Timing of blockchain adoption in a supply chain with competing manufacturers

Abstract

Recent improvements in consumers' awareness of product traceability have revealed the disadvantages of traditional supply chain traceability systems. Traditional traceability systems are centralized, and the data that they use are vulnerable to tampering, resulting in a low level of consumer trust. Blockchain technology, as a distributed ledger, can solve these problems. In this study, we examine the blockchain technology introduction decisions of a supply chain involving two competing manufacturers and a single retailer, and their effects on supply chain performance. We find that manufacturers should adopt blockchain technology only when consumer sensitivity to blockchain technology exceeds a certain level and manufacturers who can introduce blockchain technology first are more likely to reap big gains in profits. Regarding the unit verification fee that the retailer pays to the manufacturer when introducing blockchain technology, the manufacturer subsidizes this fee to the retailer in the form of lower wholesale prices. In other words, there is no additional wholesale cost to the retailer for blockchain technology-based products. The results of this study provide guidance for supply chain members’ market practices.