Tracing Blockchain Value

Abstract

Modern supply chain and procurement departments are faced with a lot of challenges. Supply chains have become global, resulting in complex networks. With access to more information customers have access and have become more demanding on issues such as quality or sustainability. This has led to an increased interest among different companies in improving their traceability capabilities. As this requires companies to collect data across their entire supply chain, new technologies are being explored to make this change happen. One of these new technologies is blockchain. It rose to fame in the financial industry, but it is certainly a topic of current interest in supply chain management as well. Blockchain is a way to store and share data in an immutable ledger by decentralizing consensus, without a central record-keeping authority. This thesis is about the use of blockchain in supply chain traceability use cases and the comparison between blockchain-enabled traceability systems and traditional, centralized systems. Through literature review and a case study, which involved expert interviews and a survey, the main research questions from this thesis was answered: Which food supply chain traceability use cases are suitable for the application of blockchain-enabled systems? In order to answer the main question, the following sub-questions were addressed: • What drives the demand for traceability in food supply chains? • How do traceability systems based on blockchain compare to centralized systems? • Which criteria make a use case suitable for blockchain technology? • Which challenges exist for successful traceability system implementation? Based on the literature review, many studies suggests that food safety and quality are the primary drivers for an increased attention to traceability. However these suggestions were not found in this study. The needs for traceability at Heineken are mainly related to consumer demands and operational efficiency. Sustainable or local sourcing and decreasing costs related to mismatched information between Heineken and its suppliers or customers are dominant elements in the case study. In these situations, trust in data integrity is critical, which leads to certain managers looking to increase their traceability capabilities. Next, blockchain traceability systems were compared against traditional, centralized systems to answer research the second research question. Blockchain systems outperform centralized systems on Transparency and Integrity, Trust and Data Quality. Although technologically the two implementations are distinct, it was found that in its usage the two are not that different. It was never mentioned that blockchain systems could fulfill use cases that traditional systems could not handle with regards to supply chain traceability. This study found that blockchain use cases in supply chains should adhere to the following criteria: • The network is decentralized, meaning it involves multi-tier suppliers and/or distributors. • A high degree of proof of integrity is required. • There is a desire to obtain a single view / version of the state of the system. • Data sovereignty is essential. These criteria were found to be most applicable to Product Provenance, Sustainable Sourcing or Product Recall use cases. This research focused on understanding the differences between centralized and blockchain-based traceability systems. It has shown that blockchain can provide value to modern supply chains, and that in its usage, it is not radically different from centralized systems. The research presents criteria to decision makers, which provide support in judging the need for blockchain in their applications and reviews the areas where these needs could be and which challenges this presents.