacturer would need to integrate
inventory location data from sensors in the supply chain with shelf-life data from manufacturing, which
might be stored in a separate database. The manufacturer would also have to determine the value of sharing
this information with its retail customers. Consider another example of a firm that uses temperature sensors
as IoT devices to measure temperature conditions in a cold storage and record the data on a blockchain.
This data would have to be integrated with inventory location information on the same or other blockchains
in order to assess the condition of each unit of inventory. Thus, to apply blockchain technology in supply

9
chains, firms have to not only adapt the technology to supply chain processes but also create new standards
and applications for sharing and using the recorded data.

4. Examples of Applications
In this section, we illustrate supply chain applications of blockchain with examples. We selected these
examples based on a review of industrial publications and websites of blockchain firms, and spoke to two
companies, DLT Labs and Dibiz, to gather further insights. We classify applications into three stages of
value addition as shown in Figure 2: The first stage is to improve process efficiency in existing tasks by
making data visible across the layers of the supply chain. The next stage is to optimize decision-making
using traceability data. Finally, the third stage is to use traceability to meet regulatory and sustainability
targets and create new value-added products. We next discuss these application cases.

Figure 2: Stages of Value Addition of Different Types of Blockchain Applications in Supply Chain
Management

New
and
innovative
use cases

Profit increase through

supply chain optimization

Cost reduction through process efficiency

4.1 Cost Reduction through Process Efficiency

Supply chains are exceedingly complex, requiring vast amounts of data, granular decision-making, and
coordination. Performing these tasks entails processing costs and is rarely flawless. Blockchain can be
useful in supply chain management for reducing manual tasks, making it easier to discover and resolve
execution errors, and increasing the speed of decision-making through faster information availability. We
regard this as the first stage of blockchain applications because it has the potential to provide tangible and
immediate gains in existing processes without further innovation. To illustrate these applications, we
discuss two examples of pilot tests and implementations conducted by companies.
Our first example relates to trucking logistics for Walmart Canada, which uses more than 70 third-
party freight carriers moving 500,000 loads per year to supply products to its stores; see Berthiaume (2020)
and Smith (2020) for details. Each load results in an invoice whose charge is calculated from close to 200
variables, such as demurrage charges that are applied when a truck is held up at a location longer than the

10
allotted free time. Most of these variables are based on a paper trail, which can lead to conflicting pieces of
information. About 70% of the invoices are disputed, resulting in costly manual processing and delayed
payments.
Walmart Canada joined with DLT Labs and Bison Transport to implement a blockchain-based
system to solve this problem. The system uses GPS devices, geofencing, temperature sensors, timestamps,
and other IoT devices to track the movement and condition of freight and records this information on a
blockchain. Freight carriers then collate all the data and generate a verifiable invoice, eliminating costly
and error-prone manual steps. Walmart Canada reports that this system has been implemented at most of
the freight carriers, and as a result, invoice disputes have declined by 97% and payments to freight carriers
are being made faster. The company reports savings of about $30 million in the cost of manual work
required to resolve disputes and due to the benefits of real-time visibility into planned and unplanned
shipping costs. Carriers have also saved cost and improved their balance sheets due to accelerated payments
and reduced administrative overhead. To implement this system, Walmart Canada required freight carriers
to install sensors for data collection and a permissioned blockchain solution was created by DLT Labs on
HyperLedger Fabric. We spoke with Loudon Owen, CEO of DLT Labs, and learned that this effort has
resulted in spillover benefits for freight carriers, such as access to lower cost financing based on Walmart’s
superior credit rating and the capability to expand this system to other customers.
Our second example relates to cross-border payments in supply chains. Such payments require a
cumbersome process through multiple intermediaries in the banking system, which can take 3-9 days
(Ripple 2019b). First the buyer firm makes the funds available to its bank. The funds are then sent to the
supplier’s country through correspondent banks. Finally, the supplier’s account is credited. Each of these
steps takes at least one day, and the cost of liquidity required to fund the transaction falls on the buyer or
the supplier. To see this, suppose that a buyer firm makes $100 million of cross-border payments in a year,
each payment requires six days, and the cost of borrowing is 10%. Then, the firm needs to borrow $1.64
million of cash (= $100 million x 6 days / 365 days) to execute these payments, resulting in an annual
interest cost of $164,000.
Ripple has created a blockchain-based global payments network, called RippleNet, as an alternative
to this traditional system of international payments to improve the speed and reduce the cost of transactions.
The network is based on a native digital asset, XRP. A financial institution seeking to send money from
country A to country B buys XRP in the currency of country A, then sells XRP to get funds in country B
in the local currency. This simpler process cuts down the cost and time of cross-border transactions
dramatically, thus releasing costly liquidity from the system. This method is used not only in supply chain
payments, but also by the online gig economy platform Freelance.com to make small-scale payments to
freelance workers across the globe.

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 The above examples illustrate the value of blockchain in improving execution efficiency and
reliability in supply chain processes. There can be many other such opportunities, such as in international
trade (see, for example, TradeLens developed by IBM and GTD Solution, Inc.) or in mitigating the
nefarious problem of inventory data inaccuracy studied in the academic literature in operations management
(Raman et al. 2001).

4.2 Profit Increase through Supply Chain Optimization

We consider the next stage of applications to be those that leverage the greater data transparency from a
blockchain to optimize decisions. We illustrate this use case with the example of Dibiz, a blockchain-based
startup firm based in Singapore, which has implemented a platform for providing traceability in the palm
oil supply chain. In our search, we have also come across other recently emerged blockchain platforms that
aim to improve supply chain traceability, such as OwlTing, Vechain, Bext360, Skuchain, and BlockVerify.
Dibiz collects and maintains transaction-level data across all the links of the palm oil supply chain:
farmers à dealers à mills à refineries à consumer packaged goods (CPG) companies. The data recorded
on the platform can be used to verify the quality and source of palm oil and to make fair payments to all
stakeholders. Dibiz discovered that dealers perform a key logistics task in this supply chain by picking up
palm fruit bunches from farmers and transporting them to mills. Because of limited information sharing in
the supply chain, it is challenging for dealers to optimize the scheduling decisions for pickups and deliveries
and to allocate truck capacity across different tasks. The cost of these inefficiencies falls not only on dealers
but also on farmers and mills in terms of wasted labor capacity and potential deterioration of fruit quality.
In fact, this problem is similar to that described in the classic case study on National Cranberry Cooperative
(Miller and Olsen 1983). The blockchain solution has enabled dealers to optimize the scheduling of pickups
and deliveries by leveraging enhanced information visibility. One benefit of optimization is a reduction in
the waiting time of trucks at the weigh bridges of mills and refineries, which lowers both operating cost and
greenhouse gas emissions. Another benefit is an improvement in the quality of processed fruit, thus
increasing its oil extraction rate (OER). Dibiz estimates that for a mill producing 5,000 tons crude palm oil
per month, a 0.1% increase in OER can potentially increase revenue by approximately USD 65,000/year
considering the current market price of crude palm oil at USD 1,100/ton.
While Dibiz provides one example, information visibility is known to be valuable in the
optimization of many types of supply chain decisions. Gaur and Gaiha (2020) report examples from two
manufacturing companies that see value from transparency for optimizing ordering and inventory allocation
decisions in the upstream supply chain. Components and capacities can be allocated to orders placed by
customers as soon as an order is received with full transparency and without the risk of a double-spend
problem. This can improve supply chain coordination and reduce uncertainties. Other applications of

12
optimization include managing perishable inventory and reducing food waste using data on product shelf
life.

4.3 New and Innovative Use Cases

Our third stage consists of applications that generate value by discovering and meeting new customer needs.
In this stage, we include applications that enable companies to track and trace their products for regulatory
compliance and sustainability. We also discuss the example of Ripe.io, a food blockchain startup that has
discovered that blockchain data can be applied to meet new customer needs.
Regulatory compliance and sustainability have emerged as the major drivers of blockchain
adoption in the food and drug industries and in consumer products, more broadly. We highlight three major
examples of such regulations. First, the U.S. Congress enacted the Food Safety Modernization Act (FSMA)
in 2011 to improve the prevention of foodborne illnesses.1 Recognizing that food safety is a shared
responsibility of the participants of the global food supply chain, the Food and Drug Administration (FDA)
has stipulated rules to implement FSMA, including a requirement for firms in the food supply chain to
maintain traceability records of key data elements and critical events related to growing, receiving,
transformation, creation, and shipping of food. The FDA has also sponsored pilot projects over time to
enable companies to test traceability systems, which has led to blockchain-based initiatives such as the IBM
Food Trust (IBM 2019).
The second example is the Drug Supply Chain Security Act (DSCSA) of 2013, designed to improve
traceability in the distribution of prescription drugs in the U.S. to help protect consumers from exposure to
contaminated, stolen, counterfeit, or otherwise harmful drugs.2 The act outlines steps to build an electronic,
interoperable system to improve the detection of such drugs and their removal from the supply chain. The
act also has a deadline of 2023 by which companies must provide such capability. To facilitate the
implementation of the act, the FDA announced a DSCSA Pilot Project Program in 2019, which led to pilots
such as those by a blockchain startup MediLedger to validate the ability of blockchain to meet the track-
and-trace requirements of the act (Hoffman and Hills 2020).3 The creation of this system is ongoing and it
is unclear at this time if the FDA will use blockchain to implement the DSCSA. The European Union

1
Food Safety Modenization Act (FSMA) URL: https://www.fda.gov/food/guidance-regulation-food-and-dietary-
supplements/food-safety-modernization-act-fsma
2
Drug Supply Chain Security Act (DSCSA) URL: https://www.fda.gov/drugs/drug-supply-chain-integrity/drug-
supply-chain-security-act-dscsa
3
Food and Drug Administration. 2019. Pilot Project Program Under the Drug Supply Chain Security Act. URL:
https://www.federalregister.gov/documents/2019/02/08/2019-01561/pilot-project-program-under-the-drug-supply-
chain-security-act-program-announcement

13
introduced a similar regulation in 2011, called the Falsified Medicines Directive, to combat fake medicines
and tampering (McCauley 2020).
Our third example relates to sustainability goals. The United Nations in 2015 created the 2030
Agenda for Sustainable Development, which includes 17 sustainable development goals. There is now a
growing awareness of sustainability among both corporations and consumers. We see examples of
traceability being applied to reduce the environmental impact of the products we consume. To wit,
corporations such as Hewlett-Packard, North Face, and Patagonia are making efforts to manufacture
products using ocean-bound plastics; and CPG brands such as Nestle, Procter & Gamble, and Unilever seek
to improve sustainable sourcing of agricultural products used in their products. Thus, regulations and
sustainability goals are an important driver of the use of blockchain to provide traceability.
Traceability data can also lead to the creation of innovative products. Ripe.io, a blockchain
technology company for agricultural produce, found that the taste of food varies with growing conditions
and that blockchain can enable a food supplier to segment its market by taste (Food Logistics 2017). The
company collects data on variables such as soil, irrigation and temperature in the growing period and
integrates this data with tracking of batches of tomatoes from production to consumption. This enables them
to predict the quality and ripening period of tomatoes as a function of growing conditions and to allocate
produce according to the requirements of different market segments. Ripe.io has piloted this use case with
Sweetgreen. We note that in this type of application, the utility of blockchain is in providing traceable data
for new value-added products. This contrasts with some other uses of blockchain, where the value is in
providing trust for contracting and dispute avoidance. In fact, the parties already trust each other and are
using blockchain as a mechanism to collect data from different systems.
Another type of innovation is to create marketplaces that help match supply and demand in
uncertain markets. During the COVID-19 pandemic, traditional supply chain linkages for agricultural
products were thrown into a disarray due to disruptions. As a result, suppliers had to scramble to find new
buyers for their products and buyers had to look for new sources of supply. Ripe.io created a matchmaking
community to connect local farm and food businesses with institutions, grocery stores, and restaurants to
serve this need. Although a marketplace platform does not necessarily require a blockchain, in this case,
Ripe.io’s blockchain platform enabled the company to utilize its existing traceability and data-sharing
capability to create a flexible and reliable supply chain from local farms to buyers. Similarly, Dibiz is
building a marketplace to connect participants in the palm oil supply chain with each other. The marketplace
leverages the inventory flows that have been recorded on the blockchain and adds price discovery and
matchmaking tools. Such services can improve the incentives for sustainable farming by making it easier
for farmers to demonstrate sustainability and get a better price on their produce. In fact, such data sharing
could become the harbinger of new flexible supply chains in the future.

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5. Discussion
Many companies in the recent years have been testing pilot implementations of blockchain in supply chain
management. In this chapter, we evaluate the status of and evidence of value from such implementations
using a few selected examples. We conclude from these examples that blockchain can indeed be successful
in improving supply chain traceability, and can yield benefits in execution efficiency, supply chain
optimization, and creation of new innovations.
Along with a growth in applications of blockchain, recent academic research in the operations
management discipline has investigated how supply chain operations can be impacted by, and should
innovate with, blockchain. We conclude this book chapter by highlighting the types of topics that are being
addressed by some of the recent academic research in this area:
• Researchers have investigated incentives of firms in a supply chain to form the right blockchain
consortium. Although visibility over actions of supply chain partners can improve operational
decisions, firms may have reservations about sharing their own data, especially when the supply
chain consists of competing firms. Thus, firms may want to form their own blockchains, even
though this would limit the benefit of blockchain. Iyengar et al. (2021) design a transfer mechanism
to resolve such an adoption failure, so that creating a single blockchain for the entire supply chain
would be feasible.
• Supply chain partners can design new contracting terms with blockchain-enabled traceability (Cui
et al. 2020, Dong et al. 2020). For example, once a defective batch is detected, the traceability
information from the blockchain can enable the sellers of agri-food products to accurately identify
which products are affected and need to be recalled. In this case, the seller would only need to
penalize the manufacturers who are responsible for the defective batch. As another example,
manufacturers who face a disruption risk may have to purchase raw materials from a more
expensive supplier when the primary supplier is being disrupted. In this case, blockchain’s
automated data recording through IoT devices can enable the manufacturer to credibly prove the
source of raw materials and implement more flexible wholesale price contracts where the wholesale
price is automatically charged via a smart contract based on which supplier is currently being used
(Cui et al. 2021).
• Researchers have also studied questions related to the design of blockchain, such as the data access
control. For example, by analyzing a supply chain consisting of multiple manufacturers sourcing
from a common supplier, Cui et al. (2021) find that it may not be optimal for all firms to have
access to the entire supply chain’s logistics data. Depending on the supply chain’s production

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 capacity, the optimal design of a blockchain that maximizes the total supply chain profit can be one
that limits the competing manufacturers’ access to the logistics data.
• Research is also ongoing into different types of applications of blockchain. Chod et al. (2020)
investigate the supply chain financing benefits of blockchain and develop an open-source
blockchain protocol that leverages Bitcoin to provide supply chain transparency at scale and in a
cost-effective way. Sumkin et al. (2021) examine the benefits of blockchain for ethical sourcing in
the diamond industry in a competitive market equilibrium model.
These academic studies aim to provide theoretical guidance for addressing the challenges of
blockchain implementation and ascertaining its value. Thus, we observe that industry development and
academic research are both moving in the same direction of greater application of blockchain in supply
chains.

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