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Analysis of resilience strategies and ripple effect in blockchain-coordinated supply chains: An agent-based simulation study.

ABSTRACT: Resilience enables supply chains to reduce their proneness to disruptions and recover faster. Many existing strategies to strengthen the resilience of supply chains are facilitated by the use of digital technology. Blockchain, as one of the promising innovative technologies, enables a transparent, secure, and timely data exchange and automation via smart contracts. In this paper, we discuss the impact of blockchain technology on supply chain risk management and, in particular, on supply chain resilience. We identify potential risk-related blockchain application scenarios and examine their impact on the existing resilience strategies. We explore the impact of the most promising applications with respect to resilience by using an agent-based simulation model of a complex supply network affected by disruptions. The theoretical analysis reveals a promotion of supply chain resilience strategies, especially if smart contracts are used for risk-related collaboration. The simulation study indicates an increase in resilience if the underlying collaboration is based on time-efficient processes: The propagation of disruptions, the network recovery time, and total costs can be substantially reduced. However, depending on the duration of the disruption, negative effects can occur if process efficiency is insufficient. From our investigations, we derive insights for managers who are interested in practical implementation.

SUBMITTER: Lohmer J

PROVIDER: S-EPMC7392885 | biostudies-literature | 2020 Oct

REPOSITORIES: biostudies-literature

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Analysis of resilience strategies and ripple effect in blockchain-coordinated supply chains: An agent-based simulation study.

Lohmer Jacob J Bugert Niels N Lasch Rainer R

International journal of production economics 20200731

Resilience enables supply chains to reduce their proneness to disruptions and recover faster. Many existing strategies to strengthen the resilience of supply chains are facilitated by the use of digital technology. Blockchain, as one of the promising innovative technologies, enables a transparent, secure, and timely data exchange and automation via smart contracts. In this paper, we discuss the impact of blockchain technology on supply chain risk management and, in particular, on supply chain re ...[more]

PMID: 32834505

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Project description:Trying to meet the Sustainable Development Goals is challenging. Food supply chains may have to become more efficient to meet the increasing food requirement of 10 Billion people by 2050. At the same time, food and nutrition security are at risk from increasingly likely shocks like extreme climate events, market shocks, pandemics, changing consumer preferences, and price volatility. Here we consider some possibilities and limitations regarding the improvement of resilience (the capacity to deal with shocks) and efficiency (here interpreted as the share of produced food delivered to consumers) of food supply chains. We employ an Agent Based Model of a generic food chain network consisting of stylized individuals representing producers, traders, and consumers. We do this: 1/ to describe the dynamically changing disaggregated flows of crop items between these agents, and 2/ to be able to explicitly consider agent behaviour. The agents have implicit personal objectives for trading. We quantify resilience and efficiency by linking these to the fraction of fulfilment of the overall explicit objective to have all consumers meet their food requirement. We consider different types of network structures in combination with different agent interaction types under different types of stylized shocks. We find that generally the network structures with higher efficiency are also more sensitive to shocks, while less efficient network types display more resilience. At first glance these results seem to confirm the existence of a system-level trade-off between resilience and efficiency similar to what is reported in business management and ecology literature. However, the results are modified by the trading interactions and the type of shock. In our simulations resilience and efficiency are affected by 'soft' boundaries caused by the preference and trust of agents (i.e., social aspects) in trading. The ability of agents to switch between trading partners represents an important aspect of resilience, namely a capacity to reorganize. These insights may be relevant when considering the reorganization of real-life food chains to increase their resilience to meet future food and nutrition security goals.

Project description:In the post-pandemic era, food supply chains and firms therein are facing unprecedented severe challenges, because once infection is detected, numerous products must be recalled or abandoned, and both suppliers and retailers in the supply chain suffer enormous loss. To survive under the pandemic, retailers have adopted different sourcing strategies, such as contingent sourcing, which, in turn, affect the upstream suppliers and hence the resilience of the whole supply chain. With the rapid development of digital technologies, retailers nowadays can utilize blockchain as a reliable and efficient way to reduce product risk and hence advance the resilience of food supply chains by improving product traceability and inspection accuracy, and making sourcing transparent. In this paper, we develop a game-theoretic model to investigate the interrelation between the retailer’s decisions on blockchain adoption and sourcing strategies. We consider that a retailer originally orders from a risky supplier while conducting an imperfect inspection to detect infected products before selling. The retailer may speculatively keep on ordering from the risky supplier or adopt contingent sourcing by ordering from an alternative safe supplier. The retailer also has an option to implement blockchain to improve the inspection accuracy and product traceability. We derive the optimal retail prices under different sourcing strategies with and without blockchain adoption and then analyze the incentives for sourcing strategy and blockchain adoption. Then, we identify the conditions of an all-win situation for food retailer, supplier, supply chain resilience, and consumers with/without government subsidy. Finally, we extend to consider the situation that some consumers have health-safety concerns and preferences for blockchain adoption. Electronic Supplementary Material Supplementary material is available in the online version of this article at 10.1007/s42524-022-0232-2 and is accessible for authorized users.

Dataset Information

Analysis of resilience strategies and ripple effect in blockchain-coordinated supply chains: An agent-based simulation study.

Publications

Analysis of resilience strategies and ripple effect in blockchain-coordinated supply chains: An agent-based simulation study.

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