Blockchain Characteristics and Green Supply Chain Advancement

Blockchain Characteristics and Green Supply Chain Advancement

Mahtab Kouhizadeh (Worcester Polytechnic Institute, USA) and Joseph Sarkis (Worcester Polytechnic Institute, USA)
DOI: 10.4018/978-1-7998-2173-1.ch005

Abstract

Blockchain is an emerging technology that has been widely hyped for addressing many business issues. Blockchain's disruptive technological capabilities have the potential to revolutionize global supply chain management processes, and impact green supply chain initiatives. Blockchain technology incorporates four major characteristics: transparency, reliability, smart execution, and tokenization. Blockchain characteristics have implications for green practices in the upstream supply chain, focal company, and downstream supply chain. This chapter provides insights, exemplary practices, and use cases on how blockchain features can enhance green supply chain activities. Research concerns and directions are proposed to advance the discussion and research on this emergent field.
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Introduction

Rapid growth in technological advancement offers new potential and opportunities for supply chain management. Industry 4.0, as a business paradigm that supports digitalization, has substantial influence on supply chain models and practices. Industry 4.0 refers to the use of digital technologies to automate manufacturing processes and building smart factories, also termed smart manufacturing. The evolution of these systems has been occurring for decades as now the information interconnectivity has created a new paradigm for modern manufacturing and supply chain practices (Khan et al., 2019).

Supply chain networks will need to transform. This transformation will include redesign of their governance, manufacturing processes, facility layouts, and location to support Industry 4.0 principles (Hofmann & Rüsch, 2017). Industry 4.0 connects multiple organizations along supply chains and enables flexible and smart process design by incorporating information, cyber-physical systems and Internet of things (IoT) devices that collaborate with each other without human intervention (Ivanov et al., 2018; Liao et al., 2017). Industry 4.0 can enhance environmentally and socially sustainability value in supply chains. Smart data acquired from digitalized processes can help companies build closed loop product life cycles, form industrial symbiosis relationships, and develop sustainable business models that minimize the negative environmental impacts (Bocken et al., 2014; Stock & Seliger, 2016).

Blockchain, also known as distributed ledgers, is an emergent technology that may be an integral development for the Industry 4.0 paradigm (Xu et al., 2018). Transactions generated by autonomous and cyber-physical devices can be recorded on blockchains. Blockchain technology is defined through distributed ledgers that collectively maintain data in a secure and verifiable manner (Swan, 2015). Blockchain ledgers can link all supply chain entities. It can digitalize various types of supply chain transactions, including the history of materials and products, transportation information, financial documents, and agreements (Kouhizadeh & Sarkis, 2018). Green initiatives embedded in transportation and distribution can positively affect the organizational performance (Khan et al., 2018b). Lower transaction costs and enhanced efficiency, security and transparency facilitated by blockchains motivate supply chains to move toward this new technology (Saberi et al., 2019a). These motivations can be substantial, but organizations and their supply chains will face significant barriers and will require enablers to overcome the barriers.

Blockchain technology, although a relatively contested definition with much variation, can generally be associated with four major capabilities: (1) transparency, (2) reliability, (3) smart execution, as well as (4) tokenization. Shared ledgers among authorized participants of the supply chain network enables transparency and traceability of information. Reliability of information is supported by cryptographic structure of blockchain that elevates the level of security; and with multiple organizations or actors validating the information. Smart execution comprises rules and conditions of contracts and triggers the underlying actions in a digital way. Tokenization refers to cryptocurrency application of blockchain that can promote blockchain adoption, incentivization, and further facilitate blockchain governance structure in supply chain networks. These blockchain features can support green supply chain management in many different ways.

Key Terms in this Chapter

Supply Chain Management: The management of the flow of goods, finance, information and services from the original suppliers to the end customers.

Use Case: A practical situation that demonstrates the possible use of an innovation.

Green Supply Chain Management: An integrated design of environmentally-friendly initiatives and supply chain management.

Sustainability: A principle that incorporates environmental, social, and economic consideration into processes and activities.

Supply Chain: A network of companies involved in the supply chain activities that aim to create, sell, and deliver goods and services to the customers.

Blockchain Technology: A digital technology that incorporates distributed ledgers of transactions that are shared among the participants of a given network.

Industry 4.0: A business paradigm that focuses on the full digitalization and automation in the manufacturing industry.

Circular Economy: A principle that refers to manage the practices that seek to minimize wastes, reuse, revitalize, regenerate, and recycle materials and products.

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