Trans-XFed: An Explainable Federated Learning for Supply Chain Credit Assessment

Abstract: This paper proposes a Trans-XFed architecture that combines federated learning with explainable AI techniques for supply chain credit assessment. The proposed model aims to address several key challenges, including privacy, information silos, class imbalance, non-identically and independently distributed (Non-IID) data, and model interpretability in supply chain credit assessment. We introduce a performance-based client selection strategy (PBCS) to tackle class imbalance and Non-IID problems. This strategy achieves faster convergence by selecting clients with higher local F1 scores. The FedProx architecture, enhanced with homomorphic encryption, is used as the core model, and further incorporates a transformer encoder. The transformer encoder block provides insights into the learned features. Additionally, we employ the integrated gradient explainable AI technique to offer insights into decision-making. We demonstrate the effectiveness of Trans-XFed through experimental evaluations on real-world supply chain datasets. The obtained results show its ability to deliver accurate credit assessments compared to several baselines, while maintaining transparency and privacy.