Are smart contracts too smart for Supply Chain 4.0? A blockchain framework to mitigate challenges

Abstract

PurposeSmart contracts are self-executing computer programmes that have the potential to be used in several applications instead of traditional written contracts. With the recent rise of smart systems (e.g. Internet of things) and digital platforms (e.g. blockchain), smart contracts are gaining high interest in both business and academia. In this work, a framework for smart contracts was proposed with using reputation as the system currency, and conducts currency mining through fulfilling the physical commitments that are agreed upon.Design/methodology/approachA game theory model is developed to represent the proposed system, and then a system dynamics simulator is used to check the response of the blockchain with different sizes.FindingsThe numerical results showed that the proposed system could identify the takeover attacks and protect the blockchain from being controlled by an outsider. Another important finding is that careful setting of the maximum currency amount can improve the scalability of the blockchain and prevent the currency inflation.Research limitations/implicationsThis work is proposed as a conceptual framework for supply chain 4.0. Future work will be dedicated to implement and experiment the proposed framework for other characteristics that may be encountered in the context of supply chain 4.0, such as different suppliers' tiers, different customer typologies and smart logistics applications, which may reveal other challenges and provide additional interesting insights.Practical implicationsBy using the proposed framework, smart contracts and blockchains can be implemented to handle many issues in the context of operations and supply chain 4.0, especially in times of turbulence such as the COVID-19 global pandemic crisis.Originality/valueThis work emphasizes that smart contracts are not too smart to be applied in the context of supply chain 4.0. The proposed framework of smart contracts is expected to serve supply chain 4.0 by automating the knowledge work and enabling scenario planning through the game theory model. It will also improve online transparency and order processing in real-time through secured multitier connectivity. This can be applied in global supply chain functions backed with digitization, notably during the time of the pandemic, in which e-commerce and online shopping have changed the rules of the game.