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Blockchain Technology - Integration in Supply Chain Processes

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Purpose: Supply chain networks face an increasing demand to integrate globally distributed customers and suppliers. As supply chain processes are deemed to lack sufficient transparency and security, blockchain solutions are piloted to offer an IT infrastructure covering these needs. This paper aims to bring current projects one step further and evolves a model for integrating blockchain solutions into supply chain processes. Methodology: In order to get an overview of existing models for technology integration , an exploratory research study is conducted. In addition, requirements for the specific integration of blockchain solutions are gathered and categorized in a systematic content analysis. Based on these requirements, the models are evaluated, compared and utilized for the development of a new model. Findings: Since none of the presented models fully meet the specific blockchain-based requirements, the existing models must be further developed. Specifically, increases in the number of supply chain partners and external stakeholders involved in blockchain-based systems are not supported by current models, and need to be integrated systematically. Originality: In this paper, an integration model is developed that is particularly suitable for blockchain integration into supply chain processes. In order to give starting points for a validation of the model, a case study is conducted in the field of blockchain-based payment gateway solutions.
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Published in: Data science and innovation in supply chain management
Wolfgang Kersten, Thorsten Blecker and Christian M. Ringle (Eds.)
ISBN: 978-3-753123-46-2 , September 2020, epubli
Published in: Data science and innovation in supply chain management
Wolfgang Kersten, Thorsten Blecker and Christian M. Ringle (Eds.)
ISBN: 978-3-753123-46-2 , September 2020, epubli
Proceedings of the Hamburg International Conference of Logistics (HICL) – 29
CC-BY-SA4.0
Tan Guerpinar, Sophie Harre, Michael Henke, and Farah Saleh
Blockchain Technology –
Integration in Supply Chain
Processes
First received: 6. Mar 2020 Revised: 20. Jun 2020 Accepted: 26. Jun 2020
Blockchain Technology Integration in Supply
Chain Processes
Tan Guerpinar 1, Sophie Harre 1, Michael Henke 1, and Farah Saleh 2
1 Chair of Enterprise Logistics, TU Dortmund University
2 Digix
Purpose: Supply chain networks face an increasing demand to integrate globally dis-
tributed customers and suppliers. As supply chain processes are deemed to lack suf-
ficient transparency and security, blockchain solutions are piloted to offer an IT in-
frastructure covering these needs. This paper aims to bring current projects one step
further and evolves a model for integrating blockchain solutions into supply chain
processes.
Methodology: In order to get an overview of existing models for technology integra-
tion, an exploratory research study is conducted. In addition, requirements for the
specific integration of blockchain solutions are gathered and categorized in a sys-
tematic content analysis. Based on these requirements, the models are evaluated,
compared and utilized for the development of a new model.
Findings: Since none of the presented models fully meet the specific blockchain-
based requirements, the existing models must be further developed. Specifically, in-
creases in the number of supply chain partners and external stakeholders involved
in blockchain-based systems are not supported by current models, and need to be
integrated systematically.
Originality: In this paper, an integration model is developed that is particularly suit-
able for blockchain integration into supply chain processes. In order to give starting
points for a validation of the model, a case study is conducted in the field of block-
chain-based payment gateway solutions.
Tan Guerpinar et al.
154
1 Introduction
Today's complex supply chain networks demand for advanced technolo-
gies that establish information systems between growing numbers of sup-
ply chain partners. In 2019, Capgemini Consulting conducted a study on the
topic of digital transformation, which reports that approximately 70% of
global change management projects are focused on the integration of ad-
vanced technologies (Capgemini Consulting, 2019, pp. 14-16). In this glob-
alized economy, cooperation and competition are increasing in the sense
of co-opetition to achieve the next level of innovation (Henke, 2002). Ad-
vanced technologies, such as blockchain technology, are gaining in im-
portance as they can establish trustful and traceable relations between
multiple organizations. The German federal government has announced its
own blockchain strategy in summer 2019. Even though the technology
emerged from the finance sector, experts believe that the greatest oppor-
tunities lie in redesigning and optimizing business processes. Currently,
10% of all companies piloting blockchain solutions mention that "closer
collaboration within their supply chain" can be seen as a main purpose and
benefit. (Bitkom, 2019)
The goal of this paper is to develop a model for the integration of block-
chain technology into supply chain processes of organizations. The follow-
ing research questions are utilized to guide the research:
1. "Which requirements do blockchain technology and its use in supply chain
processes place on integration models?"
2. "Which existing integration models can be utilized for our purposes?"
3. "What model do we need to specifically address the integration of block-
chain technology in supply chain processes?"
Blockchain Technology Integration in Supply Chain Processes
155
To address the research questions above, the terms supply chain manage-
ment and -processes, as well as blockchain technology are defined and ex-
plained briefly in the next section. In order to identify models that are suit-
able for the integration of IT technologies, a literature research is con-
ducted and analyzed subsequently. For the purpose of analysis, require-
ments of blockchain technology and its application area are identified by
means of the requirements engineering. To fully meet the identified re-
quirements, a new concept will be developed based on selected existing
models. Finally, the findings are summarized and recommendations for fu-
ture research are presented.
Tan Guerpinar et al.
156
2 Background
In literature, the concepts of supply chain management and blockchain
technology have been defined in different ways. In this section, relevant
definitions are presented to reach a common understanding.
2.1 Supply Chain Management and -Processes
Following Cooper et al. (1997), supply chain managment is defined as "the
integration of business processes from the end user to the original supplier,
who provides products, services and information that add value for the cus-
tomer". Subsequently, supply chain processes are defined as key business
processes that "run the length of the supply chain and cut across firms and
functional silos within each firm" (Croxton et al., 2001). In this paper, supply
chain processes are further understood to consider "material-, infor-
mation- and value flows over the entire value-added process" (Arndt, 2008).
In order to interlink the participants of todays' supply chains and enable a
transparent but secured exchange within the mentioned material, infor-
mation and value flows, new approaches, and technologies are needed. Yet
there are several hurdles to overcome. First, during information construc-
tion, software and hardware costs are high, risks are difficult to mitigate,
and the implementation cycle can be time consuming. Second, the partici-
pants of multi-party supply chains are often inhibited to provide relevant
information. Therefore, they may suffer from issues such as poor supplier
coordination, lack of accountability, or inability to monitor partner activi-
ties in real time. (Saberi et al. 2019, p. 2117 ff.). Blockchain solutions that
are designed particularly for supply chain management promise to address
these problems will be described in the next chapter.
Blockchain Technology Integration in Supply Chain Processes
157
2.2 Blockchain in Supply Chain Management
Blockchain technology by definition is a "technical concept that does not
store data in a central database, but rather distributes data to the user's
systems using cryptographic methods" (Burgwinkel, 2016, p. 1). The data is
therefore stored in individual blocks that are sequentially connected to
form a chain so that both the chronological order and the data integrity of
the entire data stock are ensured. Manipulations of the data stock are de-
tectable and data can only be appended in the form of a block at the end of
the existing blockchain (Burgwinkel, 2016, pp. 5-6).
One advantage of using blockchain technology is having an increased
transparency of processes and transactions throughout the whole supply
chain. Every user of the blockchain, as soon as rights are granted, can ob-
serve specific transactions or processes, which makes it easier to create
trust between individual partners. Moreover, data can be stored in a decen-
tralized and immutable manner eliminating single points of failure, provid-
ing proof or issue certificates on the basis of untampered data (Bogart and
Rice, 2015, pp. 9-12).
However, the technology also brings challenges. Considering the human
factor, companies that want to integrate blockchain solutions have to train
their employees with high time exposure (BMWi, 2016, p. 69). From a tech-
nical point of view, the interconnectivity of blockchain solutions and han-
dling of different data formats still need to be investigated (Acatech, 2018,
p. 59). Due to its novelty, the technology also has effects on security aspects
and demands the consideration of new kinds of security mechanisms
(Bitkom, 2019, p.39). Furthermore, from an organizational point of view, in-
terdisciplinary problems can arise due to the required collaboration of dif-
Tan Guerpinar et al.
158
ferent departments and disciplines (Gürpinar et al., 2019, p. 607). Also, gov-
ernmental and legal regulations affect the development of blockchain so-
lutions and have to be considered carefully (Reyna et al., 2018, pp. 182-183).
Finally, another challenge for the technology integration is the difficulty in
assessing its business value and concrete statement for potential cost sav-
ings (Fechtelpeter et al., 2019, p. 21).
As a result, a lot of blockchain projects remain in a proof of concept stage
and need guidance to achieve the integration of their blockchain solution
(Pai et al., 2018). There are some approaches that provide guidance on that
topic. Fridgen et al. (2017) develop a process model guiding the reader from
an understanding of the technology to the prototype stage. Also Wüst and
Gervais (2018) focus on the part of understanding the technology and pro-
vide a flow chart to decide whether or not to use a blockchain solution.
However, these approaches lack the consideration of an actual integration
approach after the positive decision. Apart from that, Panarello et al.
(2018), Reyna et al. (2018) and Gonczol et al. (2020) have presented work
related to the integration of blockchain solutions, considering either an IoT
environment or supply chain processes. However, their outcomes are com-
prised of integration benefits, challenges and considerations about tech-
nical characteristics without presenting integration models. Finally,
Niehues and Guerpinar (2019) present a holistic integration model for dis-
ruptive technologies and highlight the need for a model that is aimed at
blockchain solutions in particular.
Blockchain Technology Integration in Supply Chain Processes
159
3 Methodology
Because sufficient integration models for blockchain technology could not
be found, a literature research on and an analysis of integration models for
general IT technologies is conducted. Therefore, blockchain related re-
quirements are developed and utilized to evaluate the identified models.
The procedure of the literature research is based on Van Wee and Banister
(2016), as well as Durach et al. (2017). Scopus, Elsevier, IEEE, Google Scholar
und Springer Link are used as a data sources to find concepts for the inte-
gration of IT technologies. Using the pyramid system, further relevant arti-
cles are identified and further specified with filter functions. Peer-reviewed
articles are given priority in the selection of the articles, but in order to ob-
tain a wider range of practice-relevant models, grey literature is also in-
cluded.
The selection of models (see Figure 1) is divided into four steps. First, arti-
cles that are not written in German or English language are excluded. Sec-
Papers
included in
qualitative
analysis
(n=10)
Eligibility Inclusion
Screening
Initial selection
and inclusion
of additional
papers via
pyramid system
Exclusion of
non-English or
-German
papers
Inclusion
first
analysis
Exclusion
of
dublicates
Screening
of title
and
abstract
Exclusion
based on full
text (n=9)
Selection of
papers (n=16)
Assessment of
full papers
(n=25)
Papers
excluded
based on
title or
abstract
Exclusion
based on
overarching
focus (n=6)
Identification
Figure 1: Literature Selection Procedure, based on Casino et al., 2019, p. 59
Tan Guerpinar et al.
160
ond, during the title check, articles that do not sufficiently refer to the inte-
gration of IT technologies are excluded. Third, the remaining papers are an-
alyzed to ensure suitable integration models can be presented. Fourth, pa-
pers that are too generic or specific are excluded as well. Finally, ten models
are selected for the analysis. The four most important ones are described
in the next section.
3.1 Existing Integration Models
The Accelerated SAP Model (ASAP) represents a phase model with five
main phases. In the first phase, the project preparation and organization
take place. The second phase "Business Blueprint" defines the business re-
quirements. In the third phase, the basis system is configured, system ad-
ministrators are set up, interfaces are planned and data is converted. In the
fourth phase, final system tests are carried out and the employees are
trained. The final phase represents the system check and continuous sup-
port (Gulledge and Simon, 2005, pp. 715-719).
Blockchain Technology Integration in Supply Chain Processes
161
Scholl's cycle is based on the spiral model. First of all, the problem is con-
cretized and the tasks are defined. Then, the stakeholders and their needs
are considered. Next, Pre-studies are carried out, followed by a detailed
analysis of business processes and data organization, which are then rede-
signed. The information system is then developed, integrated and tested.
The first run concludes with the evaluation. The project team and manage-
ment decide whether a further run is necessary. (Scholl, 2004, pp. 286-287)
Stakeholders play an important role in the development of this cycle. By
focusing on this stakeholder group, a better understanding between the
project team and stakeholders is achieved. (Scholl, 2004, p. 298)
Figure 2: Accelerated SAP Model, based on (Gulledge & Simon, 2005, p. 720)
Project Administration
Issue Tracking / Monitoring / Reporting
Roadmaps
Business Blueprint Realization Final Preparation Go Live & Support
SAP Solution Manager in Implementation
Project Phase Project Preparation
Cross
Functions
Project Activities
Project Definition
Define System
Landscape
Define Business
Blueprints
Setup of DEV
Landscape
Customizing
Synchronization
Configuration
Developments
Authorization
Testing
End user Training
and Documentation
Data Transfer
Tan Guerpinar et al.
162
Nedbal's process model is based on a literature review. The phases of the
model are not linear, but they overlap and are flexible in their order. In the
first phase, the initial situation is analyzed and the primary objectives are
defined. In the second phase, the current situation is determined by ana-
lyzing information systems, existing business processes and technical in-
frastructures. The third phase focuses on the selection of suitable concepts
and tools. In the fourth phase, this is when the technical implementation
takes place. The integration approach is introduced and the ready-to-use
integration solution is created. In the final phase, the team evaluates the
integration solution. Continuous monitoring ensures continuous and sus-
tainable development. (Nedbal, 2013, pp. 162-168)
Figure 3: Scholl's cycle of IT-supported change of business processes,
based on (Scholl, 2004, p. 286)
Blockchain Technology Integration in Supply Chain Processes
163
The framework of Qu et al. deals with value creation, business processes,
functional structure, information flows, data flows and knowledge man-
agement. (Qu et al., 2018, p. 2) The model is divided into three phases: AS-
IS model, TO-BE model and analysis of feasibility. In the AS-IS model, busi-
ness processes, information systems and the management situation are
analyzed. In the TO-BE model, information systems and business processes
are redesigned. As far as possible, a flat, decentralized organizational struc-
ture is preferred and business processes are replaced by synchronized in-
ter-organizational procedures. In the feasibility analysis, the information
system is tested using quantitative methods to ensure the efficiency of the
new system. (Qu et al., 2018, pp. 7-11)
Assessment Analysis Design Reali-
zation
Activities:
Determine
integration
demand
Decide on
integration
project
Results:
Integration
strategy
Go-decision
from (top)
management
Activities:
Analyze organiza-
tional setting
Analyze involved
business processes
Analyze technical
infrastructure
Develop
requirements
specification
Results:
Requirements
specification
Activities:
Evaluation of the
integration solution
Continous
improvement
Results:
Evaluation report
Activities:
Implementation
of the integration
solution
Rollout of the
integration
solution
Results:
Documentation
of the integration
solution
Activities:
Choose integration
approach
Choose appropriate
concept / tool / standard /
partner for integration
Develop adjusted
requirements specification
and define target state
Results:
Adjusted requirements
specification
Cooperation contract
Operation
Figure 4: Nedbal's process model, based on (Nedbal, 2013, p. 163)
Tan Guerpinar et al.
164
3.2 Requirements for Blockchain Integration
After models for the integration of IT technologies have been selected, re-
quirements related to blockchain technology are developed. To do this, the
requirements engineering developed by Pohl and Rupp (2015) is used. The
requirements engineering has the task of "determining the requirements of
the stakeholders, documenting them appropriately, checking and coordi-
nating them and managing the documented requirements throughout the
entire life cycle of the system". (Pohl and Rupp, 2015, p. 4) The following
figure illustrates these steps.
Start
Step 1 AS-IS-model
Analysis of Management, business
processes and Informationsystems
AS-IS-model for business
processes
AS-IS-model for
Informationsystems
Step 2 TO-BE-model
Step 3 Analysis of Feasibility
Redefine objectives Redesign of business processes Redesign of Informationsystems
Check the AS-IS-model Measure the TO-BE-model Measure the redesigned
Inforrmationsystem
Feedback
Feedback
Figure 5: Qu et al.'s framework, based on (Qu et al., 2018, p. 7)
Blockchain Technology Integration in Supply Chain Processes
165
The first step in requirements engineering is the separation of the devel-
oped system from its environment. In this study, the focus is on blockchain
technology and the requirements that this technology places on integra-
tion models. In addition, business processes and supply chain processes
with their influencing factors and interfaces are relevant. The second step
is the requirements determination for important requirement sources that
are used including the consideration of stakeholders and documentation
procedures of the existing IT systems. A further literature research is carried
out to determine the requirements. The findings are then collected and
documented. (Pohl and Rupp, 2015, pp. 21-23) The third step is the require-
ments documentation. The goal for this is to summarize and structure the
requirements to make them easier and understandable. This step results in
eight requirements that blockchain technology places on an integration
model. These will be elaborated in the next steps. (Pohl and Rupp, 2015, p.
51) In the fourth step, the defined requirements are checked to ensure their
quality, the needs of the stakeholders are considered and errors in content
are resolved. The following types of errors are examined: completeness,
traceability, correctness, consistency, verifiability and necessity. (Pohl and
Rupp, 2015, pp. 97-98) In this step, two requirements can be combined. In
Figure 6: Rupp's requirements engineering, based on (Pohl and Rupp, 2015)
System
Delimitation
Require-
ments
Determi-
nation
Used sources:
Stakeholders
Documents
(old) systems
Requirements:
attributing
prioritising
tracking
revisioning
measuring
Change Management
Validation:
Meeting the
quality criteria
Stakeholder needs
taken into
consideration
important criteria:
self-explanatory
structured
High Quality
Require-
ments
Adminis-
tration
Definition of:
System
boundaries
System context
Irrelevant
environment
Require-
ments
Documen-
tation
Require-
ments
Valida-tion
Tan Guerpinar et al.
166
the fifth step the requirements are managed. In this step the requirements
are prioritized to determine the order of utilization. According to Rupp, the
following criteria is used for prioritization: implementation costs, risk, dam-
age in case of unsuccessful implementation, volatility, importance and du-
ration of implementation. (Pohl and Rupp, 2015, pp. 123-129) In this step,
one requirement is excluded as it does not contribute to the objectives of
the integration project. The procedure results in the following six require-
ments a blockchain-centered integration model for supply chain processes
needs to take into account:
(1) The stakeholders with their needs, requirements and wishes in order to
enable a successful integration (Fechtelpeter et al., 2019, pp. 18-19);
(2) The consideration of the existing information systems and examination
from different perspectives in order to create an intact system architecture
(Kahloun and Ghannouchi, 2016, p. 1018);
(3) The company and the environment in order to avoid additional adapta-
tion processes (Matthes, 2011, p. 25);
(4) Data management and the control mechanisms to be provided (Gupta
Gourisetti et al., 2019, pp. 208-211);
(5) The monetary consideration of integration costs and benefits at the begin-
ning of the integration process in order to ensure financial stability (Bosu et
al., 2019, pp. 2653-2654);
(6) The quality and complexity of the integration model. The model must be
easy to understand, versatile and of high quality (Nedbal, 2013, p. 162).
Blockchain Technology Integration in Supply Chain Processes
167
4 Evaluation
In order to evaluate the selected integration models for IT technologies
along the developed requirements, the utility analysis is used as a method.
The utility analysis is frequently used for multi-criteria decision problems
on a qualitative and semi-quantitative level. It helps with reducing com-
plexity and can easily be adapted to special cases. Also, individual aspects
can be removed or reinserted easily. (Stuhr, 2013)
The first phase of utility analysis is dedicated to the definition of the evalu-
ating requirements. This has already been done. In the second phase, a tar-
get tree is developed to weight the evaluating requirements. For this pur-
pose, the requirements are assigned to two main categories: internal and
external factors. In the third phase, possible characteristics are defined for
the respective requirements. For this purpose, the verbal response options
are assigned to numerical values of the utility value scale. (Example: re-
quirement not considered in the model = 0; requirement strongly consid-
ered = 6) (Stuhr, 2013, p. 112) In the fourth phase, each integration model is
evaluated regarding the individual requirements by forming partial utility
values. In the fifth phase, the total utility of the respective model is calcu-
lated according to the weighting factors. The result is checked by plausibil-
ity and sensitivity analysis. In the last phase, the ranking is established. For
this purpose, the total benefits are put in a sequence so that the best alter-
natives can be highlighted. (Stuhr, 2013, pp. 88-93) In Figure 7, the four best
ranked models Scholl's cycle, the ASAP model, Nedbal's process model and
the Qu et al. framework can be seen.
Tan Guerpinar et al.
168
Scholl's cycle is characterized by the special position of the stakeholders in
this model. Stakeholders are analyzed intensively in order to fulfil their in-
terests and wishes. Due to the small steps in the procedure, the model ful-
fils many of the defined requirements in the best possible way. A weakness
is the complexity and usability of the model.
The ASAP model is characterized by a simpler structure. This ensures an
easy understanding of the procedure and provides a good overview of the
project progress. However, the control mechanisms could be a weakness
for blockchain integration in this case.
models
requirements
overall
benefit
ran-
king
Quality
&
Com-
plexity
(20 %)
Control
mechanism
&
data ma
-
nagement
(15 %)
Mone-
tary
expense
(10 %)
Busi-
ness
context
(15 %)
structure of
Informa-
tionsys-
tems
(20 %)
Stake-
holders
& system
users
(20 %)
Royce, Fairley:
Waterfall model 6 4 2 4 6 0 3,8 7
Boehm: spiral
model 6 4 24 6 0 3,8 7
Microsoft: MSF 6 4 2 4 6 0 3,8 7
TOGAF 6 2 2 6 6 4 4,6 5
ASAP & SAP
Solution Manager 6 4 4 4 6 6 5,2 2
Ortiz et al: IE -
GIP 4 6 2 6 2 4 4,0 6
Scholls cycle 4 6 6 6 6 6 5,6 1
Pilorget: MIIP 0 4 2 6 6 4 3,7 8
Nedbals process
model 6 4 4 6 6 4 5,1 3
Qu et al.s
framework 2 6 4 6 6 6 5,0 4
Figure 7: Total benefits of the integration models
Blockchain Technology Integration in Supply Chain Processes
169
Nedbal clearly divides his process model in activities and results, which
simplifies goal-oriented project work and enables stakeholders to be pro-
actively informed about the progress. However, for blockchain integration,
more focus should be placed on data management.
The framework by Qu et al. is characterized by an intensive analysis of the
initial situation and the existing information system's structure. Even
though it is structured into three phases, it is more complex and harder to
apply than the other models.
The TOGAF model analyzes intensively the structure of the information sys-
tems and the business context. (Lankhorst, 2017, pp. 139-140) Neverthe-
less, it has no sufficient control mechanisms in place. The IE-GIP model has
a particularly high score in the category Stakeholder & System User. How-
ever, the monetary context and the existing information systems structure
are hardly considered. The model has a simple structure and deals inten-
sively with data management. (Ortiz et al. 1999, pp. 169-170) The waterfall
model stands out for its simple structure and its intensive examination of
the existing information systems structure but lacks flexibility. (Scharch,
2016, pp. 19-20) Boehm's spiral model is characterized by its low complex-
ity. Data management and control mechanisms are also considered in each
cycle. (Scharch, 2016, pp. 31-32) The MSF has a simple structure, a low com-
plexity and deals intensively with the existing information systems struc-
ture. Like the waterfall and spiral model, stakeholders and system users are
not taken into account. (Campbell et al., 2003, p. 7) Pilorget's model is very
complex due to the 64 defined process dependencies and the 17 MIIP pro-
cesses. (Pilorget, 2010, pp. 1-2) Although this model achieves good values
in other categories, this model is ranked last as it is hard to handle.
Tan Guerpinar et al.
170
5 Findings
In the previous section, four relevant models for technology integration
were selected and further analyzed in terms of strengths and weaknesses
by means of developed blockchain-specific requirements. In this chapter, a
new model for the specific integration of blockchain technology in supply
chain processes is introduced. During the development of the model, prior-
ity is placed on fulfilling all requirements and to find a balance between
simple and complex visualization.
Figure 8: Model for integrating blockchain technology in supply chain
Analysis
Integration Plan
Design
Integration
Evaluation
Continous Improvement & Support
Preliminary
Phase &
Evaluation
Project Administration / Feedback / Management of Requirements
Problem Tracking / Monitoring / Reporting
Cross
functions
Statement for business
impact
Set Strategy
Choose the use case & partner network
Determine integration needs
Identify benefits and challenges
Assign revenue and cost streams
First economic evaluation
Requirement
specifications
Framework &
Concensus mechanism
Evaluation
Analysis of organizational environment,
involved business processes, data
management, technical infrastructure
Proof of Concept
Modified requirment
specifications
Define objectives and target state
Second economic evaluation
Select integration approach, design tools
and standards
Regulatory
Compliance
Designed blockchain
solution
Design of blockchain and interfaces
Integration of information systems
Adaptation of business processes, data
organization, smart contract concept
Documentation
Integration Permission
Blockchain integration and strategy
Obtain necessary approvals
User training and testing or hiring
Evaluation report
Third economice evaluation using
quantitative methods
1.
2.
3.
4.
5.
6.
Activities Milestones
1.
2.
3.
4.
5.
6.
Blockchain Technology Integration in Supply Chain Processes
171
The new model is divided into six phases. It starts with the preliminary and
evaluation phase, which initiates the integration project and is only run
once. This first phase is followed by six subsequent processes, which can be
run cyclically to ensure that user feedback and necessary changes are con-
sidered and regular quality checks conducted. Furthermore, the cyclical
structure ensures that new requirements can be identified and integrates
flexibly. This way, a long-term functioning system is guaranteed. In order to
reach the next phase of the model, milestones have to be fulfilled. A mile-
stone specifies certain criteria necessary to start the next phase and divides
the project into manageable sections. (Scharch, 2016, p. 12)
The model also presents the following cross functions: project administra-
tion, consideration of feedback and management of requirements, prob-
lem tracking, monitoring, and reporting. By centrally anchoring these as-
pects, new requirements can be registered and documented immediately
to be considered in the next development cycle. Also, requirements speci-
fied by stakeholders can be considered in this way. Furthermore, continu-
ous project and problem tracking ensure that irregularities and errors are
recorded and eliminated, before they can have serious consequences for
the overall project. The documentation and reporting make the integration
process traceable for management and also serve as an important basis of
discussion with blockchain partners. The generated learnings can also be
used for further blockchain projects or to report to other stakeholders on
the project progress. (Gulledge and Simon, 2005, p. 729)
In the preliminary and evaluation phase, the blockchain use case, its appli-
cation area, and potential partners are determined. Also benefits and chal-
lenges of a blockchain integration are raised and associated to potential
revenue and cost streams. Through this and together with the methods for
Tan Guerpinar et al.
172
economic evaluation, a first statement about the business impact is pro-
duced. Finally, an integration strategy with primary goals and needs is is-
sued and agreed upon already with relevant stakeholders.
After that, the cyclical main phase of the integration model begins. In the
first phase, the analysis is based on components of the selected models.
Namely, the analysis of the organizational environment and determination
of project members, as well as of business processes, data management
and the technical infrastructure. The findings of this analysis phase form
the basis of a requirements specification and are consolidated in the end.
In this phase, it is important to identify all organizational areas and respec-
tive business processes that are affected by a blockchain integration. Also,
this phase has a strong technical focus, as the specifications of the block-
chain framework and respective consensus mechanism have to be chosen
with respect to data integrity and security.
In the integration planning phase, the requirement specifications are
adapted. The goal of this phase is to find a suitable integration approach
and to select appropriate tools for the integration. Therefore, the integra-
tion approach is determined, broken down in smaller elements that get pri-
oritized and selected. The integration approach must include the consider-
ation of affected business processes, middleware, information systems and
data types. Also, supporting tools and standards as well as security mecha-
nisms are selected at this point. Finally, the economic evaluation from step
one can be enriched with more business process details and all findings
from this phase can be incorporated into a documented requirement spec-
ification, which represents a milestone.
Blockchain Technology Integration in Supply Chain Processes
173
In the design phase, the technical system is designed. The value-added pro-
cesses, data and information flows, functional structure, and knowledge
management must be taken into account here. If necessary, the business
processes, their data organization, and the handling of existent information
systems have to be adapted or redesigned. The project team then sets up
the system and plans the interfaces and necessary data conversions. Also,
a concept for the use of smart contracts has to be installed here, which in-
cludes the decision of what data would be kept onchain or off-chain. Fi-
nally, the regulatory compliance hast to be ensured and the schedule for
the start of operations determined. The milestone of this phase is the final
documented design of the blockchain solution with the assigned responsi-
bilities for all involved partners.
In the integration phase, the blockchain solution is integrated into the con-
sidered business processes. For this purpose, the system must be tested in
advance and during the whole integration process. Besides organizational
aspects, this phase focuses on the human factor. Trainings have to be con-
ducted not only for end users but for all employees that have to deal with
adapted business processes, especially for management that has to con-
sider strategic consequences. In this phase, all necessary permissions are
obtained for the system to go live. Once the permits have been granted, the
blockchain solution can finally be tested. The milestone of this phase is the
approval of the ready-to-use blockchain solution.
In the evaluation phase, the blockchain solution is further tested. At this
point we also get more quantitative data for evaluation purposes and con-
sider operational benefits and costs, project risks, the strategic importance
and the internal resource requirements in our third economic evaluation.
To do so, Qu et al. (2018) propose the use of quantitative methods to ensure
Tan Guerpinar et al.
174
the technology's effectiveness. The aim of the evaluation is to ensure that
the business environment is fully considered and supported. This includes
the validation of business processes, technical parameters, and the survey
of end users. The milestone of this phase is the evaluation report, which
documents the success of the blockchain integration project.
Once the system has been fully evaluated, the phase of support and contin-
uous change follows. The concept of continuous change improves the inte-
grated blockchain solution over time. In our model, this last phase repre-
sents the transition to the analysis phase because the cyclical arrangement
allows newly arising requirements to be recorded and incorporated imme-
diately. Thus, the blockchain integration is part of a recurring cycle of con-
tinuous improvement.
Blockchain Technology Integration in Supply Chain Processes
175
6 Case Study
In order to give starting points for a validation of the developed model, in
this section a case study to consider practical aspects is introduced. With
the COVID-19 pandemic we have seen a significant increase in demand for
streamlined cashless payment systems, which is one reason why block-
chain-based payment gateway solutions are piloted. Apart from public var-
iants, there are also private solutions that are used with merchants and
their partners to perform automatized purchases and verify the prove-
nance of assets. These solutions are deemed to offer cheaper transaction
costs, more transparency, and also disruptive opportunities like activity-
based payments via smart contracts.
The Singaporean blockchain provider Digix develops such solutions with its
Proof of Provenance (PoP) protocol. The PoP protocol utilizes the Ethereum
platform and the Inter Planetary Files System (IPFS) to track assets through
its chain of custody. Digix also offers an API allowing other applications to
be built on top of their solution. In the following, we examine the methodi-
cal approach of the integration model and enrich it with aspects to be con-
sidered during the integration approach of a blockchain-based payment
gateway solution at Digix as our case study.
1. Preliminary Phase
First, opportunities and challenges of the blockchain solution are gathered,
possible revenue and cost streams on a monetary basis are not yet associ-
ated. Subsequently, all opportunities and challenges are compared to tra-
ditional payment solutions. The most important opportunity to be consid-
ered in our case is the enhanced transparency of the payment processes.
Tan Guerpinar et al.
176
This includes the verification of identities and allows multiple parties to in-
terconnect on a trustful basis. The most important challenge is to establish
the consortium of partners.
2. Analysis Phase
In relation to the second phase, the project team considers specifications
of the existing business processes and evaluates different blockchain plat-
forms. Most of the public solutions for PoP are built on Ethereum platform,
especially if there are multiple external parties involved. To keep transac-
tions private in a B2B setting, private protocols are also considered. In this
case, the Hyperledger Fabric protocol is commonly used. In the case of pri-
vate blockchains, participants are known to one another and jointly decide
to participate in the network. For this reason, they have to be provided with
suitable credentials to be part of the network. Also, based on the prelimi-
nary profitability statement, they have to be provided with information
about expected opportunities and challenges when participating. For this
reason, in our case study, a lot of time is invested to specify organizational
and technical opportunities and challenges for different partners.
3. Integration Planning
In the third phase, management has to decide if the software solution is to
be developed in-house or development is outsourced to an external com-
pany. In the former, team members have to be selected or hired with re-
spect to the right skillsets such as smart contract development. Also, the
adaptability and scalability of a technology stack has to be evaluated to en-
sure core processes can be carried out with minimal distractions. The inte-
gration model also refers to design tools being considered. In our case this
would be with regard to where the data is placed and stored in the archi-
Blockchain Technology Integration in Supply Chain Processes
177
tecture. This can be an on-chain data store of a private blockchain. Alterna-
tively, data can also be stored off-chain using a third party tool such as IPFS.
For the consideration of data security, in our case study, securing mecha-
nisms like the chainpoint protocol can be selected to ensure that embed-
ded data is secured.
4. Design
In the design face of a payment gateway, the use of complex smart con-
tracts and micropayments have to be considered, which often come in an
either/or relationship. As such, the project team has to evaluate how to de-
sign smart contracts and whether or not advanced rules are integrated into
the templates. Throughout this phase, it is important to have all involved
parties be able to respond and provide their input whenever they are trig-
gered. Another aspect for consideration in the design phase is data govern-
ance. All parties must decide what parties share and own data and what
data is enough for mutual agreement. In this phase, user interfaces of the
blockchain solution must be developed to drive ease of adoption and usage
with minimal distraction. Processes involved need to be assessed and
streamlined and business functions have to be engaged in all phases.
Lastly, the compliance with international, regional and country's respec-
tive regulations must be considered to reach the milestone. In this case, it
is the Monetary Authority of Singapore Regulation (MAS). The regulations
determine how the integration processes will be performed in detail and
eventually lead to how interoperability such as exchanges between data
need to be managed.
5. Integration
Tan Guerpinar et al.
178
In the integration phase, the blockchain solution is to be tested. In our case
study, because blockchain integrations tend to fail due to partner willing-
ness, high importance is placed on understanding the partners' goals and
showing that the product fulfills them. In this stage, the project team also
needs to consider the interconnections between their chosen consensus
mechanism and the system's modularity ensuring data integrity and scala-
bility of the solution. Also, the integration model refers to trainings at this
point, which are very important. Also, external parties involved such as
partners and merchants need to be trained to get familiar with blockchain
terms and terminologies to increase their confidence and competency to
perform their tasks in the transparent network. Internal employees or
newly hired development teams need to scale up their technical skillsets to
ensure the product can be developed based on best practices. In this case
study, the usability of go language for smart contract development plays an
important role. At the same time, business functions such as marketing,
procurement and compliance teams have to be trained to analyze block-
chain data in order to perform their tasks.
6. Evaluation
The integration model suggests to conduct a final evaluation of the integra-
tion project. In this case study, the following positions would need to be
evaluated.
(1) Partner acquisition costs: This can be related to marketing costs or ex-
penses that occurred to drive partner's adoption such as training or com-
pliance with regulations.
(2) Influence on IT infrastructure and maintenance: A good infrastructure
regardless of a centralized or decentralized system has to be considered to
ensure 99.99% uptime and its ability to scale up when the number of on-
Blockchain Technology Integration in Supply Chain Processes
179
boarded partners grows, or the size of data and network throughput in-
creases.
(3) System interfaces: As the blockchain solution needs interfaces to exist-
ing systems, the ease of integrating the solutions also with partners' infra-
structure needs to be evaluated.
(4) Data governance and analytics: Consensus relies on the parties making
rational decisions. Controls such as transaction monitoring can be explored
to ensure that no party is performing any illegal tasks and the wallet ad-
dresses used are whitelisted.
Tan Guerpinar et al.
180
7 Conclusion
Since blockchain technology is increasingly crossing into various supply
chain processes of organizations, but in some cases remains in proof of con-
cept phases, an extensive literature research to identify suitable models for
technology integration is conducted. In a second literature research, re-
quirements that blockchain technology places on the integration models
are collected. For this purpose, the requirements engineering following
Pohl and Rupp is utilized. This way, six requirements are developed: The
consideration of stakeholders & system users, as well as of existing infor-
mation systems, the business context, control mechanisms & data manage-
ment, monetary expenses as well as quality and complexity of the integra-
tion models. Together with these requirements, all models are evaluated
by means of a utility analysis. As a result, four technology integration mod-
els emerged to be used as a basis. We then developed a new model that
meets all the predefined requirements for blockchain integration and con-
ducted a case study to ensure plausibility.
In summary, in this paper, an integration model was developed that is par-
ticularly suitable for blockchain integration into supply chain processes.
Nevertheless, limitations have to be considered. First, all of the selected pa-
pers in the literature research have a focus on IT technologies. Other scien-
tific approaches like innovation, or strategic management are not consid-
ered. Second, the integration model is not specified on a certain blockchain
use case. Application areas in supply chain management might vary from
one another, and therefore, additional case specific integration require-
ments need to be considered.
Blockchain Technology Integration in Supply Chain Processes
181
It should be noted that there are only few approaches dealing with the in-
tegration of blockchain technology into supply chain processes and a ho-
listic model is needed to guide organizations in their attempts of fully uti-
lizing the technology and overcome proof of concept phases. Hence, as fur-
ther research need, the validation of our model along with a live case study
can be suggested. Only this way, unconsidered aspects can be identified
and practical applicability can be ensured. In addition, further models fo-
cusing on the economic evaluation of blockchain technology should be de-
veloped and integrated in order to reach the overall goal of scalable and
profitable blockchain solutions in supply chain processes.
Tan Guerpinar et al.
182
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Technical Report
Die Befunde zum Industrie 4.0-Umsetzungsstand der KMU zeigen, dass sich nahezu alle der an der Vorstudie teilnehmenden Unternehmen intensiv mit Industrie 4.0-Technologien und Anwendungen beschäftigen. Es herrscht das Verständnis, sich fortlaufend mit Handlungsoptionen auseinandersetzen zu müssen, um nachhaltig wettbewerbsfähig zu bleiben. Dabei wollen die befragten Führungskräfte von KMU einen signifikanten Anteil der Lösungsentwicklung in Eigenregie bewältigen und Kompetenzen aufbauen, um mit Partnern auf gleicher Augenhöhe kooperieren zu können. In vielen KMU werden spezifische Industrie 4.0-Projekte abgewickelt. Von einem Verharren in alten Strukturen kann keine Rede sein. Dennoch kann der Fortschritt unternehmensindividuell sehr variieren. Während Vorreiter bereits Industrie 4.0-Lösungen anbieten oder einsetzen, stehen andere KMU erst am Anfang, erwägen die Umsetzung grundlegender Funktionen oder informieren sich über neue Technologien. Im Hinblick auf die Transformation der Marktleistung hin zu integrierten Produkt-Service-Systemen befinden sich die meisten KMU noch in der Analyse oder experimentieren. Beispielsweise steht die Datennutzung als Grundlage für Dienste vielfach noch am Anfang. Digitalen Geschäftsmodellen wird vor allem eine perspektivische Relevanz beigemessen. Beim Großteil der KMU spielt die digitale vertikale Integration der Wertschöpfung eine wichtige Rolle und mündet in verschiedene Lösungen. Dennoch ist die Mehrheit der KMU von einer durchgängigen Vernetzung noch entfernt. Hinzukommt, dass die längerfristig angelegte Steuerung der Industrie 4.0-Aktivitäten anhand einer Industrie 4.0- beziehungsweise Digitalisierungsstrategie nur bei einigen KMU erfolgt. Viele der befragten KMU nehmen Industrie 4.0-Unterstützungsangebote zur Sensibilisierung oder zur Bedarfs- und Ideenfindung in Anspruch. Mehrere Befragte äußern zudem, dass Formate zur Lösungsumsetzung genutzt werden, und betonen die Attraktivität KMU-spezifischer Förderprogramme wie des Zentralen Innovationsprogramms Mittelstand (ZIM), der Förderinitiative KMU-innovativ des Bundesministeriums für Bildung und Forschung (BMBF) oder der Vorhaben der Industriellen Gemeinschaftsforschung (IGF). Ferner äußern die Führungskräfte durchweg eine hohe Nachfrage nach Erfahrungsaustauschformaten, da sie in Bezug auf Industrie 4.0-Anwendungsbeispiele den Erfahrungen anderer KMU eine hohe Bedeutung beimessen. Auch begrüßen einige Befragte Möglichkeiten zum schnellen, praktischen Kennenlernen und Erproben. Dennoch zeigen die Befunde zur Nutzung von Angeboten eine Zurückhaltung gegenüber Industrie 4.0-Demonstrationsumgebungen. Die teilnehmenden Unternehmen sind für Kooperationen durchweg offen. Es wird deutlich, dass viele KMU regional gut vernetzt sind und bei der Angebotsnutzung Partner in ihrer Nähe favorisieren. Folglich zeichnet sich ab, dass die regionale Ebene ein zentrales Gestaltungsfeld der KMU-Unterstützung zu Industrie 4.0 darstellt. Cluster und regionale Netzwerke werden als besonders nutzbringend wahrgenommen. Diese bilden vielschichtige vitale Innovationsökosysteme für den Austausch mit anderen KMU sowie wissenschaftlichen Einrichtungen und unterstützen die Orchestrierung von Unterstützungsangeboten. Obwohl viele KMU Industrie 4.0 sehr engagiert angehen, zeichnen sich sowohl bei der Umsetzung als auch bei der Angebotsnutzung Hemmnisse und Herausforderungen ab. Nicht alle Hemmnisse treffen gleichermaßen auf jedes Unternehmen zu. Vorderhand werden Herausforderungen bei der Rekrutierung von Fachkräften sowie knappe Ressourcen im Hinblick auf eigene Fachkräfte genannt. Die Beschäftigten müssten neue Kompetenzen aufbauen, sind jedoch im operativen Tagesgeschäft gebunden. Als gravierend nehmen die KMU Hemmnisse im Bereich der Standardisierung wahr, etwa hinsichtlich Schnittstellen. Zugleich existieren Schwierigkeiten im Bereich IT-Sicherheit für cyber-physische Systeme (CPS) und cyber-physische Produktionssysteme (CPPS): So geben mehrere KMU an, nicht über die notwendigen Ressourcen und das Know-how zur Gewährleistung von IT-Sicherheit zu verfügen. Ferner bestehen bei einigen Befragten Unsicherheiten bei der Technologie-, Potenzial- und Wirtschaftlichkeitsbewertung möglicher Industrie 4.0-Lösungen. Einige Interviewpartner merken dazu an, dass ihnen Vorstellungen für die strategiegeleitete Umsetzung fehlen. Obwohl viele Befragte bereits Angebote genutzt haben, äußern einige von ihnen Hemmnisse bei der Identifikation von Angeboten und Partnern. Es fällt teils schwer, einen Überblick zu gewinnen. Die verfügbaren Unterstützungsangebote werden zwar als vielfältig, aber kleinteilig und isoliert voneinander wahrgenommen. Zudem verweisen Befragte auf Lücken in der Angebotslandschaft, etwa zur Unterstützung des innerbetrieblichen Wandels in Richtung Industrie 4.0. Das Meinungsbild über geförderte Projektangebote ist geteilt: Während die genannten KMU-spezifischen Förderprogramme als positive Beispiele gelten, sind vorwettbewerbliche Verbundprojekte nach Meinung vieler Interviewpartner eher forschungsgetrieben und zu weit von der Praxis entfernt. Insgesamt sehen viele Befragte Verbesserungsbedarf bei den Rahmenbedingungen geförderter Projektformate. Auch werden aufwendige und langwierige Antragsprozesse der hohen Dynamik des Wandels nach Einschätzung der Befragten nicht gerecht. Zu denken geben auch die Aussagen, die auf eine gewisse „Berührungsangst“ bei potenziellen Hochschulpartnern hindeuten, Kooperationen mit KMU einzugehen. Mehrheitlich sind die Befragten der Meinung, dass KMU ein vielfältiges Unterstützungsangebot vorfinden. Dennoch bestehen noch nicht abgedeckte Bedarfe der Industrie 4.0- Unterstützung. So formulieren mehrere Führungskräfte den Wunsch nach einer Übersicht aktueller und zukünftiger Standards. Um Bestandsanlagen fit für Industrie 4.0 zu machen, bedarf es nach Aussage einiger Befragter zusätzlicher Unterstützung. Vielfach bestehen Bedarfe im Bereich der Kompetenzentwicklung für Industrie 4.0. Dies betrifft etwa die Unterstützung zur Entwicklung anwendungs- und systemspezifischer Kompetenzen oder Angebote, die für interdisziplinäre Schnittstellenfunktionen qualifizieren. Außerdem werden Angebote nachgefragt, um alle Beschäftigten in den Transformationsprozess einzubinden. Viele Befragte wünschen sich Projektangebote, die eine Umsetzung konkreter, praxisorientierter Industrie 4.0- Aufgabenstellungen fördern. Bevorzugt werden Vorhaben mit geringer Vorlaufzeit und einer Umsetzungszeit von einigen Monaten. Der Wunsch nach einer Verminderung des administrativen Aufwands bei geförderten Angeboten ist grundsätzlich hoch. Mehrere Interviewpartner geben neue Impulse zur Gestaltung von Formaten: Sie wünschen sich eine höhere Flexibilität, um Förderangebote ausgehend von der vereinfachten Beantragung einer Initialphase schrittweise nutzen zu können. Mehrere Befragte betonen, dass eine finanzielle Förderung nicht zwingend notwendig ist. Vielmehr kann die indirekte Unterstützung durch den Zugang zu Know-how und Kapazitäten von Hochschulen oder Forschungseinrichtungen, wie in manchen Angeboten der Mittelstand 4.0-Kompetenzzentren möglich, einen wichtigen Beitrag leisten. Gefordert wird zudem eine auf KMU ausgerichtete Ansprache in den Informationsdokumenten zu Unterstützungsangeboten. Die Programmbeschreibungen und ähnliche Dokumente sollten adressatengerechter formuliert werden. Weiterhin zeichnet sich der Bedarf ab, zusätzlich zur Orchestrierung auf regionaler Ebene die vertikal gerichtete Abstimmung zwischen nationalen und regionalen Industrie 4.0-Aktivitäten weiter zu verbessern. Aus den Befunden zum Industrie 4.0-Umsetzungsstand, den Hemmnissen bei der Umsetzung und Angebotsnutzung sowie den Bedarfen an die Industrie 4.0-Unterstützung zeichnen sich Hebel ab, existierende oder zukünftige Angebote noch besser auf KMU auszurichten. Diese wurden im Zuge einer Synthese in Handlungsfelder und -optionen überführt. Es wurden 19 Handlungsfelder ermittelt. Diese enthalten insgesamt 45 Handlungsoptionen, die den Gestaltungsraum der KMU-Unterstützung umreißen. Die prägnante Beschreibung der Optionen erfolgt in den Kapiteln 8.1 bis 8.5. Ferner visualisiert ein Portfolio in Kapitel 8.6 eine Einschätzung der Optionen in den Dimensionen „Aufwand“ und „Hebelwirkung auf den Innovationserfolg“. Aus der Darstellung zeichnet sich eine erste Priorisierung der Handlungsoptionen ab. Im Anschluss an diese Vorstudie gilt es, diese Ergebnisse gegebenenfalls weiterzuentwickeln und zu konsistenten Handlungskonzeptionen mit hoher Wirkung zu bündeln.
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Globalisation of supply chains makes their management and control more difficult. Blockchain technology, as a distributed digital ledger technology which ensures transparency, traceability, and security, is showing promise for easing some global supply chain management problems. In this paper, blockchain technology and smart contracts are critically examined with potential application to supply chain management. Local and global government, community, and consumer pressures to meet sustainability goals prompt us to further investigate how blockchain can address and aid supply chain sustainability. Part of this critical examination is how blockchains, a potentially disruptive technology that is early in its evolution, can overcome many potential barriers. Four blockchain technology adoption barriers categories are introduced; inter-organisational, intra-organisational, technical, and external barriers. True blockchain-led transformation of business and supply chain is still in progress and in its early stages; we propose future research propositions and directions that can provide insights into overcoming barriers and adoption of blockchain technology for supply chain management.