Private blockchain in Supply Chain Management, the next
step?
Exploring obstacles and enablers for implementation
Master thesis
By: C. R. Strikwerda
Private blockchain in Supply Chain Management,
the next step?
Exploring obstacles and enablers for implementation
Author: C. R. Strikwerda
Student No: S2955180
Email: c.r.strikwerda@student.rug.nl
Date: July 20, 2020
Study: Msc Supply Chain Management
First supervisor/ university: Dr. Ir. S. Fazi
University of Groningen Second Supervisor/ university: Dr. O. I. Kilic
University of Groningen
Word count: 11966
Abstract
BC is a digital information recording method, with instant visibility of information to all participating parties and ensures a single version of the truth. By using BC in SCM, benefits like transparency, traceability, and non-mutability can be gathered, resulting in maximal compliance and minimal risk. However, empirical evidence lacks in the available literature of BC in SCM. This research investigates the implementation of BC in SCM empirically by conducting semi-structured interviews in three different cases to identify obstacles, enablers, and solutions to obstacles. Being aware of the obstacles, enablers, and solutions may contribute to a successful implementation of BC in practice. The obstacles that have been found are divided into intra-, inter-organizational, system-related, and external obstacles.
Acknowledgements
Table of contents
1. Introduction ... 5
2. Theoretical foundation ... 7
2.1 Blockchain, the next step?... 7
2.2 Barriers of BC ... 8
2.3 Authenticity of information ... 9
2.4 Integration of information systems and ERP ... 10
2.5 Smart contracts ... 11
2.6 Conceptual model and research questions ... 11
3. Methodology ... 13
3.1 Research method ... 13
3.2 The case selection ... 14
3.3 Data collection ... 15
3.4 Data analysis ... 16
3.5 Validity and reliability ... 17
4 Findings ... 19
4.1 Influencing factors ... 19
4.1.1 Systems related factors ... 19
4.1.2 External factors ... 19
4.1.3 Inter-organisational factors ... 20
4.1.4 Intra-organisational factors... 22
4.2 Solutions ... 26
4.2.1 Solution to misinterpretation of blockchain ... 26
4.2.2 Smart contracts & Oracles ... 26
4.2.3 Business management approach of implementing BC ... 27
4.2.4 Demarcate the process ... 28
4.3 Comprehensive model of findings ... 31
5 Discussion... 32
5.1 Discussion of findings ... 32
5.2 Limitations and future research ... 34
6 Conclusion ... 36
7 References ... 38
8 Appendix ... 44
Appendix B: Code managers ... 49
Appendix B1: code manager of solutions ... 49
Appendix C: Table of results Obstacles ... 50
Appendix D: Table of results solution ... 52
1. Introduction
Blockchain (BC), introduced in 2008 (Nakamoto, 2008), is one of the most significant digital disruptive innovations in information and communication technologies (Frizzo-Barker et al., 2019). BC is a digital information recording method that creates instant visibility of information to participating parties. It ensures a single version of the truth, due to linked blocks, which are secured by cryptography (Risius & Spohrer, 2017; de Leon et al., 2017; Inasiti & Lakhimi). Dickson (2016) defines it as: “Blockchain transforms the supply chain and changes the way we produce, market, purchase, and consume goods.”
There are two different types of BC: Private BC and Public BC. In public BC, decentralized authority and anonymity are of significant importance. This form of BC has been introduced and gained attention through the Bitcoin (Nakamoto, 2008). However, in supply chain management (SCM), the opposite of anonymity and decentralization is necessary, to do business and track and steer their complex processes (Iansiti & Lakhani, 2017). Therefore, in private BC, identity and traceability are critical (Litke et al., 2019; Banerjee et al. 2018). This identity and traceability make private BC an opportunity for SCM. BC helps to disclose information by establishing a collaboration between organizations in a SC or within an organization. Consequently, the increase in traceability and visibility, regarding disclosing information, contributes to long term competitiveness (Bartlett, Julien & Baines, 2007). The focus of this research lies on the manufacturing industry because private BC is especially valuable due to the increasing importance of traceability and visibility from customer and SC-partner.
Zhao et al. 2016). One research, being the first of its kind, has combined barriers of BC-implementation, in sustainable supply chain management (Saberi et al., 2018). However, this research is also in need of empirical evidence. Empirical evidence around private BC can finally be gathered since private BC has now been increasingly implemented in SCM. Besides the empirical evidence, Saberi et al. (2018) do not focus on private BC. This study will empirically focus on validating obstacles and enablers of private BC in SCM, found in literature, and exploratory add new factors that have influence. Besides exploring and testing obstacles and enablers of BC in a different context, there forms another gap in the literature, concerning the solutions to the obstacles of private BC implementation in SCM. No scholar has yet suggested multiple solutions for BC-obstacles. Even though, knowledge of solutions is crucial to overcome or prevent obstacles and successfully implement BC. These missing solutions form a gap in the literature and elaborate on the goal of this paper by not only highlighting the implementation of BC in SCM but also providing solutions to obstacles to successfully implement BC in SCM. This results in the following research questions:
RQ1: What are the obstacles & enablers of successfully implementing private BC in SCM? RQ2: How to solve or prevent the obstacles of private BC implementation in the SCM?
Through qualitative multiple-case study research, new obstacles, enablers and solutions to obstacles are found and extensively discussed. By conducting a multiple-case study in different manufacturing firms with similar SC’s, the obstacles and enablers are tested. New factors that have come across in practice are explored, validated, and added into a comprehensive model. In this way, this research contributes to preparing companies one step more for the implementation of private BC and facilitates the successful implementation of BC in SCM.
2. Theoretical foundation
This section shows the state-of-the-art information of the available literature on BC and forms a comprehensive conceptual model, based on the model of Saberi et al. (2018), with additional factors that are not proven to have a positive or negative influence on BC implementation in SCM.
2.1 Blockchain, the next step?
Public BC was implemented first in the financial field of cryptocurrencies (Nakamoto, 2008). However, scholars have identified that BC is suitable not only for the financial field but also in other fields such as SCM (Hackius & Peterson, 2017). The traceability and visibility of crucial information that BC provides are essential to long-term competitiveness in SCM (Bartlett, Julien & Baines, 2007). Besides this, in order to tackle the increase in the complexity of SCM, BC brings the possibility to track and steer these complex processes (Iansiti & Lakhani, 2017). In the research of Kshetri (2018), the role of BC in meeting SCM goals is investigated in a case study. This well-cited research can be derived from what the benefits of BC are. Once implemented successfully, the benefits that BC brings are mainly concerning security, traceability, and efficiency.
Transparency throughout the supply chain is difficult to achieve but also the essential improvement area in supply chain management and logistics (Abeyratne & Monfared, 2016).
2.2 Barriers of BC
The paper of Saberi et al. (2018) forms the foundation of this study since it is the first to explain BC in SCM conceptually. One part of the research considers the barriers of BC adoption in sustainable SC. These barriers are based on literature concerning previous digital disruptions, which are similar to the BC technology. Even though the framework is built using literature, Saberi et al. (2018) state that empirical evidence is needed to support this framework. Saberi et al. (2018) divided the barriers into four different fields: Inter-organisational barriers, intra-organizational barriers, systems related barriers, and external barriers.
The intra-organizational barriers are concerned with the internal actions of an organization. For example, top management support is of significant importance and commitment to management (Fawcett, 2006); otherwise, it forms a barrier to financial decisions and resource allocations. BC entails hardware costs and IT tools that impact a company’s financial situation (Mougayar, 2016; Abeyratne & Monfared, 2016). As a disruptive technology, Blockchain can require a different culture in the organization; this can result in resistance and difficulties (Mendling et al. 2017; Jharkharia & Shankar, 2005). Besides this, the limited expertise, knowledge, and tools within an organization can be seen as a potential barrier since the application of BC in SCM is limited (Mougayar, 2016; Mangla, Govindan & Luthra, 2017).
The system-related barriers are based on the BC itself and its functioning. Besides the acquisition of new IT, Fawcett, et al. (2006) and Gorane & Kant (2015) state in their studies that members of the BC should all have access to the information to grasp the benefits of BC. This full access can result in an obstacle of access limitation to information within a supply chain. Data manipulation is already a significant concern in SCM (Mishra, Raghunathan & Yue, 2007). It can form an obstacle for implementing BC in SCM because the information in a BC should be the correct real-time information. In a BC, information cannot be removed or changed; this is called the immutability of information. It averts the falsification of data (Tian, 2017). Therefore, it is essential to have real information instead of manipulated information.
The external barriers of BC implementation in SCM indicate the obstacles that cannot be influenced. One external barrier is the lack of governmental policies since BC is relatively new and immature. The government has not created any policies, which makes it a possible obstacle due to its uncertainty (Mougayar, 2016). Next, external stakeholders’ involvement is an influencing factor since they are not directly economically benefiting from SCM activities. Even though in the future, it will yield them significant benefits in terms of efficiency, their involvement can be lower since it is an indirect effect of a costly implementation. On the one hand, lower involvement can even turn out to resistance, which hinders BC's implementation, making it an obstacle. On the other hand, higher external stakeholder involvement can positively influence the implementation of BC.
2.3 Authenticity of information
immutable information, which in turn can be embedded in the BC in order to gain real-time information. So, if the authenticity of information is high, it would positively impact the BC implementation, since it stores real-time information. However, if the authenticity of data is low, it has a negative impact on BC implementation.
2.4 Integration of information systems and ERP
A factor which has an influence on BC that kept reoccurring in the academic literature around BC (Korpela, Hallikas & Dahlberg, 2017; Banerjee et al., 2018) is the integration of different information systems (IS). The input of BC mostly relies on data from IS gathered by different actors in the SC and the integration of those systems (Korpela, Hallikas & Dahlberg, 2017). However, these IS’s are not always compatible with each other, making integration difficult. It is important to have compatible IS’s between different actors in the SC (Korpela, Hallikas & Dahlberg, 2017). Otherwise, it leads to instability and inaccuracy in the supply chain network. Because the data is not accurate due to inadequate integration, and this makes the SC instable. The instability and inaccuracy make it harder to implement a BC successfully.
In their research, Korpela, Hallikas & Dahlberg (2017) analyzed the readiness of BC integration with SCM. They found that many IS-functionalities were missing in practice like timestamping of transactions, monitoring, and tracking of information flows, which indicates that companies are not ready for BC due to the integration of their IS’s. This missing integration can have a negative impact on the BC implementation because the missing functionalities of IS’s make traceability and visibility in SC difficult. Also, Korpela, Hallikas & Dahlberg (2017) mention that digital supply chain integration needs standards for system interoperability. This implies that intra-organizationally, information systems should first work well together and be compatible before implementing blockchain. To make IS’s integrate intra-organisationally, an overarching IS called Enterprise Resource Planning (ERP) is widely implemented in the manufacturing industry.
an opportunity in SCM because an inter-organizational network of ERP-systems can overcome the obstacle of cooperation and sharing information between companies in the BC mentioned by Saberi et al. (2018). This ERP-network generates real-time data of different BC-members in the SC, increasing the traceability and transparency of the SC.
2.5 Smart contracts
Smart contracts are digital agreements among members in a SC, written in software code and embedded in the BC, where they will self-execute when predetermined conditions are met. A decentralized, immutable record ensures all members of the BC have equal access to the data. This equal access increases the trust among the SC. Smart contracts improve the transparency, traceability, and efficiency of a SC, allowing it to be more agile while strengthening relationships among stakeholders (Saberi et al., 2018; Prause et al., 2019 and Kosba, et al., 2015). Prause et al. (2019) and Kosba et al. (2015) found that smart contracts can enable cooperation between BC members. Smart contracts reduce SCM complexity since the contracts automatically verify and execute multiple business transactions (Prause et al., 2019). According to Prause et al. (2019), by making transactions irreversible and trackable, smart contracts can reduce the transaction costs, such as enforcement and arbitration costs, and yield great potential benefits in terms of lead-times or efficiency. In the literature, smart contracts are mostly used for business transactions (Dolgui, A., Ivanov, D., Potryasaev, S., Sokolov, B., Ivanova, M & Werner, F., 2020) and not for data exchange.
2.6 Conceptual model and research questions
obstacles, since these obstacles first need to be empirically proven. Once these are proven, they will be questioned in practice and supported by literature, in the findings section. This will answer RQ2: “How to solve or prevent the obstacles of private BC implementation in the SCM?”. The research question that will be answered by the comprehensive model based on this conceptual model is RQ1: What are the obstacles and enablers of successfully implementing private BC in SCM?
Figure 2.1. Conceptual model
3. Methodology
The formulated research questions in the theoretical foundation should be answered through a suitable methodology. This chapter explains and motivates the decisions considering the research method, case selection, data collection, data analysis, and reliability & validity.
3.1 Research method
In order to empirically research the obstacles and enablers of BC implementation in SCM, found in literature, a multiple-case study (MCS) has been chosen to prove that the findings are generalizable through the manufacturing industry. The multiple-case study enhances the external validity and helps guard against observer bias (Karlsson, 2016). On the other hand, a single-case study focuses more on getting to the bottom of one particular case because that particular case is interesting to research. However, this paper has the aim to discover and empirically prove different obstacles and enablers throughout BC implementation in different SC’s, not only in one. Within the factors that influence BC in SCM, the focus lies on intra- and inter-organizational factors. The external factors are difficult to influence, and the system-related barriers require knowledge from the information management field.
According to Benbasat et al. (1987), a case study has three outstanding strengths first, that a phenomenon can be studied in its natural setting. Which this study needs, since the topic of private BC in SCM is under-investigated. The case study method also allows the questions of why and how to be answered. These questions provide a full understanding of the nature and complexity of the complete phenomenon. In this study, this full understanding is of significant importance to answer RQ1 and RQ2. Thirdly, the case study lends itself to early, exploratory investigations where the variables are still unknown and the phenomenon not all understood. This exploratory nature helps discover new obstacles, enablers, and solutions, which is the theoretical addition of this article. These new factors will be added to the conceptual model, and the nature of their influence will be investigated and discussed in comparison to the literature.
3.2 The case selection
Multiple cases within three different companies have been investigated to improve the generalizability of the research (Voss, 2002; Yin, 2003). Two of the three companies are manufacturing firms, which have implemented BC in their SC. The reason for selecting two manufacturing firms is that their SC has a similar structure, which improves the generalizability of this study's outcomes over manufacturing firms. Besides the manufacturing firms, another company has been investigated in this study. This company is an IT-consulting company, which implements BC in the SC of manufacturing firms. This selection is because this company has overcome obstacles of BC in SCM, in practice. Since the core business of this company is implementing BC, they have gained significant experience in this field. There is no single unit of analysis by having two different types of companies with their own goals and perspectives. The unit of analysis in the first place would be manufacturing firms that have implemented BC in their SC, and the other unit of analysis would be a company that implements BC. The criteria of the case selection were mostly concerning the stage of implementation of BC, and the case should operate within the manufacturing sector. Different implementation stages were researched; one of the cases had already implemented blockchain in their supply chain, where the other company only implemented a pilot version. In table 1 below, the reason behind choosing this stage of implementation is explained.
Table 3.1 Reason behind case selection
Implementation
stage
Main topic Reason
Underlying
topic
Case 1 Implementor of BC Solutions Experience Explain the obstacles & enablers behind certain solutions and actions
Case 2 Beginning of the implementation
Obstacles The first version of BC has been implemented, but now run into obstacles
Case 3 Implemented fully working BC
3.3 Data collection
In this paper; interviews, are used to collect data. Through conducting interviews, one can identify a full understanding of a phenomenon and personal experiences (Hennink, Hutter, & Bailey, 2011). The interviews' strategy was to test the obstacles and enablers found in literature and to explore new ones in practice such that a comprehensive model can be built. This strategy asked for a semi-structured interview protocol because the questions were partly known beforehand in the interview protocol. There was space and time necessary to explore and probe new influencing factors. The testing factors from the literature were embedded in the interview protocol in appendix A. However, once a new influencing factor was found, the interviewer probed. The factor was validated by questioning the other cases this same factor, to understand if other companies experienced the same factors. The interview protocol for the manufacturing firms can be found in Appendix A1. However, a slightly adjusted interview protocol can be found in Appendix A2 for the implementor of BC. The reason for adjusting the interview protocol is because this company has different goals and experiences. Besides that, the interview's aim with the BC implementor was focusing more on solutions instead of enablers and obstacles; a clear overview of the focus can be found in table 3.1. Once the interviews were taken, it was possible to analyze which factors were supported and which were not. In this way, the conceptual model is empirically validated, and the added factors make the conceptual model a new comprehensive model that helps successfully implement BC in SCM.
Two or three interviews of approximately one hour were taken per case. In this way, the respondent bias is reduced, and more information is gathered (Voss, 2002). To ensure the anonymity of the respondents, table 3.2 is created. Besides the role and number of the respondent, the duration of the interview is given. This information provides an insight in the cases while respecting anonymity. Not all cases were able to answer all questions. Therefore the length of the interview differs per case. The interviewees that were chosen had to meet the following criteria:
- The interviewee should have been participating in the implementation of BC. - The interviewee should have managed the implementation of BC.
Table 3.2 Description of the cases
Company Role Length of interview
Case 1A BC implementor Commercial partner 47:01 minutes
Case 1B BC implementor IT partner 1:12:13 minutes
Case 1C BC implementor IT partner 58:02 minutes
Case 2A Adhesive company Project leader 1:29:17 minutes
Case 2B Adhesive company Resistant employee 17:15 minutes
Case 2C Adhesive company Head of production 20:45 minutes
Case 3A Juice producer Supply chain manager 19:41 minutes
Case 3B Juice producer Project leader 37:51 minutes
3.4 Data analysis
in appendix C, D, and E. The results are incorporated in the comprehensive model, explained in paragraph 4.3.
3.5 Validity and reliability
To increase validity, the tactics of Yin (1994) have been used. The application of these tactics can be found in table 3.3. In this study, three different cases are investigated to gain multiple sources of evidence and form a triangle to increase validity. Besides three different cases, this paper discusses multiple interviews within each case to decrease the respondent bias (Voss, 2002). Within cases, it is also essential to investigate different perspectives. Therefore the interviews were taken with employees from different levels in the organizations. To create a chain of evidence, this study is structured to lead the reader step-by-step through the process. This structure shows the evidence and how it is gathered and analyzed. Besides that, the research process is evaluated, awareness of limitations is created, and suggestions for future research are made.
Table 3.3 Description of validity tactics Tactic Implementation of tactic
Multiple sources of evidence
Multiple sources of evidence are used through selecting not only one company but three companies and combine these results
Triangulation Triangulation is applied through interviewing all perspectives from the companies. The managers, the implementation leaders and the employees. Also triangulation in stage of implementation has been applied, one case which had fully implemented a working BC, another case was in the beginning phase and one company which implemented BC’s as core business had knowledge about different stages.
Chain of evidence A chain of evidence is established by following the case study protocol as mentioned by Yin (1994);
empirically validate obstacles and enablers, since that would only yield one company—the results of this study yield for the manufacturing industry.
4 Findings
This section discusses the main findings and answers the research questions. It is structured as follows. All the influencing factors that have been embedded in the conceptual model of the theoretical foundation are explained in the first paragraph to have positive, negative, or no influence. In other words, whether or not they are an obstacle or enabler and why. Then, the solutions to the obstacles can be found in the second paragraph. Furthermore, in appendix C, D & E are the analysis of the results in more detail explained and whether the influencing factors are supported or not, the reason, quotes, and quotes from the case. In the last paragraph, the final comprehensive model will be explained.
4.1 Influencing factors
This section answers RQ1: What are the obstacles and enablers of successfully implementing private BC in SCM?
4.1.1 Systems related factors
To start, the “Immaturity of technology” has not been supported. The reason for this is that throughout the last years, there has been rising a significant amount of private BC initiatives. Case 1B states: “There have been many initiatives, technologically, in the area of private BC.” So, this can no longer be seen as a barrier to BC implementation.
Next, the “Security/immutability challenge” is neither supported nor removed and corresponds with the “Authenticity of data.” Due to the private BC technology, it is impossible to change data once in the BC. This impossibility to change data is not seen as a barrier if the data is correct and authentic. However, if the BC is fed with wrong data (not authentic), it is impossible to change it and become an obstacle. As case 2A mentioned: “The BC only reads, (…), you feed it with information and the moment you put the wrong information in, you get wrong information out.” So, the “security/immutability challenge” can positively and negatively influence BC implementation in SCM, but it depends on the “Authenticity of data.”
4.1.2 External factors
connected to stakeholder involvement. On the one hand, external stakeholders like the idea of having minimal risk and maximum compliance. This means that the managers can see what happens, and they can anticipate which minimizes risk. Besides that, the external stakeholders now have real-time insight into the KPI’s concerning the organization or SC. On the other hand, some companies are not comfortable with transparency, since it does not fit in their culture. For example, companies are used to “Spread the profit a little bit and you cannot do that with the BC” (Case 1A). So, BC can bring positive or negative stakeholder involvement.
No information was gathered around governmental policies since none of the cases knew the policies that the government made for private BC’s. One thing that was mentioned by case 1A was: “We come across that 95% of the information about BC in the Netherlands is about public BC because that was the first.” This indicates that there is no significant attention paid by society and the government in private BC. From this, a new external factor has been found: “Misinterpretation of BC”. This factor is of significant importance since it was found in all this study’s cases and not in the literature. It came forward that BC-customers or BC-implementing companies think about public BC instead of private BC when they hear the word “Blockchain”. This shows a lack of awareness and knowledge around the concept of BC. Companies fear the public BC because they think their core business secrets and data become transparent and publicly available. However, this is certainly not the case in a private blockchain. Case 1B states: “Public blockchain has no meaning for SC-business and private blockchain is very suitable”. This misinterpretation makes it difficult for companies to share data via BC-technology, even though it provides a long-term competitive advantage. It is more secure than the data sharing method currently used. Therefore the misinterpretation of BC has a negative influence on BC-implementation and forms an obstacle.
4.1.3 Inter-organisational factors
encounter in practice are, for example, Case 3A: “The ERP system generates so much information that it is difficult to extract it. (…) Nevertheless, it is also sometimes difficult to connect it to another system.” This explains that it is challenging to link ERP-systems to other systems. However, “The BC works very quickly, and you can easily add links, which is bad within SAP.” (Case 3B). The more difficulties there are with the ERP systems, the more difficult the implementation of BC becomes.
Another reason why it is so difficult to integrate IS’s or with an ERP system is that they do not make use of the same semantics of data. This means that one data point can have different meanings because it can be interpreted in different ways. All of the cases in this research have validated that they had problems with data formats that negatively affect the integration of IS and ERP systems and negatively influence BC-implementation. So, besides the “Integration of IS and ERP” another indirectly related factor is found called “Data format difficulties”, which causes “Bad integration of IS and ERP”. To illustrate the data format difficulties, case 3B explains: “The biggest stumbling block was, we knew where the data was in our system, (…) However, to cast the data in the correct form. I think that was the most difficult point.” Moreover, case 1B: “Data from another system does not have the same format or has a different meaning. (…) However, you have to agree, you provide me with the data, but for me to work with it, you have to tell me how that data works and what it means.” An enabling factor that makes the obstacle of data format difficulties easier to overcome is to have created a compact structure in the data. This is, most of the time, easier said than done. Case 3B explains that they had trouble understanding the data because it had all different kinds of meanings: “It is therefore important to make and keep the data as compact as possible. Compact in the sense of, you can never add three or four things if they are not needed, then leave them out. Don’t take that with you. Keep the data as lean as possible.”. The factor “Data format difficulties” forms an obstacle because BC works with data from different systems. These systems can be communicating within the company or between companies, which makes this obstacle intra-, and inter-organizational of nature.
in culture among the SC partners. The factor “Cultural differences” should be further investigated in future research among more internationally operating supply chains to prove the positive or negative influence on BC-implementation.
“Cooperation and communication among SC” has a direct positive or negative influence on BC-implementation in SCM. Communication is, and cooperation is inherently connected. Because, once the communication is excellent, the cooperation becomes stronger. However, when the inter-organizational cooperation is not in place, or there is mistrust among supply chain partners, it can form an obstacle for the implementation of BC in SCM. Once the cooperation or communication between the customer and the organization is not in place, for example, the BC will be fed with wrong data because it is not communicated in an intended way. On the one hand, once the cooperation between firms or between customer and organization is in place and agreements have been made, it can positively influence the BC-implementation. On the other hand, once there are no clear agreements or wrong agreements, it can significantly negatively influence BC's implementation because the agreements need to be revised and restructured, which brings along extra work. Case 3B states: “The biggest obstacle is the man. What do I mean by that: communication.” This statement shows that communication is crucial because there is much interpretation involved in cooperation. This interpretation of communication is also supported by case 1C: “There is a certain barrier of interpretation that can be disastrous for delivering the right product (BC).”. This case explains that there is a barrier of interpretation in communication involved in creating a BC. The communication must be right and clear to overcome this interpretation barrier and to have the same goal for every involved employee. This yields for intra-, as well as inter-organizational communication. Bad communication can hinder the cooperation, and in turn, slow down the BC implementation.
4.1.4 Intra-organisational factors
time-case 2C: “Yes it takes a very long time. Nevertheless, that is not surprising because everything takes a long time with software.”. How longer the implementation takes, the more costly the implementation becomes. Case 2A: “I especially mind financially. There is quite a bit of money involved here.”. This forms an obstacle at some moment, for example, case 2C: “Our financial employee (case 2A) says, do not hire the implementors of BC too often because they make the implementation expensive. The other employee who has to work with the BC says, why don’t these BC implementors come every day? So I can work with it.” These quotes show the different perspectives on the financials involved in the BC implementation within a company. From these quotes, the financial employee (case 2A) is concerned about the financial resources, even though they are in the first stage of implementation (Table 3.1). Consequently, this concern affects the BC implementation negatively because the company hires the implementors of BC less often. This means that the BC implementation will slow down. So, there is a paradox created around the financial resources and BC implementation. On the one hand, the BC implementation should not take too long because it requires too many financial resources. On the other hand, once a company stops with investing financial resources in the BC, the implementation slows down or even stops.
“Management commitment and support” has a direct positive influence on BC-implementation. The reason is that once the management is convinced of the benefits that BC brings in SCM, the rest of the employees will follow. Whether this is done via a hard top-down approach or a more charismatic change style, depends on the management. Nonetheless, the employees have to obey and enable the implementation of BC. Case 1A summarizes: “Most importantly, there must be commitment and carrying capacity from above. So if you have a manager or director of a company, they do not drop out very quickly and influence others in the organization.”. This indicates that once there are management commitment and support, it has positive consequences for the BC-implementation.
process, and this brings along resistance from those employees. Besides “Lack of employee commitment”, the factor “IT-resistance” is formed. Together, both factors belong to the overarching factor: “Work floor resistance”. The two factors are separated since they had too many differences, and it was found that they needed different solutions. The factor: “IT-resistance” can be explained by the following statement of case 1A: “Many IT people see BC as a threat as if you were entering their world”. Therefore, the IT-staff resist the implementation of BC. However, IT-employees can also see BC as a supportive system that automates the simple tasks for them, and this enables the implementation. Another enabling factor is to continuously explain the goal of the BC to the employees and let them be actively participating in the process. In this way, the employees understand the goal of the process. One way to realize this is to evaluate the process from time to time with a project group. Case 1A summarizes this: “It is also crucial to have the group together in the meantime, that you evaluate, keep people with you, keep you involved. So also ask permission in advance, can I also contact people if I have questions. Another tip is that you should also give people a glimpse of what they will achieve with it. Because people who work with it need to know that their problem is solved.” To conclude, “Lack of employee commitment” and “IT-resistance” form the overarching factor “Work floor resistance” and together have a negative influence on BC-implementation.
“Knowledge and expertise” has been mentioned in the explanation of “Misinterpretation of BC.” This factor is proven to have a negative influence once there is a lack of it. Once there is, in fact, BC knowledge and expertise, it has a positive influence on BC implementation. Case 1C states: “Certainly there are barriers in knowledge. These can play between IT-party and customer but also intra-organisationally, due to different terminologies between departments.” This shows that a knowledge and expertise barrier can be formed inter-organisationally as well as intra-inter-organisationally. Furthermore, the lack of knowledge and expertise always negatively influence BC-implementation.
which are real-time information for external stakeholders. This feeling of being watched creates anxiety. Due to this anxiety, resistance is created, which hinders the implementation of BC, making it an obstacle. Before the BC, people were given the freedom, throughout the years, to deviate from the process. However, BC removes this freedom by making the process traceable. The statement of case 2C fits this claim and reoccurred in case 1: “We always do it like this. Why would I change that because it works anyway?” and 2C states: “You have to deviate from your normal work, and people like me have a hard time since we have been doing the same for 25 years.”. This statement shows from an employee perspective that employees find it hard to change their way of working, and this requires a difficult change in organizational culture. The same yields for the factor “Convert to new systems”. This factor has a negative influence on BC-implementation. Here employees must be aware of the benefits BC brings. Otherwise, they will resist to the BC-implementation. As case 2A explains: “The BC is a piece of technology that is said to be a bit exciting. If it is not understood or people do not see the point of it, it will be difficult to convince people to enable the implementation.”. This quote shows that employees and managers should be convinced to convert to new systems and to change their way of working.
4.2 Solutions
This section answers RQ2: How to solve or prevent the obstacles of private BC implementation in the SCM? The findings of this section are not incorporated in the comprehensive model (figure 4.2), but summarised in table 4.1.
4.2.1 Solution to misinterpretation of blockchain
To overcome the obstacle of misinterpretation, it is crucial to make the difference clear between the two different aspects and explain the opportunities of private BC. The customer, implementing company, manager, or department within a company, clearly has to be convinced of the benefits that BC brings. The implementor of BC, case 1B, explains, “I start like this: What you think you know about blockchain, has nothing to do with it. Then you will explain the difference between public and private and why you actually focus on a private blockchain and why it is suitable for business processes. Nevertheless, that must be really clear from the start, otherwise, you will get a lot of resistance.”. In the way that case 1B explains, the company which implements BC in their SC knows the difference and sees the opportunities. Here the obstacle has been solved by simply explaining the difference.
4.2.2 Smart contracts & Oracles
that executes itself whenever data is imported or exported. Case 1C provides a practical implication of how smart contracts solve their ERP-integration difficulties: “So if data is transferred from one system to another, it must meet the rules and requirements. Which means that if at once Exact (ERP-system) or SAP (ERP-system) no longer sends the customer number, the BC says we have a (smart)contractual agreement here, that you always send a customer number from the submitting system, you no longer do that, so I refuse this transition. Then it is immediately clear that the SAP side of the process has not fulfilled its agreement.”. In this way, smart contracts can improve the communication between inter-organisational IS’s but also intra-organizational, linking IS’s with ERP system. Smart contracts help to improve inter-organizational cooperation. The reason for this improvement is that the cooperation is no longer based on (mis)trust because every point of (mis)trust has been embedded in the smart contract. The BC shows precisely which of the actors can be held accountable for the problems that arise because it is logged and traced on the BC. However, smart contracts are not the only way to solve the obstacle of misinterpretation.
Another solution to “Data format difficulties” and “Integration of IS and ERP” is the use of “Oracles”. Case 1C explains what oracles are: “It is a service that can make external data from another system available within a blockchain. So it’s really your hatch to the real world, to other systems outside of the BC.” and “What we can do with oracle servers is retrieving data from systems or writing data to systems” (Case 1C). So, the oracles can provide the BC the information that it wants in the right data format. An oracle is named at the mythical Oracle of Delphi, where one gets information without knowing how it is gathered, but one knows it is true. The oracles in BC do not differ much from this and solve the data format difficulties.
4.2.3 Business management approach of implementing BC
then the way to achieve the goal. All these steps are done in cooperation with the domain expert to reduce goal-misalignment and get more management commitment. Once the domain experts, the managers, demarcated their process, which they want to embed in the BC, they are more likely to commit to the implementation. However, one must be aware that “The domain experts need to get used to this way of working.” (case 1B). If the managers are committed, they can influence the employees via different means of leadership or a top-down approach. To reduce the lack of commitment of employees and the IT-department, the manager should make sure that (IT)employees see BC as a supportive mechanism instead of punishing them. Case 2A: “But we must prevent the blockchain from getting the character of it is a system to punish me.”. Making the employees within the company clarified that the BC does not punish them but instead supports them in reaching their goals, the culture is accepted more easily. In order to stimulate the business management approach, communication intra-organisationally should be in place.
To improve communication within a company is difficult since there are many aspects. However, in the case of BC-implementation, the solution to communication is “To point out on or two project leaders or a project team which jointly makes decisions and evaluate the current process of BC-implementation, in order to decrease miscommunication.” (Case 1B) Moreover, if this does not work to increase employee commitment, a top-down approach of implementation can be used to force employees to work with the BC.
This top-down approach of implementation is more suitable to decrease the resistance of the IT-department because the IT-department usually has more power than the average employee. There is a significant chance that the IT-department already resists against the initiative of BC, case 1A states: “But you should actually try to get to the table without IT first. Because then you have the domain expertise at the table. And what is also important that there must be capacity from above.”. So, besides the resistance in general, there must be carrying capacity throughout the implementing company, from people who have the most power—in other words, having a high management commitment. In this way, the resistance will be reduced. Besides the carrying capacity, the explanation of the benefits BC brings to different (IT-) employees is of significant importance in order to reduce the resistance.
term proof of concept is shown. This proof of concept requires little financial capabilities because “How longer the implementation takes, the more expensive it becomes.” (Case 3A). The proof of concept of the demarcated process also improves the lack of management-, employee- and IT-commitment because the benefits can be gathered, and they are convinced. Case 1A explains what often happens in the implementation of BC: “What you shouldn’t do is expand the process as you go. This is quite a danger. Because of enthusiasm, companies often want to tackle many other things in the process.” So, due to the enthusiasm of the BC benefits, domain experts often want to involve other sub-processes in the BC. However, this increases the complexity of the implementation, which in turn results in higher costs. The solution is to demarcate a specific process and let individual wishes out of it. Otherwise, it cannot be realized with the given financial resources. Case 2C explains this as follows: “Where it often goes wrong is where the individual wishes of people are fully highlighted and embedded in the BC. If you allow that less, the process will become clearer. And then you say this is the process we have to work with.”. Letting individual wishes out of the first stage of implementation is mainly to increase the efficiency and decrease the costs. Case 2A explains what went wrong in their first stage of implementation: “We had a fairly well-defined section at the beginning. Over the months, different things have been added, with the result that people would also like to plan via the system (…) also map stock positions and stock levels. (…) the purchase was also added. But then I actually said from the very first moment, guys let’s not do that. Because the initial process is difficult enough.”. Within case 2, this results in statements from the employees like 2B: “It all takes so long now, you see. And yes, it is a bit frustrating and I hoped it would go a little faster.” As well as case 2C: “But yes it takes a very long time.” Once the commitment increases and the resistance decreases, the efficiency of BC-implementation is increasing. If the decision is then to add another process to the BC, the costs are known to be efficient, making the expectations of financial constraints easier to manage.
Table 4.1 Summary of solutions to obstacles
Solution Directly solves Indirectly solves Enabling factor
Smart contracts & Oracles “Data format difficulties” & “Integration of IS and ERP” “Cooperation, communication & trust among SC” Compact data structure Business management approach of implementation “Work floor resistance” & “The lack of management commitment and support” “Financial capabilities” Evaluation of the implementation, continuously explain the goal and benefits of the BC & Lean management
Demarcate the process “Financial
4.3 Comprehensive model of findings
A comprehensive model of the factors influencing BC implementation in SCM has been made (figure 4.2). It summarizes the main findings from this study but does not incorporate whether nature of the influence is positive or negative; this is explained in the findings section. The reason for not incorporating the nature of influence is that it depends on the amount or level of the factor, or how the factor is formulated. For example, once “financial capabilities” are low, it has negative influence on BC implementation; making it an obstacle. If “financial capabilities” are high, this factor does not form an obstacle. An example of the formulation is that “work floor resistance” can also be formulated as “work floor cooperation”, making it an enabler.
5 Discussion
In this section, the findings will be linked to the literature, and this study's addition to the current research body around BC in SCM is explained in detail. Next, it is essential to highlight the limitations of this research. The limitations of the research are focused on reflecting on the research process and how this can be improved in future research.
5.1 Discussion of findings
The current literature, once the research bases on BC, mostly focuses on the concept of public BC. However, this research replaces the public BC with the private BC. It investigates whether similar barriers or enablers can identify with public BC from previous literature. One of the findings can already be derived from this, and concerns the added obstacle “Misunderstanding of concept BC.” This obstacle indicates that most literature and information bases on the concept of public BC because of the cryptocurrency (Nakamoto, 2008). This misunderstanding of BC has common ground with, and is strengthened by, the external barrier of Saberi et al. (2018): “Governmental policies” since the policies around BC are primarily based on public BC rather than private BC. However, in this research, it was impossible to generate hard evidence concerning governmental policies since no respondent knew about it. In scientific literature, private BC in SCM lacks investigation. However, in practice, this misinterpretation formed a significant obstacle that must be addressed in this research, and it should be investigated further in the future.
integration and ERP” that has been identified in this study will also be solved since data format is the root cause. The inter-organizational mistrust will also be decreased. This makes smart contracts a powerful tool. In the literature, smart contracts are only mentioned to make business transactions trackable and irreversible. However, the data exchange and verification through smart contracts is found in the interviews and can be of significant interest for future research. Smart contracts, in cooperation with BC, can help conduct business process reengineering across enterprise borders, decreasing data issues, and creating trust among the SC (Chang, S. E., Chen, Y.-C., & Lu, M.-F., 2019). Besides smart contracts, the term “oracles” is rather new in the literature in the context of SCM. The oracles provide the data the company needs, in the right data format, without knowing how. The implementor of BC in this study has been using “Oracles” and has gained significant benefits combined with smart contracts. This topic should be investigated more since it positively affects the BC-implementation, and it could complement supply chain 4.0 and industry 4.0.
BC-The financial constraints of BC implementation are indicated by Saberi et al. (2018) and supported by all of the cases in this study. The reason being that implementation of BC takes much time and is therefore very costly. By demarcating the process first to the initial process, and not adding individual wishes and other systems, a proof of concept is shown. This proof of concept reduces the resistance and increases the BC implementation’s efficiency, reducing the financial constraints. This claim is supported by the paper of Weston, (1999), which explains a model-driven approach to software reconfiguration where the proof of concept needs to be built at first. So, the approach itself is not a new insight, but the application in BC contributes to the literature since it has not been linked before.
The verification system before the step of recording in BC should guarantee that the link between the physical action and the record is ensured to have authentic real-time data. However, the limitation of this verification is that every transaction needs acknowledging all the nodes within the supply chain. Different digital innovative technologies can help to verify recordings, for example, RFID technology (Sidorov et al., 2019) or the Internet of Things (IoT) (Sharma et al., 2017). RFID is a technological tag that has to be added to the products to see where the products come from. This RFID technology can cooperate with the blockchain (Sidorov et al., 2019). The application of IoT and blockchain can be considered the most promising in the logistics sector (Zheng et al., 2017). IoT has already been widely implemented these days, and by making use of IoT, one can track data through sensors that generate real-time data. By using sensors, it is almost not possible to manipulate the data. If the IoT is well-integrated with the blockchain, this provides real-time data into the blockchain. However, the next section discusses the possible obstacle of integration.
5.2 Limitations and future research
investigated. This would gain more insights and more empirical evidence around “Cultural differences,” influencing BC implementation. According to Saberi et al. (2018), culture could have a negative influence on BC. Therefore, it has been mentioned in the interviews, as can be seen in the transcripts. However, culture has neither been supported nor denied as an influential factor because this study’s companies were originated in the Netherlands. Furthermore, their business culture was Dutch and quite similar. Even though their customers were located across the world, and some suppliers as well.
Another limitation of this research is that there are no external stakeholders interviewed, even though the factor “External stakeholder involvement” has a significant impact on the financial resources of a company. This finding comes from the perspective of case 1, which is based on experience in the field. However, to put the factor “External stakeholder involvement” from a different perspective, this study calls for more empirical evidence from an external stakeholder’s perspective.
Next, the governmental policies were questioned, but none of the cases gave information about the policies. The reason was that none of the cases had knowledge concerning governmental policies. This may well indicate that there have not yet been governmental policies considering private BC, but more research needs to be conducted to prove it empirically.
Smart contracts & oracles have been suggested to function as a solution to “Data format difficulties.” In cases 2 and 3, this has proven its benefits. However, there has been no scientific research on the topic “oracles” in BC. Furthermore, the usage of smart contracts for the exchange of data also remains under-investigated. The combination of smart contracts with oracles can improve BC's performance, making the “Data format difficulties” and “Integration of IS and ERP” easier. These topics require further research.
6 Conclusion
This empirical qualitative research is focused on the implementation of private BC in SCM, making it the first of its kind. Now BC has been finally implemented; it is possible to shine a light on BC’s implementation in SCM. The obstacles, enablers, and potential solutions for the obstacles have been identified to implement BC in SCM successfully. From here, both research questions are drawn, where RQ1 aims to find the obstacles and enablers of BC-implementation in SCM, and RQ2 aims to understand how the obstacles can be solved. By conducting semi-structured interviews, a conceptual model based on state-of-the-art literature has been validated and improved. The improved model shows the influencing factors on BC in SCM, and the nature of their influence, supported by empirical evidence are identified. Once a factor has a negative influence, it can be seen as an obstacle. Once a factor has a positive influence, it is an enabler.
First of all obstacles, it is crucial to notice that there is a misunderstanding about the difference between private- and public BC in general, leading to resistance. The obstacle which had the most significant influence is the “Work floor resistance” which consists of resistance from the IT-department and the lack of commitment from the employees. This resistance is formed because BC provides transparency and traceability in the process. This transparency and traceability of the process change the culture of a company. The difficulties of this change in culture are supported to be an obstacle. The BC makes use of different information systems (IS) that generate their data. The BC should integrate the IS’s, but this brings along difficulties since data is not stored in the same format, making it difficult to import and export. The most significant information system in a company is the ERP system, referred to in the literature as an enabling factor. However, in practice, the ERP-systems and other IS’s are a nightmare to link, import, and export data, which form an obstacle.
“lean management” philosophy within a company. If this philosophy has already been implemented, employees' resistance decreases with difficulty in changing culture.
When successfully implementing BC in SCM, it is essential to know what the obstacles are, but it is even more important to know how they can be solved. The solution to data format difficulties is that one can use “Smart contracts” and “Oracles” to import and export the correct data according to the agreed requirements. When overcoming the misunderstanding about BC, it is crucial to clarify what private BC is and why someone can benefit from it. To overcome and reduce the resistance of (IT-) employees or managers, a business management approach is suggested based on the principles of the research method “Design-science”. In this way, the domain expert controls the goals and how they will be reached. The next solution towards resistance, considering change management, is by pointing out power leaders, or project teams, within the organization to carry the implementation. This change method increases efficiency, effectiveness, and communication around the BC-implementation. As a final solution, it is essential to demarcate the initial process that needs to be embedded in the BC to create a proof of concept. This proof of concept creates an increase in efficiency and decreases costs because the internal and external resistance decreases.
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