Blockchain in Global Supply Chains and Cross Border Trade: A Critical Synthesis of the State-of-the-Art, Challenges and Opportunities (1901.02715v1)

Abstract: Blockchain in supply chain management is expected to boom over the next five years. It is estimated that the global blockchain supply chain market would grow at a compound annual growth rate of 87% and increase from \$45 million in 2018 to \$3,314.6 million by 2023. Blockchain will improve business for all global supply chain stakeholders by providing enhanced traceability, facilitating digitisation, and securing chain-of-custody. This paper provides a synthesis of the existing challenges in global supply chain and trade operations, as well as the relevant capabilities and potential of blockchain. We further present leading pilot initiatives on applying blockchains to supply chains and the logistics industry to fulfill a range of needs. Finally, we discuss the implications of blockchain on customs and governmental agencies, summarize challenges in enabling the wide scale deployment of blockchain in global supply chain management, and identify future research directions.

• The paper presents a critical synthesis showing how blockchain enhances traceability, dispute resolution, and cargo integrity across supply chains.
• It employs case studies from initiatives like TradeLens and Walmart Food Trust to demonstrate reductions in transit times and improved data reliability.
• The study underscores integration challenges and calls for further research on combining blockchain with IoT, AI, and robust regulatory frameworks.

Blockchain in Global Supply Chains and Cross-Border Trade: A Critical Synthesis of the State-of-the-Art, Challenges, and Opportunities

The paper presents a detailed examination of the integration of blockchain technology in supply chain management (SCM) and cross-border trade, highlighting its potential to address the perennial challenges of traceability, dispute resolution, cargo integrity, digitalization, compliance, and trust among stakeholders. Given the decentralized nature of blockchains, their capability to provide secure, transparent, and immutable records is posited to fundamentally alter the fabric of global trade networks.

Overview of Challenges in Global SCM

The paper begins by cataloging current issues faced by global supply chains. These include:

1. Traceability: The lack of full visibility in supply chains contributes to inefficiencies and safety concerns, exemplified by high-profile E.coli outbreaks where sources could not be definitively identified.
2. Dispute Resolution: Contractual ambiguities lead to disputes are costly and time-consuming to resolve. Disputes regarding on-time and full delivery, such as those implemented by Walmart, highlight the financial impact of these issues.
3. Cargo Integrity and Security: The supply chain is susceptible to fraud, theft, and quality misrepresentation, with significant economic impacts. This is augmented by rising cyber threats.
4. Compliance: Adhering to the plethora of regulatory requirements across regions remains cumbersome and prone to human error.
5. Trust and Stakeholder Management: Trust underpins effective collaborations between parties. However, the reliance on third-party intermediaries and lack of transparency hinders its development.
6. Supply Chain Digitalization: While digitalization holds the promise of efficiency gains, current adoption levels are below potential, with prevalent reliance on fragmented IT systems and paper-based processes.

Potential of Blockchain Technology

The paper synthesizes how blockchain technology can mitigate aforementioned challenges and enhance supply chain efficiency:

• Enhanced Traceability and Transparency: Blockchain's cryptographic protocols ensure record tamper-resistance, enabling product provenance validation even in complex multi-tiered supply chains.
• Streamlined Dispute Resolution via Smart Contracts: Automating agreements through blockchain smart contracts simplifies the execution of agreement terms and conditions, resulting in reduced dispute incidence and resolution times.
• Improved Cargo Integrity and Security: The immutable nature of blockchains enhances fraud prevention and ensures precise ownership tracking and cargo condition reporting during transit.
• Facilitation of Supply Chain Digitalization: Automation of paper-trail processes through blockchain reduces inefficiencies and processing delays and aligns with the digital transformation of supply chain management.

Industry Pilot Initiatives

The authors compile an array of pilot projects evidenced in the field:

• Maersk & IBM's TradeLens tracks millions of shipping events to drive efficiency and cost-effectiveness within container logistics, demonstrating transit time reductions up to 40%.
• Port of Antwerp Initiatives leverage blockchain for secure container release and documentation workflow, addressing fraud prevention effectively.
• Walmart & IBM's Food Trust initiatives highlight blockchain's utility in ensuring food safety and supply chain transparency, notably reducing the tracing time of product origins from days to seconds.

Challenges in Blockchain Adoption

Despite these promising directions, major adoption hurdles persist. These include the technological complexity of blockchain deployment, scalability to manage vast transaction volumes, interoperability with existing systems, and the establishment of legal and regulatory frameworks necessary for widescale implementation.

Implications and Future Research Directions

The research implications of blockchain integration in SCM span both practical and theoretical domains. Potential areas of exploration include the fusion of blockchain with IoT and AI to enhance decision engines within supply chains. Future studies should also consider frameworks weaving governmental and institutional integration into blockchain ecosystems, ensuring compliance, data synchronization, and process optimization are addressed comprehensively.

In conclusion, while challenges remain in the mainstream deployment of blockchain technology within global trade and supply chains, its transformative potential promises significant gains in security, efficiency, and transparency, meriting continued collaborative research and pilot testing.