Blockchain Adoption for Traceability in Food Supply Chain Networks
50 Pages Posted: 21 Nov 2019 Last revised: 12 Aug 2020
Date Written: August 10, 2020
Innovative retailers in food supply chains have been exploring blockchain as part of an ongoing effort to reduce contamination risks and food waste. We develop a three-tier supply chain model with multiple upstream (tier-2) suppliers to investigate: how blockchain adoption affects incentives of supply chain members, and whether and how its anticipated benefits can be realized. We find that blockchain-enabled full traceability brings direct revenue benefit to every supply chain member by saving uncontaminated food from disposal (pure traceability effect), but also leaves each tier of the supply chain vulnerable to its immediate downstream buyer’s exploitation through strategically lowering the purchasing price (strategic pricing effect). The interplay of the two effects may result in some of the supply chain members (even the retailer) being worse off with blockchain adoption, and the system being exposed to higher contamination risk; the latter is due to the weakened upstream supplier’s incentive to exert contamination risk-reduction effort. Moreover, the supply chain network structure also influences the benefit distribution of blockchain adoption: The retailer always benefits from blockchain adoption in network structures where the tier-1 supplier’s strategic pricing power is eliminated or weakened; all supply chain members benefit from blockchain adoption in a network with a large number of tier-2 suppliers. Finally, we show that alternative risk-mitigation schemes such as tier-2 coordination can diminish the value of blockchain adoption, and partial traceability enabled by tier-1 product inspection can be more beneficial to the retailer than blockchain adoption.
Keywords: Blockchain, traceability, multitier food supply chain, food contamination, technology adoption
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