Abstract
Supply chain networks have grown in complexity and size due to increased globalization leading to a variety of challenges and opportunities for improvement. Optimizing inventory levels and adjusting replenishment policies have significant effects on the operational performance and profitability of supply chains. Vendor Managed Inventory (VMI) is a mutually beneficial arrangement between supplier and buyer, where the supplier is responsible for making inventory and replenishment decisions based on buyers’ inventory status. Potential benefits of VMI include reducing inventories, enabling information sharing, eliminating safety stock, and reducing purchasing related costs across the supply chain. In today’s supply chains, VMI operations face critical challenges related to data integrity, transparency, traceability, and single point of failure due to its centralized architecture. Blockchain technology is a distributed ledger that ensures a transparent, safe, and secure exchange of data among supply chain stakeholders. The advantages of adopting blockchain technology for VMI operations in a supply chain include decentralized control, security, traceability, and auditable time-stamped transactions. In this paper, we present a blockchain-based approach using smart contracts to transform VMI supply chain operations. We propose a generic framework using Ethereum smart contracts and decentralized storage systems to automate the processes and information exchange and detailed algorithms that capture the interactions among supply chain stakeholders. The smart contract code was developed and tested in Remix environment. We present cost and security analysis incurred by the stakeholders in the supply chain. Adopting a blockchain-based solution to VMI operations in supply chains is economically viable and provides a streamlined, secure, trusted, and transparent mode of communication among various stakeholders.
Highlights
Chain management is a core business function responsible for the movement of goods and services across several stakeholders
We propose an Ethereum blockchain-based solution which captures the key interactions between supply chain trading partners using an Ethereum smart contract and a decentralized storage system
We provide a cost and security discussion of the proposed system to show the feasibility of implementing our solution
Summary
Chain management is a core business function responsible for the movement of goods and services across several stakeholders. The exponential increase in data availability and implementation of technology-driven solutions results in effective inventory and replenishment policies leading to massive improvements in products and information. Vendor Managed Inventory (VMI) is a strategy that has been adopted by vendors to optimize supply chain processes as it offers many beneficial advantages to diverse stakeholders. Under VMI, the vendor assumes full responsibility for inventory strategy, execution, and delivery management of stock to the customer This process eases customers the burden of constant tracking and replenishment of stock while allowing suppliers full freedom in devising the most cost-effective and efficient method of product supply. Blockchain synchronizes VMI operations between all stages of the supply chain as planning and execution processes are made transparent It can automatically generate alerts when stakeholders violate predefined conditions for replenishment stated in smart contracts.
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