Blockchain Adoption for Traceability in Food Supply Chain Networks

50 Pages Posted: 21 Nov 2019 Last revised: 12 Aug 2020

See all articles by Lingxiu Dong

Lingxiu Dong

Washington University in St. Louis - John M. Olin Business School

Phil (Puping) Jiang

Washington University in St.Louis - John M. Olin Business School

Fasheng Xu

Syracuse University - Whitman School of Management

Date Written: August 10, 2020

Abstract

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

Suggested Citation

Dong, Lingxiu and Jiang, Phil (Puping) and Xu, Fasheng, Blockchain Adoption for Traceability in Food Supply Chain Networks (August 10, 2020). Available at SSRN: https://ssrn.com/abstract=3484664 or http://dx.doi.org/10.2139/ssrn.3484664

Lingxiu Dong

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1156
St. Louis, MO 63130-4899
United States

Phil (Puping) Jiang

Washington University in St.Louis - John M. Olin Business School ( email )

St. Louis, MO
United States

Fasheng Xu (Contact Author)

Syracuse University - Whitman School of Management ( email )

721 University Avenue
Syracuse, NY 13244-2130
United States

HOME PAGE: http://www.fashengxu.com

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