Relationship and Impact of Block Chain

Technology and Supply Chain Management

on Inventory Management

Muhammad Irfan Khan, Syed Imran Zaman,

and Sharfuddin Ahmed Khan

1 Introduction

Blockchain technology, also known as BCT, is quickly becoming one of the most
talked about topics in the world today. Because digitization is so ubiquitous (and
most likely necessary) in today’s world, we have begun the process of digitizing our
assets. The process of converting information into numbers (data) that can be saved,
transferred, and analyzed by a computer system is referred to as digitalization. We
have started looking at several methods that may help us safeguard all of the
resources that this technology will allow us to digitize (turn into data). Therefore,
the technology known as blockchain was first designed to protect digital assets (i.e.,
cryptocurrency). Blockchain technology is viewed with skepticism by businesses
owing to the fact that it is innovative and unpredictable. As a consequence of this,
businesses may feel that the investments they have made in this technology are laden
with a significant amount of risk (Meidute-Kavaliauskiene et al., 2021).
Businesses have the potential to boost customer satisfaction and, as a result,
customer loyalty by introducing greater openness into their supply chain operations.
In addition, more transparency in the supply chain may improve supply chain
collaboration by fostering a greater level of confidence between businesses (Mubarik
& Naghavi, 2020; Khan et al., 2022a, b, c). The adaptability of a company’s supply
chain may be an essential component in the achievement of a long-term competitive

M. I. Khan
Department of Business Administration, Jinnah University for Women, Karachi, Pakistan

S. I. Zaman (✉)
School of Economics and Management, Southwest Jiaotong University, Chengdu, China
S. A. Khan
University of Regina, Regina, SK, Canada
e-mail: Sharfuddin.Khan@uregina.ca

# The Author(s), under exclusive license to Springer Nature Singapore Pte 53

Ltd. 2023
M. S. Mubarik, M. Shahbaz (eds.), Blockchain Driven Supply Chain Management,
Management for Professionals, https://doi.org/10.1007/978-981-99-0699-4_4
54 M. I. Khan et al.

advantage for the company. Blockchain is a technology that can offers significant
benefits in all three categories of customer satisfaction, customer loyalty and greater
openness. The present chapter is aimed to address the concerns about the blockchain
technology in general and particularly in the context of supply chain. There are
various studies (e.g., Rasiah et al., 2017; Mahmood & Mubarik, 2020; Mubarik
et al., 2021; Ahmed et al., 2021; Khan et al., 2022c; Zaman et al., 2022), which have
highlighted the need for advance technology that can help firm to strike balance
between its explorative and exploitative activities (Alexopoulos et al., 2019; Khan &
Zaman, 2023).
The next sections of the book chapter are organized as, the second section
discusses about blockchain management, its importance, elements, functions, types
and benefits. The third section discusses about supply chain management, its
importance, components, types, benefits and impact on inventory management.
The fourth section discusses about blockchain and inventory management, its
benefits, role, aspects, benefits, limitations. The fifth section discussed the recent
developments, limitations, summary and conclusion.

2 Blockchain Technology

The blockchain is a decentralized, immutable database that makes it possible to

record transactions and keep track of assets inside a business network. Both physical
and intangible things, such as bank accounts, reputations, and patents, may be
considered assets. Examples of material assets include a house, a car, cash, and a
plot of land (intellectual property, patents, copyrights, branding). On a blockchain
network, nearly anything of value may be recorded and traded, which lowers the risk
for everyone and brings down prices (IBM, 2022). Some basic benefits of
blockchain management are shown in Fig. 1. Basic blockchain management works
as below.

2.1 As each Transaction Occurs, it Is Recorded as a “Block”

of Data

These dealings include the exchange of either a tangible (a product) or intangible

(a service) asset (intellectual). The data block is capable of storing the information
that you specify, such as who, what, when, where, how much, and even the
condition, for example the temperature at which a food shipment was kept (IBM,
2022).

2.2 Each Block Is Connected to the Ones before and after it

When an asset moves from one place to another or when ownership is changed, these
blocks create a data chain to reflect the movement of the asset. The blocks perform a
Relationship and Impact of Block Chain Technology and Supply. . . 55

Fig. 1 Benefits of Blockchain management. Source: cloudcredential (2022)

timing and order check on the transactions, and the fact that they are securely
connected to one another makes it impossible for any block to be altered or inserted
in the space between two already existing blocks.

2.3 Transactions Are Blocked Together in an Irreversible Chain:

A Blockchain

The verification of the chain as a whole is strengthened with the completion of each
subsequent block, which in turn strengthens the verification of the block that came
before it. The blockchain is so rendered tamper-proof, hence delivering the immuta-
bility that serves as the fundamental property of this technology. This removes any
possibility of manipulation and generates a record of transactions that you and the
other people who participate in the network can rely on (IBM, 2022).

2.4 Importance of Blockchain Management

The verification and tracking of multi-step transactions, which are often difficult to
do, may be simplified using blockchain technology. It is possible that it will make
56 M. I. Khan et al.

transactions more secure, reduce costs associated with compliance, and speed up the
processing of data transfer. The management of contracts and the verification of
goods origins might both benefit from blockchain technology. In addition to that, it
may be used for the maintenance of titles and deeds, as well as voting platforms.

2.5 Key Elements of a Blockchain

There are a number of key elements of blockchain as below.

2.5.1 Distributed Ledger Technology

Every member of the network has access to both the distributed ledger as well as the
immutable record of transactions it maintains. Because just one copy of each
transaction is kept in this shared ledger, the effort duplication that is typical of
more traditional business networks is significantly reduced.

2.5.2 Immutable Records

Once a transaction has been entered into the communal ledger, none of the
participants are permitted to change it or otherwise interfere with it in any way. In
the event that a record of a transaction contains an error, it is necessary to record a
new transaction in order to correct it, and both of these transactions must then be
accessible.

2.5.3 Smart Contracts

For the purpose of expediting transactions, a predetermined set of guidelines is
digitally signed and stored on the blockchain in the form of a “smart contract.” A
smart contract may specify the requirements for the transfer of corporate bonds, the
conditions of payment for travel insurance, and a great deal more.

2.6 Types of Blockchain

There are four different sorts of structures that may be used for blockchains, and they
are as follows (Fig. 2):

2.6.1 Public Blockchain

Public blockchains are distributed ledgers that do not need any special authorization
to use and are open to participation from anybody. A public blockchain provides all
nodes with the same opportunities to access the blockchain, create new data blocks,
and validate existing data blocks. At this point in time, the majority of bitcoin trade
and mining takes place on public blockchains. It’s possible that you’re already aware
with popular public blockchains like as Bitcoin, Ethereum, and Litecoin. Nodes on
public blockchains “mine” cryptocurrencies by solving cryptographic equations in
order to produce blocks for transactions required by the network. This process is
known as “block generation.” Miner nodes are rewarded with a token amount of
bitcoin for the computational work they do. The miners serve much the same
Relationship and Impact of Block Chain Technology and Supply. . . 57

Fig. 2 Different types of blockchain. Source: Nadeem and Shah (2021)

purpose as bank tellers in today’s world, since they are responsible for facilitating
transactions and “mining” pay for their efforts (Wegrzyn & Wang, 2021).

2.6.2 Private (or Managed) Blockchain

Private blockchains are permissioned blockchains that are maintained and controlled
by a single entity. These blockchains are also referred to as managed blockchains. A
central authority will decide who may participate as a node in a private blockchain
and who cannot. In addition, the permissions to carry out functions that are granted
to each node by the central authority are not necessarily on an equal footing. Due to
the restricted access that the general public has, private blockchains may only be
considered partially decentralized. Both Ripple and Hyper ledger, which is an
umbrella project for open-source blockchain applications, are examples of private
blockchains. Ripple is a business-to-business virtual currency exchange network.
Hyper ledger is an umbrella project (Kusi-Sarpong et al., 2022).

2.6.3 Consortium Blockchain

Consortia blockchains are permissioned blockchains that are controlled by a consor-
tium of companies, in contrast to private blockchains, which are administered by a
single firm. Consequently, consortium blockchains are more decentralized than
private blockchains, which results in an increased level of security. Consortia
formation, on the other hand, might prove to be a challenging endeavor since it
requires cooperation between a number of companies, which brings up both logisti-
cal challenges and potential antitrust violations (which we will examine in an
upcoming article). In addition, some participants in supply chains might not have
the necessary hardware and software to implement blockchain technologies. Even
those who do might conclude that the upfront costs of digitizing their data and
58 M. I. Khan et al.

establishing connections to other participants in the supply chain are too high to
justify the investment.

2.6.4 Hybrid Blockchain

One kind of blockchain known as hybrid blockchains is run by a single entity, but
they are still subject to some level of oversight by the public blockchain. This
oversight may take the form of auditing or monitoring. This monitoring is necessary
in order to carry out the necessary validations for certain transactions. IBM Food
Trust is an example of a hybrid blockchain that was designed with the intention of
increasing efficiency across the whole of the food supply chain. This system was
created by IBM. One of the topics that will be discussed in further depth in an
upcoming post that is a part of this series is the IBM Food Trust (Wegrzyn & Wang,
2021).

2.7 Benefits of Blockchain

Time is often wasted in operations due to duplicate record keeping and validations
performed by third parties. Fraud and other forms of cybercrime are easily
perpetrated against information management systems. It’s possible that a lack of
transparency will make it more difficult to verify data. And because of the Internet of
Things, the amount of transactions has increased dramatically. Because of all of this,
company is slowed down, earnings are reduced, and a new strategy is required.
Bring up the topic of blockchain (Hughes et al., 2019).

2.7.1 Greater Trust

Using blockchain will give you the assurance that the data you are receiving is
accurate as well as up to date, and that the other members of the network will only
have access to your confidential blockchain records if you give them that authoriza-
tion explicitly. This will give you the peace of mind that you need to feel comfortable
using blockchain. Using blockchain will provide you with the assurance that the data
you are getting is correct and up to date if you are a member of a network that is only
available to members.

2.7.2 Greater Security

Once a transaction has been confirmed, it can never be modified again since it is kept
permanently; this is one of the requirements that every member of the network must
fulfill in order to achieve a consensus on the authenticity of the data. Nobody, not
even the person in charge of managing the system, will ever be able to wipe out a
transaction (IBM, 2022).

2.7.3 More Efficiencies

By using a distributed ledger that is shared across all of the users in a network, time-
consuming record reconciliations may be eliminated completely. This would result
in significant time savings. Additionally, in order to speed transactions, a preset set
Relationship and Impact of Block Chain Technology and Supply. . . 59

of instructions, also known as a “smart contract,” may be recorded on the blockchain

and then automatically carried out. This practice is known as “smart contracting.”

3 Supply Chain Management

Supply chain management refers to the administration of the transportation of

products and services, including the transformation of raw materials into completed
commodities. It involves making a concerted effort to streamline the supply-side
operations of a firm in order to maximize the value provided to customers and gain a
competitive edge in the market (Fernando et al., 2022).
It is essential that two requirements be satisfied for the supply chain of a firm to be
successful. First, the supply chain must be cost-effective, and second, it must give
results on time. Both of these factors must be satisfied. We began out with an
explanation of how management of the bread supply chain works. It is not very
complicated. There are many different sophisticated techniques for managing supply
chains, and these procedures vary according on the size of the organization, the
intricacy of the chain, and the number of goods involved in each step. Therefore, the
management of the supply chain begins at the point of origin of the product or
service and continues all the way through its distribution and the consumption of it
by end users.

3.1 Importance of Supply Chain Management

It is possible for a firm to increase its profits if it is able to reduce its operating costs,
which is something that may be done via efficient management of the supply chain.
This level of efficiency is observable at each stage of the process, from the very
beginning, when the idea is conceived, all the way until the very end, when the
product is put on the market (Indeed, 2021).

• The consumer is entitled to the expectation that the product selection that is
offered to them will be true, as well as the quantity.
• The consumers have the right to anticipate that the things they purchase will be
easily available in the designated area. (That instance, if an auto repair shop does
not have the proper components in stock and cannot service your car for an extra
day or two, the level of customer satisfaction will decline.)
• Appropriate Delivery Timing - Customers anticipate that items will be delivered
at the given time, and they expect that things will be delivered on time (i.e.,
customer satisfaction diminishes if pizza delivery is 2 h late or Christmas presents
are delivered on December 26).
• Support Immediately After the Sale - Customers anticipate getting assistance with
their purchases in a timely way when it comes to obtaining support right after the
sale. (for instance, if a customer’s home furnace breaks down in the midst of
60 M. I. Khan et al.

winter and the issue can’t be rectified for a number of days, the customer’s level
of satisfaction will decline) (CSCMP, 2022).

3.2 Types of Supply Chain Management (SCM) Systems

Supply chain planning systems, also known as SCPs, and supply chain execution
systems, also known as SCEs, are the two types of supply chain management
systems. The functions that are carried out by the supply chain management systems
serve as the criterion for classifying them into one of the two categories (Kukreja,
2022).

3.2.1 Supply Chain Planning Systems

Companies may find here data that is beneficial to them in the process of developing
their supply chains, which is provided by these systems, and which can be located
here. In the process of creating supply networks, the following are some of the most
important jobs that must be filled:

• Developing a plan for acquiring the necessary resources and carrying out
manufacturing for the commodities in question, as well as estimating the degree
of demand for each item individually
• Formulating an estimate for the overall quantity of the product that will be
produced in a certain period of time
• Determining the location where the finished goods will be stored and completing
the necessary preparations for their warehousing.
• Determining the mode of transportation that will be used in the process of
delivering the products in a manner that is efficient and cost-effective
• Figuring out how much finished product, intermediate product, and raw material
to have on hand in the proper proportions
• Determining how much of a certain product or service a firm has to create in order
to meet the requirements of all of its customers and ensure their satisfaction
(Kukreja, 2022).

3.2.2 Supply Chain Execution Systems

These informational systems provide assistance to firms in the course of carrying out
the phases that are engaged in their supply chains by providing data that is of use to
those organizations (Azmat et al., 2022; Ali et al., 2021; Qader et al., 2022). When it
comes to the execution of supply chain activities, the following is a list of some of
the most significant duties that are carried out:

• Managing the flow of things from manufacturers to distributors to retailers and

finally to consumers in order to guarantee the accurate delivery of products and
ensuring that customers are satisfied with the service.
Relationship and Impact of Block Chain Technology and Supply. . . 61

• Providing information on the current processing status of orders in order to enable

vendors to give customers with realistic estimates of when their items will be
delivered
• Keeping a record of shipments and giving an accounting of things that have been
returned or are planned to be repaired and serviced in the future.

3.3 Drivers of Supply Chain Management

There are a number of components of supply chain management as below.

3.3.1 Planning
This is a very important stage in the process. Before beginning the whole supply
chain, it is vital to complete and put into action the strategy that will be used. It is
essential to investigate the product or service’s demand, as well as its viability,
expenses, profitability, and labor, among other factors. It will be quite challenging
for the organization to achieve success in the long run if it does not have an
appropriate plan or strategy. Therefore, this phase requires a substantial amount of
time to be committed to it. It is impossible to go forward until all potential
advantages and disadvantages have been weighed and the plans have been
completed. Every company needs some kind of plan, whether it’s a blueprint, a
road map, or a strategy, on which to base its strategic decisions. The ability to
recognize demand and supply trends in the market is one of the many contributions
that planning makes to the establishment of a successful supply chain management
system (iqualifyuk, 2017; Kusi-Sarpong et al., 2022; Piprani et al., 2022; Miao et al.,
2022; Mubarik et al., 2022).

3.3.2 Information
The unceasing dissemination of knowledge is the driving force behind today’s
globe. In order for a company to be successful, it is very necessary for that company
to have access to the latest information about every aspect of the product that it
manufactures. If the information is given efficiently and in a timely way to all
business levels, then the market patterns of supply and demand for a particular
product may be grasped most effectively. This may be the case if the information is
shared throughout the firm. In a global economy that is dependent on the accumula-
tion of knowledge, information is very important, and ignorance on any aspect of a
business may literally spell doom for the company’s future (iqualifyuk, 2017).

3.3.3 Source
The suppliers are an essential component of the management systems for the supply
chain. When developing goods and services for final consumers, many sets of raw
materials are put to use in the production process. As a result, it is very necessary to
get raw materials of an acceptable quality at rates within a reasonable price range. If a
supplier is unable to meet both the deadline and the established budget for delivery,
the company may suffer financial losses and suffer a horrible public image.
62 M. I. Khan et al.

3.3.4 Inventory
A well-kept inventory, which is painstakingly maintained, is an essential component
of a supply chain management system that achieves a high level of success. A list of
the things, raw materials, and other essentials that are required for the manufacturing
of a product or service is referred to as an inventory. This list has to be updated on a
regular basis so that we can differentiate between the existing inventory and the
required inventory. The management of inventories is a crucial part of the supply
chain management function. Without it, neither the production nor the sale of the
product would be possible, hence inventory management is absolutely necessary for
this function. Businesses have started paying a larger amount of attention to this
element as a result of the impact it has on the supply chain (iqualifyuk, 2017).

3.3.5 Production
The production stage is one of the most important parts of the whole system. It is
only possible if all of the other components of the supply chain are working in
tandem with one another. It is essential that proper planning and supply of
commodities, in addition to the maintenance of an accurate inventory, be carried
out before the production process can get underway. Following the completion of
production, products are examined, packaged, and given their last touches before
being sent out for delivery.

3.3.6 Location
Any firm that has the desire to continue existing and even thriving will want a
location that is profitable for the business. Take, for instance, the construction of a
facility to produce carbonated beverages in an area with a restricted availability of
water resources. A corporation of this kind has an essential need for water. It is
possible that the lack of available water may impede operations and have a detri-
mental effect on the company’s image. A company will not be able to grow if it is
required to split a scarce raw resource with the community. Because of this, it is
essential for a company’s success to choose a location that is beneficial, well-
connected, and located in close proximity to the source of important production
supplies. When developing a business unit, it is important to consider both the
availability of and the demand for human labor (iqualifyuk, 2017).

3.3.7 Transportation
Transportation is very necessary in order to get unprocessed resources to the
manufacturing unit and completed goods to the market. It is imperative at each
and every level that products be transported in a timely manner in order to keep the
flow of the business process uninterrupted. Any business that gives this component
the attention and care it deserves will be rewarded with timely production and
delivery of its products, which will lead to increased profits.

3.3.8 Return of Goods

A strong supply chain not only includes a mechanism for the return of things that are
faulty or do not perform as intended, but it also includes a customer grievance
Relationship and Impact of Block Chain Technology and Supply. . . 63

resolution unit that is very responsive. Nobody is without flaws. It’s possible for a
machine to break down only once, or over a million times. It is possible to plan for
the possible return of products under a variety of circumstances as part of a strong
business operation. Even the most meticulous quality control procedures might
sometimes miss flaws due to unanticipated circumstances. In the case that such
violations do place, which are always followed by complaints from customers, a
corporation is required to recall the product (or products) in question and provide an
apology. This not only helps to cultivate great connections with customers, but it
also helps to maintain goodwill over time (iqualifyuk, 2017).

3.4 Benefits of Supply Chain Management

The following are some of the benefits that are made possible by effective supply
chain management (SCM) systems, which also contribute to an improvement in the
company’s overall performance.

• Improve the quality of service provided to customers by delivering to them the

relevant products at the suitable time and in the appropriate location. This will
eventually lead to a rise in income for the company (Mubarik et al., 2021).
• Provide the companies with the capacity to quicken the process by which they
bring their products to market in order to better compete. Because of this, the
companies get their payments in a timelier manner compared to their rivals who
do not have an efficient supply chain.
• Decrease the entire costs associated with the supply chain, including the costs
associated with obtaining materials, the costs associated with shipping, the costs
associated with carrying stocks, etc. The reduction in the costs associated with the
supply chain has contributed to the expansion of the profitable operations of the
firm (Kukreja, 2022).

3.5 Blockchain Technology in Supply Chain Management

Blockchain is more than just electronic data exchange (EDI); it is the backbone of
supply chains, giving substantial benefits over the traditional IT infrastructure and
analytical capabilities of today’s supply networks. BCT is scalable, which means
that any number of participants may be added to the blockchain without the integrity
of the data being compromised. Since blockchain is independent from both its
immediate surroundings and previous systems, it enables speedy installation. Once
information has been recorded in a block, it cannot be changed, and the use of
distributed storage makes it very difficult to launch a cyberattack. Every person that
is a member of the chain has their own complete copy of the data. Participants, on the
other hand, have the ability to maintain the confidentiality of firm information
provided they precisely define their access rights. (Lierow et al., 2017). Because
businesses may digitize physical assets and generate a decentralized unchangeable
64 M. I. Khan et al.

record of all transactions using blockchain technology, it is feasible to trace assets

from the moment of manufacture all the way through delivery or usage by the end
user. Blockchain technology may enable end-to-end tracking in the supply chain
more transparent and accurate. Both enterprises and consumers gain from the better
visibility of the supply chain because to this increased openness (Laaper &
Fitzgerald, 2021).
Increased supply chain transparency may be driven by blockchain technology,
which may aid in the battle against fraud for high-value products such as diamonds
and prescription drugs. The use of blockchain technology could assist businesses in
gaining an understanding of the process by which raw materials and finished
products are moved from one subcontractor to the next, thereby lowering the risk
of profit losses due to counterfeiting and gray market trading and boosting end-user
confidence by lowering or eliminating the impact of counterfeit products.
In addition, firms are able to have a better degree of control over contract
manufacturing that is outsourced. All of the parties in a supply chain have access
to the same information through blockchain, which has the capacity to decrease the
amount of errors that occur during data transfer or communication. It is feasible to
spend less time checking data and more time offering goods and services, which may
result in either an increase in quality or a decrease in cost, or both (Laaper &
Fitzgerald, 2021).
Some other benefits of blockchain driven supply chain are:

• Enhance the material supply chain’s ability to be monitored in order to ensure

compliance with corporate needs.
• Decreased losses caused as a consequence of dealing in counterfeit products or
gray markets
• Strive to attain improved visibility and compliance with reference to outsourced
contract manufacturing.
• Decrease the quantity of paperwork as well as the costs of administration.
• Additional potential for benefits.
• Improve the company’s image by being open and clear about the sort of materials
utilized in the creation of items.
• Increase the data’s creditability as well as the public’s faith in it.
• Take actions to limit the prospective harm to your public relations caused by
supply chain malfeasance.
• Engage stakeholders.

3.6 The Impact of Supply Chain Management on Inventory

Management

The supply chain would not function properly without proper management of the
inventory. It covers a number of different issues, including the management and
supervision of purchases made from suppliers and consumers, the control of the
amount of product that is available for sale, the maintenance of storage space for
Relationship and Impact of Block Chain Technology and Supply. . . 65

stock, and the fulfillment of requests (Waller & Esper, 2014). The management of
connections with both customers and suppliers is an essential component of supply
chain management. The idea of working together to solve problems has been seen as
the essential component of supply chain management in a few different contexts. On
the other hand, a more in-depth analysis of supply chain connections, in particular
those involving product flows, reveals that inventory movement and storage are at
the heart of these interactions. The process of acquiring, transferring, or
administering inventories makes up a significant amount of the tasks that are
involved in managing relationships. Due to the fact that it is the pivotal node in
supply chains, inventory plays an extremely important part in the logistics of supply
networks. One of the most fundamental roles that inventory plays in supply networks
is ensuring that demand and supply remain in a state of balance with one another.
When it comes to effectively managing forward and reverse flows in the supply
chain, businesses have to deal with upstream supplier exchanges as well as down-
stream customer requirements. Because of this, a company is placed in the situation
of having to find a way to meet the often unpredictable demands of customers while
also ensuring that it has an adequate supply of resources and products. Inventory is
often used to accomplish this equilibrium-setting task. For example, the use of sales
and operations planning (S&OP) strategies is becoming more popular as a trend. The
major goal of S&OP is to match strategic plans between the company’s demand
management activities (such sales forecasting and marketing) and its operational
divisions. This is the core purpose of S&OP (such as manufacturing, supply chain,
logistics, and procurement). This often necessitates in-depth discussions on the
on-hand inventory, inventory that is in route, and inventory that is currently being
processed by the firm (Waller & Esper, 2014). Some of other impacts of supply chain
management on inventory management are below.

3.6.1 Decreases Purchasing Cost

Retailers are depending on supply chains to swiftly deliver expensive things so that
they may reduce the length of time that they are obliged to maintain expensive
inventories in their stores. For instance, in order to cut down on unnecessary
inventory expenses, consumer electronics merchants want prompt delivery of
60-inch flat-panel plasma HDTVs (Waller & Esper, 2014).

3.6.2 Decreases Production Cost

It is depending on supply networks whether or not manufacturers are able to reliably
move materials to assembly plants. In the absence of these systems, there is a
possibility that production may be interrupted due to a scarcity of materials. For
example, if a vehicle assembly factory is forced to shut down because of an
unforeseen delay in the delivery of components, the consequent lost pay might
amount to millions of dollars each day and $20,000 per minute.

3.6.3 Decreases Total Supply Chain Cost

The design of networks that meet the needs of the customer service while incurring
the least amount of total cost is the responsibility of the managers of the supply
66 M. I. Khan et al.

chain. These managers are vital to the success of both manufacturers and retailers.
Companies who are able to maintain seamless operations across their supply chains
have a greater ability to compete successfully in the market. For instance, the
innovative approach to the computer supply chain that Dell utilized involved the
production of each computer according to a specific order placed by a client,
followed by the shipment of the computer directly to the consumer. This was
accomplished by placing the production of each computer directly after the order
was placed by the client. Because of this, Dell was able to avoid having substantial
stockpiles of computers sitting in warehouses and retail locations, which resulted in a
cost savings of several millions of dollars (Prologis, 2022).
Since the focus of this chapter is on inventory management the next section will
focus on blockchain integration with inventory management in supply chain.

4 Blockchain Technology and Inventory Management

Participants in a blockchain supply chain may find it easier to enter pertinent

information, such as price, date, location, quality, and certification, using the ledger
to facilitate more efficient supply chain management. The accessibility of this
information within blockchain has the potential to improve the traceability of the
material supply chain, reduce losses incurred as a result of counterfeiting and the
gray market, enhance visibility and compliance regarding outsourced contract
manufacturing, and possibly strengthen an organization’s position as a leader in
responsible manufacturing (Laaper & Fitzgerald, 2021).

4.1 Role of Blockchain Technology in Different Aspects

of Inventory Management

There are a number of roles blockchain technology can play in different aspects of
inventory management as below.

4.1.1 Blockchain in Inventory Management

Blockchain technology was not initially developed to assist warehouses in improv-
ing and optimizing their inventory management; however, this is something that the
technology does very well. By keeping a permanent record of each transaction,
blockchain technology makes it possible to link warehousing facilities, factories,
suppliers, distribution hubs, production locations, and retail partners. After then, the
data are saved and made accessible to everyone who uses the network (Prologis,
2022).

4.1.2 Blockchain in Inventory Costing

When the distributed ledger technology (blockchain) is used for record keeping,
various assets, such as units of inventory, orders, loans, and bills of lading, are each
given a one-of-a-kind identification that also functions as a digital token. This
Relationship and Impact of Block Chain Technology and Supply. . . 67

ensures that each asset can be traced back to its original owner. In addition,
participants in the blockchain are each given a one-of-a-kind identity, which is
also referred to as a digital signature, that they are required to use in order to
authenticate the blocks that they contribute to the distributed ledger. This is done
in order to prevent tampering with the data in the distributed ledger. After that, the
blockchain makes a record of every single step of the transaction as a transfer of the
corresponding token from one party to another participant (Gaur & Gaiha, 2020).

4.1.3 Blockchain in Warehouse Inventory Management

Even in the field of warehouse operations, blockchain technology is still in its
infancy; yet one cannot ignore the enormous potential that it has for the industry
as a whole. Warehouse operations are one of the most important parts of the supply
chain. It has the potential to revolutionize everything, from the administration of
inventory to the tracking of transportation to the logistics of relocating objects from
one place to another. Because of the use of blockchain technology for the purpose of
data authentication, the whole supply chain is able to contribute data and validate
that data. Because of this, it is impossible for the data to be changed in any manner
(Prologis, 2022).

4.1.4 Blockchain in Inventory Accounting

The necessity to enter accounting information into a large number of databases is
eliminated by BCT’s use of a technology known as distributed ledgers, which makes
this task unnecessary. In addition to this, the necessity that auditors reconcile several
ledgers may be eliminated as a result of this change. As a result of this, large amounts
of time may be saved, and the possibility of mistakes brought on by people may be
considerably reduced (Gaur & Gaiha, 2020).

4.2 How Manufacturers Can Use Blockchain for Inventory

Management

When it comes to managing their inventories, most retailers and enterprises have
always operated under a reactive paradigm. If manufacturers managed their
inventories with the use of blockchain technology, they may see significant
reductions in the imbalances and inefficiencies they now face. It is reasonable that
blockchain is becoming increasingly popular for use in inventory management given
that it enables businesses to link every aspect of the supply chain with a safe,
transparent, and permanent ledger of transactions, thereby resolving the greatest
challenges that inventory management teams face. According to the findings of some
studies, the adoption rate of blockchain technology for inventory management was
somewhere about 5% in 2018. It is expected that it will reach 54 percent during the
course of the subsequent 5 years. It is easy to understand why blockchain technology
is becoming increasingly popular for use in inventory management. Blockchain
enables businesses to connect every aspect of their supply chain with a secure,
68 M. I. Khan et al.

Fig. 3 Different types of blockchain. Source: Allerin (2022)

transparent, and permanent ledger of transactions. This helps inventory management

teams overcome the most difficult challenges they face (Joshi, 2019) (Fig. 3).

4.3 Proactive Inventory Management with Blockchain

Using blockchain technology, each player in the supply chain is able to communi-
cate with one another. It helps to improve communication between partners in the
supply chain, which in turn cuts down on the amount of errors that are made. The
fact that the data can be accessed in real time makes blockchain an invaluable tool for
streamlining processes and ensuring that the system always provides correct results.
Blockchain is a decentralized ledger that offers complete safety and transparency for
all transactions that take place throughout the supply chain. The records of the
transactions are saved, and they may be accessed by anybody who uses the network.
Once data is recorded, it cannot be changed without the approval of all participants,
and every transaction and alteration that takes place on a blockchain can be tracked
back to its original source. This helps to decrease fraud committed by employees and
gives a mechanism of traceability that saves time in the event that fraud does take
place. Businesses are able to more accurately forecast the demand in the market
when they use blockchain technology. As a consequence of this, the personnel
responsible for inventory management are able to pro-actively prepare for refilling,
rather than just reacting to stock-outs (Ishizaka et al., 2022; Joshi, 2019).
Relationship and Impact of Block Chain Technology and Supply. . . 69

4.4 Blockchain Basics for Inventory Management, Logistics

and Warehousing

A manufacturer may record and see transactions made at each level of the supply
chain if they are using blockchain technology. Because of its decentralized character,
distributed ledgers provide companies with access to a single, immutable truth that
may be used not only for the settlement of disputes but also for the planning,
administration, and operation of logistics and storage facilities. The fact that the
Blockchain technology is incredibly secure is another benefit for companies to take
use of. Hackers would have a very difficult time targeting encrypted information that
is maintained on blockchain because to the immutable and decentralized nature of
block chain. Hackers would have a very difficult time targeting blockchain-stored
information (Wegrzyn & Wang, 2021).

4.5 Blockchain Benefits for Inventory Logistics and Warehousing

Management

Both the absence of visibility across contemporary logistics networks and the
continued use of antiquated paper documentation techniques are contributors to
the complexity and inefficiency of these systems. Blockchain technology offers a
solution to each of these issues.

4.5.1 Lack of Visibility

Because of the complexity of their logistics networks, businesses often have blind
spots in their supply chains, which makes it more difficult to locate things at any
given time. Because of this lack of visibility, firms sometimes have a difficult time
identifying performance issues. The inability of firms to maintain accurate delivery
schedules and make efficient use of corporate resources is hampered by the absence
of real-time monitoring (Gaur & Gaiha, 2020).

4.5.2 Paper-Based Systems

Paper-based records are the standard for logistics networks; as a consequence, each
entity that handles a product is required to manually keep records on that commod-
ity; this might result in duplicate information or information that is in contradiction
with other data. In addition to this, dishonest individuals may easily fabricate paper
documentation since it is so easy to do so. In conclusion, it’s possible that the players
in the supply chain may provide and process paper documents more slowly than
digital documentation. In the present logistics supply chain, there is a possibility that
cargo containers may be held up at the port while authorities wait for the receipt of
the paper bill of lading (which functions as the contract of transport, certification of
product reception, and title document) (Gaur & Gaiha, 2020).
70 M. I. Khan et al.

4.5.3 Blockchain Benefits for Warehousing

The growing need for storage space in general has brought to the forefront some of
the challenges that are connected with managing and keeping track of warehouse
inventories. Utilizing blockchain technology may assist in alleviating some of the
challenges connected with regulating and keeping track of inventory.

4.5.4 Moving beyond Reactive Inventory Management

In most cases, companies manage their warehouses in a very reactive manner, which
means that they only buy more inventory when stock levels are low or when
predictive models (which might take some time to build) indicate the need to order
additional inventory. This means that corporations only buy more inventory when
stock levels are low or when predictive models (which might take some time to
build).

4.5.5 Minimizing Manual Processes

The bulk of warehouse tasks, such as recording the location of goods, picking
inventory, and monitoring inventory, are carried out manually. Smart warehouses
may be able to increase their level of automation by adding blockchain technology as
firms continue to phase out human processes as a result of the development of
advances in warehouse automation (such as inventory-counting drones and picking
robots). Stocking, replenishing, selection, and packaging are all more efficient
thanks to the usage of blockchain technology, which facilitates digital recordkeeping
and the creation of smart contracts (Kukreja, 2022).

4.5.6 Smart Contract Solutions

Computer programs known as “smart contracts” are designed to carry out activities
automatically in accordance with a pre-established set of guidelines. The technology
that supports blockchain enables the execution of what are known as “smart
contracts.” Transactions that take place between participants in a supply chain may
become simpler as a result of this function, which also produces a paper record of the
transactions that take place. It is possible that participants in the supply chain will get
their payments in a timelier manner, which will result in a reduction in administrative
costs. The following are some of the ways that businesses engaged in logistics and
storage may utilize smart contracts:

• Put in place a program that will make the recording of delivery times and the
receipt of items into inventory fully automated.
• Utilize an automated method to process payments for the inventory that was
received.
• In the event that a product that is currently held in inventory is likely to go out of
date or if the price of a product that is currently held in inventory has reached a
“strike price” that was previously decided, the necessary parties should be
notified.
Relationship and Impact of Block Chain Technology and Supply. . . 71

• Collaborate with devices that are connected to the Internet of Things in order to
send out alerts whenever the conditions of a warehouse or shipping container,
such as temperature and humidity, suffer a change.
• Put in place a program that will remove credits automatically in the event that the
Service Level Agreement (SLA) and Key Performance Indicator (KPI) metrics
are not satisfied.

It is important to automate the process of recording product transfers across members

of the supply chain, beginning with the manufacturer and ending with the final
consumer. Establishing a link on the blockchain between importers, exporters, and
each party’s bank may help to automate the execution of commercial transactions
between the two parties. Because of this, we will be able to reduce the amount of
paperwork and quality control processes that are unnecessary (Kukreja, 2022).

4.5.7 Blockchain for Digital Inventory Logistics and Smart

Warehouses
The handling of inventory logistics, which is the management of incoming and
departing flows of products, as well as inventory warehousing, both cost businesses
a large amount of money. Inventory logistics refers to the management of incoming
and exiting flows of items (the receipt, storage, and distribution of goods). Even
when business is booming, it may be difficult to maintain a handle on the costs
associated with logistics. During times of extensive disruption, the costs may go
perilously close to becoming unsustainable, which would be a terrible situation.
Only COVID-19 was to blame for the widespread shortages of consumer products
and the accompanying hikes in prices (Wegrzyn & Wang, 2021).

5 Recent Developments and Future Outlook

Some recent developments in blockchain are Bitcoin, the first blockchain applica-
tion, inspired substantial blockchain testing, mainly in the financial services indus-
try. In 2015, Nasdaq and OMX Group Inc. worked with Chain, a blockchain
business, to test and assess blockchain technology for share trading on Nasdaq
Private Market. Visa Europe, the Commonwealth Bank of Australia, RBS, and a
number of UK high street banks have all claimed that they are constructing their own
blockchain-based proof-of-concepts (Laaper & Fitzgerald, 2021). Large
corporations and startups are examining uses for blockchain outside of the financial
services industry as the technology gains prominence. Numerous organizations are
currently experimenting with blockchain technology to satisfy a range of objectives.
Provenance, a firm focusing on supply chain transparency, has conducted a
six-month test for tracking the ethical origin of tuna in Indonesia using blockchain
technology. Monegraph, a startup created in 2014, leveraging blockchain technol-
ogy to guarantee the use and sharing rights of digital media such as video snippets
and brand-sponsored content, and to allow revenue sharing among media creators,
publishers, and distributors. Skuchain provides blockchain-based B2B trade and
72 M. I. Khan et al.

supply chain finance solutions for the $18 trillion global trade finance industry,
which is composed of various actors, such as buyers, sellers, logistics providers,
banks, customs, and third parties (Jiang et al., 2021; Laaper & Fitzgerald, 2021).

5.1 Current Limitations Faced in Inventory Management

The supply-and-demand model serves as the foundation for the present-day inven-
tory management system. When using this method, businesses confront a significant
obstacle when attempting to manage the network of their supply chain. The lack of
visibility that exists farther down the supply chain makes it difficult to accurately
gauge the level of demand from customers. These supply chains include a wide
variety of partners, including wholesalers, distributors, and retailers working
together. Each of these organizations operates according to its own procedures and
frameworks in order to efficiently manage financial transactions and the flow of
commodities (Joshi, 2019).

5.2 Concluding Remarks

In this chapter, we have investigated the principles of blockchain technology, as well

as its history and how it might be used in supply chain management. We
demonstrated how blockchain technology may be connected with supply chain
management to provide more efficient inventory management. We address the
significance of blockchain technology in supply chain management technologies
as well as the advantages it offers in terms of the integration and adaption of
inventory and cost. Blockchain technologies have the potential to provide additional
answers to issues relating to supply chain management, which will enable a wide
variety of applications. The global business will see an improvement in blockchain
management for supply chain operations as a result of more research into the
domains and applications discussed in this chapter.

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