IN DEGREE PROJECT INDUSTRIAL ENGINEERING AND MANAGEMENT,SECOND CYCLE, 30 CREDITS

, STOCKHOLM SWEDEN 2018

Potential of Smart Contract in Business to Business

AVINASH VATTIKUTTI

KTH ROYAL INSTITUTE OF TECHNOLOGYSCHOOL OF INDUSTRIAL ENGINEERING AND MANAGEMENT

www.kth.se

Potential of Smart Contract in Business to Business

by

Avinash Vattikutti

Master of Science Thesis TRITA-ITM-EX 2018:716

KTH Industrial Engineering and Management

Industrial Management

SE-100 44 STOCKHOLM

Master of Science Thesis TRITA-ITM-EX 2018:716

Potential of Smart Contract in Business to

Business

AVINASH VATTIKUTTI

Approved

2018-10-23

Examiner

Jannis Angelis

Supervisor

Luca Urciuoli

Commissioner

SCANIA

Contact person

João Dias Ferreira

Abstract The implementation of smart contract technology with their plausible applications in a business

to business are explored. The thesis work shows how Blockchain technology works on the

concept of decentralized system which is beneficial to eliminate the need for central authority.

The thesis focuses on elimination of challenges pertaining to the selected departments in an

organization. The thesis resolves challenges pertaining to lack of transparency, traceability and

significant time-delays while in the process of decision making. The influence of blockchain

technology and smart contract technology to eliminate these challenges are discussed. Logic of

the smart contract and working of the blockchain pertaining to a specific industrial case study

are demonstrated. Methodology to set up a smart contract interface in a business to business

setting is investigated in this thesis. An observation study has been done in order to show how

transparency, traceability and time delay in decision making is achieved by using smart contract

interface. This thesis also shows how the blockchain and smart contract technology tries to

implement coordination theory.

Keywords: Smart contract technology, Blockchain technology, transparency, traceability, time-

delays, coordination theory.

Acknowledgement

To Luca Urciuoli, my thesis supervisor, for his extreme motivation and guidance in each and

every step of the way. Without his support, expertise and extreme patience, this thesis would

not have been possible. I could not have imagined having a better supervisor for my thesis

study.

To João Dias Ferreira, my company supervisor, for his guidance in each and every stage in the

research. Without his support, this thesis would not have been possible.

To Jannis Angelis, my thesis examiner, for his guidance helped me in all the time of research

and writing of this thesis.

To my family and friends, who have always supported and believed me in each and every step

I have pursued and done.

Table of Contents

1.0 Introduction ....................................................................................................................1

1.1 Research Background ...................................................................................................1

1.2 Problematization ...........................................................................................................2

1.3 Research Purpose ..........................................................................................................3

1.4 Research Questions .......................................................................................................3

1.5 Delimitations ................................................................................................................3

1.6 Contribution .................................................................................................................4

2.0 Literature review ............................................................................................................5

2.1 Information Sharing ......................................................................................................5

2.2 Distributed Ledger technology ......................................................................................6

2.2.1 Blockchain Platform ...............................................................................................7

2.2.2 Smart Contract ...................................................................................................... 12

2.3 Supply Chain Management ......................................................................................... 17

2.4 Supply Chain Coordination ......................................................................................... 17

2.4.1 Transparency ........................................................................................................ 18

2.4.2 Traceability........................................................................................................... 19

2.4.3 Time delay ............................................................................................................ 20

2.5 Literature Framework ................................................................................................. 20

3.0 Method .......................................................................................................................... 22

3.1 Research Approach ..................................................................................................... 22

3.2 Research Method ........................................................................................................ 22

3.3 Data Gathering............................................................................................................ 23

3.3.1 Literature Review ................................................................................................. 23

3.3.2 Interviews ............................................................................................................. 23

3.4 Steps to create smart contract Interface ....................................................................... 24

3.5 Research Ethics .......................................................................................................... 25

4.0 Problem Description ..................................................................................................... 26

4.1 Implementation ........................................................................................................... 27

4.2 Result from the smart contract interface ...................................................................... 29

4.2.1 Observation on transparency ................................................................................. 29

4.2.2 Observation on traceability ................................................................................... 30

4.2.3 Observation on time delay .................................................................................... 31

4.3 After Implementation of smart contract ....................................................................... 32

5.0 Discussion ...................................................................................................................... 33

6.0 Conclusion ..................................................................................................................... 36

7.0 References ..................................................................................................................... 38

Appendix 1: ......................................................................................................................... 43

Appendix 2: ......................................................................................................................... 44

List of Figures

Figure 1: Framework for Blockchain analysis (Brenig, 2016) .................................................7

Figure 2: Centralized, de-Centralized and distributed network comparison (Morabito, 2017 ...8

Figure 3: Blockchain visualization (Zheng et al., 2016) ..........................................................9

Figure 4: Matrix to plot data access and writing/validation restriction (own representation) .. 11

Figure 5: Elements of smart-contract technology (own representation) ................................. 15

Figure 6: Simplified block structure in Ethereum blockchain (own representation) ............... 16

Figure 7: Framework for literature review (Own representation) ........................................... 20

Figure 8: Research approach (own representation) ................................................................ 22

Figure 9: Steps for developing smart contract interface (own representation) ........................ 24

Figure 10: Asset flow and Information flow between departments ........................................ 26

Figure 11: Data for creating smart contract interface(own representation) ............................. 27

Figure 12: Generation of new blocks and connection of blocks in represented in Sequence

Diagram(Own representation) ....................................................................................... 28

Figure 13: Input conditions for generating Block (Own representation) ................................ 28

Figure 15: Input conditions for generating Block (Own representation) ................................ 29

Figure 16: Input conditions for generating Block (Own representation) ................................ 30

Figure 17: Input conditions for generating Block (Own representation) ................................ 30

Figure 18: Traceability of asset before implementation of smart contract (Own representation)

..................................................................................................................................... 30

Figure 19: Traceability of asset after implementation of smart contract (Own representation)

..................................................................................................................................... 31

Figure 20: Notification in the smart contract interface .......................................................... 32

Figure 21: Asset flow and information flow through smart contract between departments

(Own representation) .................................................................................................... 32

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1.0 Introduction Every business in the modern era is highly dynamic and competitive. To stay ahead of other

competitors, companies demand continuous innovation in their strategies on various aspects.

This continuous process of improvement is driven by the introduction of new technologies to

solve perennial management problems. Problems are broadly classified purely as managerial

and strategic issues which hamper the available productivity and reduce the efficiency of the

overall system.

At present organizations around the world widely use ERP (Enterprise Resource Planning) to

store data in a centralized system. Data can be fetched from the centralized system such that

every stakeholder in the organization can access it. But often in big companies due to reasons

pertaining to lack of communication, transparency, traceability and time delay in planning and

scheduling, the ERP platform poses threat to proper functioning of routine tasks.

In order to counter these demerits of ERP new technologies have to be tried out. One

meaningful way to mitigate such problems is to use smart contract. As described by Nick Szabo

in 1996, “a smart contract is a set of promises, specified in digital form, including protocols

within which the parties perform on these promises” (Nick, 1996). The relevance of Blockchain

technology is probed by improvement in areas such as tracking of asset, traceability of asset

and making the manufacturing business processes more secure and transparent. As per one of

the definitions, “In essence, Blockchain is a technology for decentralized storage of

transactional data. The storage of a transaction is organized in so-called blocks, while following

transactions are stored in new blocks. The sum of several blocks makes up a chain; a logical

sequence of transactions” (Nick, 1996). As far as supply chain management is concerned,

Blockchain technology is potentially poised to play a crucial role in three aspects: first is

traceability, second is smart contracts and third is safe transactions. Creating a consistent

network for traceability of assets will remain a major objective. Moreover, to achieve

transparent and reliable documentation of all movements and transactions, communication in

operations management must be matured as lack of cross functional coordination is one of the

biggest issues faced in currently implemented ERP systems. (Gopaul et al., 2016).

1.1 Research Background Given the advantages of Smart contract, its implementation in operations management is poised

to be disruptive (Erik, 2018) since it is relatively new. It is important to take a step-wise

approach towards the validation of such technology before its implementation on a day-to-day

basis in a business context. Therefore before implementing it on a big network, it is essential to

develop a concept and validate it on a small scale.

At Scania, Södertälje three different departments namely, machining, assembly and logistics

function in the production of an automotive engine component are considered to implement

Smart Contract to their day to day business affairs. Throughout the asset flow, there are several

stakeholders who are involved right from the supplier where the raw material is produced until

the logistics which delivers the product to the end user. In the current study, when it comes to

addressing issues related to traceability, time delay in decision making and planning; and

transparency among the three departments the smart contract is implemented.

If the departments in the company were considered as separate units, a set of rules or protocols

to allow fluent working environment are to be followed both within and outside the

departments. This set of rules not only separates the units, but also connects them. These

established rules and protocols do not necessarily streamline the information sharing and asset

flow process, thus giving rise to strategic issues. To resolve these issues it is first essential to

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identify the problems that do not allow streamlining of the information and asset flow. The

identified issue in an ERP system are transparency, traceability and time delay in planning and

scheduling. Moreover, once the issues have been identified the use of Smart contract to resolve

the gaps are to be explored. Pertaining to this thesis, a Smart contract can be used to establish

a set of rules and protocols that nullifies the operational limitations of the involved units

(departments) by real time validation and verification of data. Thus, implementation of a smart

contract interface that quickens the communication and has the potential to boost productivity

is an interesting area to probe in. Instead of analyzing business to customer relationship, here

the Smart contract are to be implemented in a business to business setting. The departments of

interest can be considered as a partial link of a big supply chain network.

The most important area of focus here is real time access to data as well as control of the shared

data and immutability of data. Moreover, this enables transparency and traceability of

information among the involved departments. This is because, a transparent association offers

information in a way that the responsible stakeholders can obtain a profound insight into the

problems that are substantial for them (Maitri, 2010). When it comes to importance of

transparency in operations management, some critical business issues like production

performance can be evaluated without any hassle (Meuwissen et al., 2003). If the system is

transparent then it is easier to narrow down to the problems that affect the business performance

and profitability. The performance and profitability are directly attached to the KPI (Key

Performance Indicators). An increase in the KPI highlights better profitability and performance

(Maitri, 2010).

1.2 Problematization The organization of interest have problems with tracking of asset flow and sharing of

information related to the asset which need to be investigated. Upon collection of information

about the issue, the problems that the three departments, logistics, machining and assembly,

were facing could be classified in three different categories:

Transparency – despite collecting data and tagging the assets with identification like

barcode, it is difficult to get the details of the stakeholders involved in handling the

asset, because the barcode is only there to connect the component to information on a

system and in this system the information might not be complete. Moreover, it is easy

to know where and how a problem has occurred. This is possible only when all the

involved stake holders have access to information for monitoring, while only the

authoritative personnel have the designation to modify or approve it. To create such an

open platform for information sharing, the information is to be decentralized so that

everyone who is authorized to get the information can access it.

Traceability – due to various reason like quality rejections and producing different

variants of products, etc. manufacturing businesses are often unable to trace where

exactly the problem arose. By the time the problem is traced back to its origin a lot of

time and effort is already lost. Moreover, in complex manufacturing setting as the one

that has been analysed in this study, tracing an anomaly is quite challenging. To improve

traceability and avoid production or delivery of unwanted asset a platform that connects

all the important nodes of the material flow for a given asset is needed.

Time delay – loss of productive time is intrinsic to the above-mentioned issues in a

general sense. Moreover, there are other activities like planning for maintenance,

scheduling, and decision making, etc. which cannot be categorized as futile but can be

made quicker to improve productivity. This is possible if there was a system that would

record the essential parameters in real time and present the impact results to assist

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operations management authority in running the business more efficiently. It is not only

about making quicker decisions but making decisions based on actual information. This

will improve the decision making since better decisions can be made when we know

better the state of things.

A suitable technology which could mitigate these problems need to be implemented

therefore enabling streamlined flow of information across all departments.

1.3 Research Purpose

The purpose of this thesis is to see the potential of Smart contract technology in addressing the

problems stated in the problematization. The potential of Smart contract is to be assessed,

considering the domain as three departments (Assembly, Machining and logistic) at Scania,

Södertälje.

Since the departments like logistic, machining and assembly have different technical roles and

different information requirements, it is important to provide a solution that resolves the issues

separately and bring the departments on the same platform as far as the information sharing is

concerned. Therefore, the objective is to device a software solution that allows access to

important information (attached to the asset like product identification number) that tracks

information from the order to delivery and contains the important parameters of time delay.

Access to these information in and across the logistic, machining and assembly departments in

an organized way is to be presented by the Smart contract interface.

1.4 Research Questions

The research purpose will be accomplished by answering the following research question:

The first question is related to creating smart contract interface

What type of contractual agreements (conditions) between the departments are

considered for creating smart contract interface?

The next two questions is related to how smart contract interface will achieve the problems

How are smart contract used to bring transparency and asset traceability across

departments in a business to business setting?

How are smart contract used to share asset information that improves the decision

making and planning procedure across departments in a business to business setting?

1.5 Delimitations This thesis is aimed to provide answers to the questions mentioned with regard to presented

problematization. But there are certain restrictions under which the thesis was performed. It is

delimited to a geographical area of Scania in Södertälje, even further the entire facility is not the

domain of this thesis. Since the focus was to design and test a Smart Contract interface, the domain

has been restricted to only three departments in the company; logistics, assembly and machining.

Nevertheless, the thesis does not take into consideration the supply chain related issues although

it is a popular belief that Blockchain is a solution to the transparency and traceability issues in

supply chain management. At this conceptual stage, financial aspects have been assumed to be of

minor importance, since they are difficult to estimate. Even so, by delimiting the thesis by

considering monetary aspects, the possibility for the solution presented here to serve as a complete

solution is also limited. To explore the technical challenges in implementing smart contract

crank-shaft is the only asset that has been considered for study, this restricts the domain of the

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thesis but allows the possibility to explore the intricacies of Blockchain and smart contracts in

depth. The interface has not been implemented and tested on actual asset flow in the department

rather, the interface was tested virtually with manual input of data from different nodes

(different computers). This was done to avoid the purchase of new sensors and systems which

would have incurred costs. In order to avoid breach of privacy and legal scenarios, information

which was identified as personal or sensitive for the company has been excluded from the trials

of the interface. The author made the decision to focus only on the technical solution which is

based on Blockchain technology, this is because scholars believe it to be of great potential in

the future.

1.6 Contribution

The main contributions of this thesis can be characterised as empirical and analytical. Empirical

in a way that the thesis work has concluded to a profound technological and business

recommendation. Analytical in a way that the results this thesis has produced are analytical and

are based on empirical findings.

This thesis mainly focuses on exploring the potential of Smart contract technology for

operational processes and information sharing optimization in the three chosen departments.

The topic of this thesis is interesting because currently there is a hype about Blockchain

technology, however there is limited knowledge about its applications in the manufacturing

business and how it can be used to improve the tracking of assets. The target of this thesis is to

design and implement a Smart contract interface based on the recommendations provided by

the officials. The interface benefits transparency, traceability and reduces the time delay for the

activities of the three departments. The operational and technical benefits of using this

technology are discussed in terms of information flow optimization.

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2.0 Literature review The focus of the literature review is justified by the purpose and research objectives. The main

focus of this chapter is to provide insightful details and analyses that have been done by

previously conducted researches in the subject.

2.1 Information Sharing

For a proper function of supply chain operations and planning, a comprehensive information

system is required which initiates, monitors, assists in decision making and reports. For forming

an integrated information system many components are to be combined. The major components

include:

Enterprise Resource Planning (ERP)

Material Requirements Planning (MRP)

Enterprise resource planning (ERP)

The ERP systems are also known as legacy systems and comprise the backbone of supply chain

information systems for most of the organizations. These systems hold the current and past data

as well as the transactions pertaining to the processes which enable initiating and tracking of

performance. Legacy systems are the main frame applications which were developed before

1990 for automation of transactions like order entry, order processing, warehouse operations,

inventory management, transportation and the financial transaction that are related to the

department. For example, the systems labelled as Order Management Systems (OMS) were the

ones that were related to customer orders, this is because these systems managed the process of

order fulfilment. In Addition to the order information, legacy systems also manage information

about customers, products, status of inventory and facility operations. In majority of the cases,

these legacy systems represented software modules which were developed independently,

hence they lacked consistency and integration. Thus, leading to problem of integrity and data

reliability.

ERP systems allowed integration of operations and initiation of reporting, monitoring and

tracking of critical activities like replenishment and fulfilment of processing. Moreover, the

ERP systems also incorporated an integrated corporate-wide database which was also referred

as a data warehouse, which along with the appropriate transactions facilitated logistics and

supply chain operations. Typical transactions comprised of order entry and fulfilment,

procurement or purchasing and transactions pertaining to production.

Communication system, execution system and planning systems are working close with the

ERP.

Communication Systems

The flow of information between functional groups within a firm and amongst the supply chain

partners was facilitated by the communication module. The logistic information consists of real

time data about operations of the company, inbound material flow, and status of production,

inventory, customer shipments and a record of the incoming orders.

Execution Systems

Enterprise execution systems work in close conjunction with the ERP systems to provide

specific function and support to the logistic operations. While, the ERP systems include

substantial functionality, most of them lack the capability to facilitate warehouse and

transportation operations. Most of the execution systems are integrated in the ERP to allow data

exchange. Apart from the supporting the warehouse management functions like receiving,

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storage, shipping and the warehouse automation, Warehouse Management Systems (WMS)

also included reporting for management, value added services support and decision capability.

Planning Systems

Supply chain planning systems are now called as Advanced Planning and Scheduling (APS)

systems, these are developed to support in evaluation of supply chain alternatives and advice

the supply chain in decision making. The use of sophisticated supply chain planning systems is

increasing rapidly to allow for considering complex alternatives especially under tight decision

time constraints. General supply chain planning applications comprise of activities like

production scheduling, inventory resource planning and transportation planning. The APS

software systematically identifies and evaluates alternative courses of actions and proposes an

optimal solution that follows the imposed constrains. The decision making and proposing by

the APS is done based on the previously maintained and acquired data. The constraints that

generally are involved in the system are related to production, facility, transportation, inventory,

or raw material limitations.

Material Requirements Planning (MRP)

Material requirements planning (MRP) originates at the sales department with the planning of

sales. This plan allows the management to estimate the volume that they think is to be sold in

the following months or years to come. Then the comparison is made between the sales plan

and the available finished product stock which yields the volume to be produced. The

information from this calculation acts as an input for the manufacturing planning and control

systems. This input information can be distinguished in the following elements:

Master planning

Manufacturing resources planning

Master production scheduling

General capacity testing

Material requirement planning

Capacity requirements planning

Order release

Priority management

Capacity Management

2.2 Distributed Ledger technology

According to Goel (2016), the main four fundamental features are required to create the

distributed ledger technologies. Firstly, the distributed nature of technology is completely

independent and of third party intermediaries. Secondly, the cryptographic hashing creates

consensus mechanism in which transactions are verified. Thirdly, “the irreversibility” of the

transaction history, enabled by a proofing process. Lastly, the selection between permissioned

and permission less ledger, which defines much of the privacy.

The Blockchain is a peer-to-peer distributed decentralized application system which was

originally introduced for Bitcoin application, which then evolved and used for wide range of

applications (Goel, 2016). In the ongoing researches blockchain technology has often been

described as a milestone and considered as the next technology revolution referring to ‘the next

internet’ (Goel, 2016). This chapter serves to make such a statement comprehensible by

providing a basic understanding of how the technology works. In order to explain the

blockchain technology as an integral unit it is necessary to know its purpose, its structural

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components and functions. In this chapter the vision that is pursued with this technology is

described along with the prerequisites that must be fulfilled. There are many ways in which the

blockchain technology can be implemented and hence a fully-explanatory explanation cannot

be made.

The technology described in this chapter is based on the blockchain technology behind Bitcoin

blockchain, which in other words is the basis for the explanation of a Smart-contract in the

blockchain applications. A technological framework that will work as a base to understand

following chapters of this research project is shown in Figure 1. The description of technology

is shaped as per the framework provided by Brenig et al. (2016).

Figure 1: Framework for Blockchain analysis (Brenig, 2016)

Blockchain Platform: According to Brenig et al. (2016) A Blockchain platform is identified

as a Decentralized consensus system. In market, there are different standards for Blockchain

technology. For example, the technologies working as the backbone of Bitcoin introduces some

standards, Ethereum introduces standards but it is different from Bitcoin standards and they

both represent different platforms, even if they are decentralized consensus system.

2.2.1 Blockchain Platform This section is aimed at providing a comprehensive definition for Blockchain platform. This is

done by analysing the critical building blocks that composes the Blockchain. According to

Mougayar (2016), the Blockchain platform can be recognized as the protocol of the Blockchain

technology, which is the fundamental basis for the other two layers, which are called as

applications and services. Blockchain primarily consists of a skeleton that works as the

technical backbone of applications like Bitcoin and Ethereum.

Following the definition provided by Glaser (2017), the current research recognizes Blockchain

platform as: “Blockchain is a transactional database, which is distributed among nodes linked

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in a peer-to-peer (P2P) communication network. The access to the network is based on a

permission mechanism, which enables the nodes to perform transactions that hold validity

based on a consensus mechanism.” (Glaser, 2017)

The following paragraphs provide a complete description of the technical building blocks

behind the interface of the Blockchain platform. The main aim of the subsequent sections is to

provide an overview of the technical characteristics behind the present and the future potential

market applications.

The top - down approach is followed for the description of structure of Blockchain platform.

Which starts by describing the network structure. Secondly, after the analysis of the ledger

architecture it will be disintegrated into blocks and transactions. Thirdly, a general

understanding on the Blockchain working procedure will be presented by the transaction

mechanism. Fourthly, the definition of permission mechanism will be established. Finally, the

description of various consensus mechanisms will be done.

2.2.1.1 The Network Architecture According to Swan (2015), the distributed nature of the Blockchain technology is its key

feature. A distributed computing network system is a system where data and resources are

spread out on various hardware nodes, which is different from the centralized and decentralized

networks. As shown in Figure 2, every node in the decentralized network will maintain

historical those who hold signed ledger can access the information. Database of transactions

which is shared among the nodes. In spite of having copy of the ledger on every node, only

According to Morabito (2017), the blocks can be considered as containers that are composed

of the shared ledger which hold the data. These containers can only be accessed by those who

have the permission, otherwise these containers are sealed and their content cannot be accessed.

Figure 2: Centralized, de-Centralized and distributed network comparison (Morabito, 2017)

The IP addresses are used to identify each node, while public key is used by the users to address

to each other. According to Glaser (2017), every node in the network represents a

physical/virtual machine that shares and transfer information via TCP/IP with other nodes in

the network. if the receiver’s public identity is known then any node can be used to send a

transaction to that particular node in the network. This doesn’t require any involvement from

the third party or central authority in the transaction.

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The system is more secure due to the absence of a central server, this is because it is more

difficult for a network to experience attacks like service denial attacks or client related attacks.

Additionally, huge hash recalculations are required for every block for changing a transaction

in the chain, which is to be registered after the modified block. This will improve the security

protection. Therefore, a trustworthy invisible authority which is represented by a consensus

mechanism is the basis on which the Blockchain is built (Xu, 2016).

As noticed by Meijer (2017), every node in Blockchain doesn’t have same power. Thus, a clear

distinction of powers is made. Making a clear distinction is also important since terms like

“miners”, “validators” and “full-node” are not used correctly and their meaning tends to vary

from application to application:

Users who only read the data: Those who have access to the data and store the

Blockchain.

Users who can read and write the data: These are the users that can send and receive

transactions through the Blockchain. Moreover, these users have access to the data and

store the Blockchain.

Users who validate data: These are the users that validate the transaction that are sent to

the Blockchain.

2.2.1.2 The Ledger Architecture According to Chuen (2015), a Blockchain ledger can be described as a string of blocks, which

can include a detailed list of transaction record, which is also similar to the conventional public

ledger. In Figure 3 describes a schematic visualisation of Blockchain. Every block in the chain

comprises of block-header and block-body. Block-header contains the data of previous and

following block-header hashes and time-stamp. Block-body is having inputs and outputs, which

comprises number of transaction and collection of transaction.

Figure 3: Blockchain visualization (Zheng et al., 2016)

Each node in the network hold a set of private and public keys. The private key is used to

encrypt the transaction before sending them. In order to send transaction, a sender needs his

private key and receiver’s public key. Before being stored or recorded in the Blockchain, the

transaction should undergo verification phase and signing phase. The signing phase is defined

as encryption of the sender’s data with the private key. The verification phase includes

computational problem’s solution that prevents same transaction from happening twice

(Morabito, 2017).

2.2.1.3 Blockchain Transaction Mechanism According to (Froystad P. and Holm J., 2016): The mechanism of transaction can be

explained in five key phases.

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Definition of Transaction: A sender creates transaction in the Blockchain, by

mentioning the value of transaction and the details of receiver’s public key (It also

includes receiver’s address). Lastly, the sender transaction approves with the sender’s

cryptographic digital signature. According to Morabito (2017), this proves the digital

authenticity.

Authentication of Transaction: As soon as transaction is sent to the network, nodes in

the network receives transaction, then it confirms the message validity by decrypting

the digital signature. As per (Froystad P. and Holm J., 2016), transaction will be waiting

in the pool of pending transaction until block is created.

Creation of the Block: In order to create block, a node in the network takes responsibility

of the transaction by combining with all other pending transaction. Moreover, this is an

updated version of the ledger. As soon as block is created, a block is spread all over the

network for validation.

Validation of the Block: The nodes in the network will be responsible for validating the

block received by the proposed block. Then nodes in the network will start an interactive

process to validate the block. In this process of validation, there might be deviation in

the Blockchain branches, since different nodes do not share same perspective of the

entire network state. Hence, it is essential to reach a consensus on the block validity

among the different nodes based on a validation technique. According to Zheng (2016),

this phase will verifies the validity of every transaction by avoiding the fraudulent

attempts of transaction.

Chaining Block: As soon as each every transaction is included in the block, a block has

been accepted. If the new block is recorded, this will be linked to the last Blockchained

in time. The chain is updated and spread to the network, which will be accepted as

verified version of the Blockchain (Froystad P. and Holm J., 2016).

2.2.1.4 The 4 Ps of the Blockchain The original decentralized Blockchain structure is not applicable to all time stamped ledger

application. Each and every type of applications requires different level of security. Hence,

Blockchain architecture is based on two dimensional classification system:

Public Blockchain/Private Blockchain

There is a huge difference between public Blockchain and private Blockchain, especially when

it comes to level of platform accessibility. In public Blockchain, any user can join the network,

without requiring third party permission. A platform allows to each and everyone in the network

can do transaction. In private Blockchain, only authorize user can have an access and read the

data. In this every user in the network are known and trusted.

Permissioned Blockchain/permissionless Blockchain

Based on the rights to write and vote on the platform, permissioned Blockchain and

permissionless Blockchain is distinguished. Only limited and known users can have an access

to create, update and verify the ledger is called permissioned ledger. But in permissionless

ledger, every users have rights to verify and propose updates to the ledger.

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Figure 4: Matrix to plot data access and writing/validation restriction (own representation)

2.2.1.5 Consensus Mechanism Blockchain platform is a cryptography-based system that is used to secure transactions in a

verifiable ledger of records. This basis leads to a redefinition of the mediator’s role as a

guarantee of validation in the system. This trust doesn’t rely more on any third-party but rather

on consensus mechanism. According to Swanson’s definition (2015), “consensus mechanism

is the process in which a majority (or in many cases all) of network validators come to

agreement on the state of a ledger”. Therefore, it comprises in the set of procedures and rules

that allow multiple nodes that are participating in the system to trust the information. From a

technical point of view, the use of pre-defined state transition rules is enabled by the consensus

algorithm, these rules act as a method to securely update the states, where the transition of state

is modified and decentralized in every node (Buterin, 2014). According to Morabito (2017), an

operative consensus mechanism should be based on three key concepts:

The laws, rules, transitions and states in the Blockchain are mutually accepted;

The nodes infrastructure, methods and stakeholders to which the laws apply are also

mutually accepted;

The perception of identity that is accepted by all nodes should be common and should

comply with the same set of rules.

There are various alternative consensus mechanisms that have been developed during the past

three decades. One of the most famous consensus mechanism is the Bitcoin, the Bitcoin

Blockchain is based on the “longest chain” mechanism, in this mechanism the chain which has

the most proof-of-work is defined as the valid ledger. However, there are some drawbacks and

limitations of the original Bitcoin- Blockchain technology like scalability, flexibility,

confidentiality and governance. These limitations have encouraged the investigation of other

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consensus mechanisms. There is an attempt to make new Blockchain platforms which have

better scalability and are more energy efficient in ways of achieving the consensus amongst the

nodes for a given network. According to Mattila (2016), there are examples of alternative

consensus mechanisms like Proof-of-stake (this has more than one definitions), proof-of-

activity, proof-of-burn and proof-of-validation. The major the proof-of-work (PoW)

mechanism. They were the first to introduce the network security protocol, and then, later the

Hash cash proof-of-work scheme was theorized by Back (1997consensus types are briefly

described in the following part of this section.

The study done by Dwork and Noar (1993) provided). The concept consists of solving

mathematical computation that matches the hash relative to the transactions with one of the last

block recorded on the Blockchain. However, the computational process here needs to be

supported by a hardware, which demands a lot of energy. When the energy required for a single

transaction is multiplied with the total transactions required per second, the total energy

required is evaluated and it is found that the entire process is highly energy demanding.

The proof-of-stake (PoS) represents a treasured substitute to the PoW scheme, this is because

it is based on a more efficient computation procedure. Despite the blocks being generated

similarly to the PoW mechanism, the entire hashing procedure gets processed in a substantially

less search space, whereas unlimited search space is needed for of PoW (King and Nadal, 2012).

With the PoS scheme, since the transactions can be managed and registered quicker, the system

becomes faster and more energy-efficient. However, this system has its own challenges. For

example, there is risk of centralization, this is because the nodes with a high number of stake

holders exerts a dominant role on the remaining network.

According to the theory proposed by King and Nadal (2012), the version that is amalgamation

of Pow and PoS is a hybrid that represents the combination of the mining process of PoW while

having the energy effectiveness of PoS. In this Hybrid mechanism, the mining of the block is

done by miner with highest coinage, which is characterised by the cumulative amount of coins

that are owned by a miner throughout the span of ownership of the coin. In simple words, it

consists of a scheme with has low latency which is typically a PoW characteristic and low

energy-cost which is typically a PoS characteristic on the long run.

2.2.2 Smart Contract

Smart contracts in a Blockchain are nothing but a logic that is applied on the Blockchain, this

Blockchain consists of nodes which can receive and perform transactions among the linked

nodes. Smart contract is the logic on which these transactions are based and controlled. The

entire purpose of smart contracts is like a "computerised transaction protocol that executes

terms of a contract" (Szabo, 1996). The term ‘Smart contracts’ term was first coined by

cryptographer Nick Szabo. The elementary idea and the origin of the contract-part is that several

parts of the contracts can be included in the software in such a way that their breach is either

very expensive or entirely impossible. Sometimes, these smart contracts are often confused with

Ricardian contracts (Griggs, 2015), which is nothing but the compilation of digital recording

and connections of systems on a contract that is to be lawfully abided. But, these are not smart

contracts because they are neither supposed to be legal in any way nor connected to any outside

systems. It can however be imagined that value in connection of smart contracts is one defined

by Ricardian as "outsource" functionality of legal contracts.

According to Szabo, contracts should have a couple of characteristics if they are to be called as

smart contracts. These characteristics are as he describes it are, “visibility, online enforceability,

verifiability and privity”. These are explained as:

Visibility: Visibility (Szabo uses the term observability) means transparency, which is

that the participants bound by the contract should be able to see each other’s

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performance and some certain activities as per the terms of the contract. Moreover, they

should be able to prove the implementation of their own terms to other participants. It

is like referring to the transparency of the actions taken by the logic algorithm of the

contract. Like, a Point-Of-Sale screen that shows the amount that is to be paid to the

customer but omits the fact that the data is being retrieved and saved from the credit

card is an excellent example of such a hidden action.

Online enforce-ability is referred as making sure of fulfilment of the terms of a contract.

The actions which can be taken to achieve this can be characterised as proactive and

reactive ones. Proactive measures try to make it technically impossible for the

participants to breach the contract terms and prevents either party to drop out of the

contract as well. Furthermore, if in case there is a valid breach on another part, then that

should be notified for further dealing. However, reactive measures seem to deter

malicious behaviour through the reputation or enforcement and by recovery of potential

assets after the breach of contract.

Smart contracts should be verifiable and auditable if there is a conflict amongst the

participants.

Smart contracts should be as private as possible, which means that the knowledge and

control pertaining to the data involved in a smart contract can only be accessed by the

participants if necessary.

The above-mentioned objectives of smart contracts can be observed as resulting in two separate

directions. Privacy is exercising a controlling force over contracts, ability to minimise openness

to outside parties. Whereas, on the other hand, there are three other objectives of: visibility,

enforceability and verifiability. These objectives require access to contractual data, which is to

be available to participants. Thus, an optimum solution must be found where even the little

information’s control is possible if it is given to external parties, however the possibility to

verify, observe and enforce should be simultaneously available.

2.2.2.1 Free Programmability in blockchain The smart contracts are designed to enable the creation of the decentralized programs, it will

also monitors and execute the programs. In addition the smart contracts allows the

implementation and mapping of agreements and stores the complete corporate structures

(Dannen, 2017). In this section, what are all the strength of smart contracts, how the

Implemtation is done are explained. In order to implement the programmable blockchain, the

following conditions are necessary:

The programming in the Blockchain: All the business agreements includes the terms and

conditions. The basic goal of smart contract is to include these conditions as a logical commands

through blockchain system.

The Reliable execution of the code: The implemented code must be work reliably on the

decentralized system. And also data should not be changed without the authorization by the

user.

The Automation of code execution: The fulfillment of all the terms and conditions of a

program is resolute in a digitally. It is the fundamental concept of smart contract.

The Consideration of external influences: The conditions in the program, which refers

circumstances that are linked to several digital systems. Therefore, the applicability of smart

contract is enable interface with other systems and also include the information from external

systems.

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The Coordination of decentralized: The contracts are digitally signed. They are compatible

with the theory of blockchain. The testing of conditions and the execution of their logic must

function in the network of decentralized.

Speed: The software script is executed and implemented in the platform of blockchain, a fast

response time is required. This would be in conflict with the time consume for processing.

Non-manipulability: Once data and programs is entered into the blockchain system, which

cannot be able to manipulated or deleted. The unauthorized modification of the blockchain is

usually not possible.

Consistency: The programs in the blockchain is reliably stored, nevertheless of the time

between execution and implementation. The stored programs are available all time.

The conditions stated above is satisfying, the blockchain system is used to map the business

logic and agreements. The smart contract also offers different possibilities for participants in

the network:

The reduction in labor: The smart contract helps in real time monitoring, the enforcement of

agreements and the conclusion of agreements can be automated, this help in reducing the human

labor.

Avoiding third parties: The smart contract is a decentralized blockchain structure which

enables automated contract handling and therefore the supervisory from the third parties can be

eliminated.

Reduction in cost: By avoiding third parties and automating the process in turn helps in saving

the labor and time, this helps in transaction and processing cost can be reduced.

The security of the agreement: if the non-manipulability and reliability of a smart-contract

network is ensured, then the foundation to secure the agreements will be created. This includes

both their long-term feasibility over several decades and prevention of unexpected beach of

agreement by the participants.

The Ethereum platform with a Virtual Machine (Ethereum Virtual Machine, EVM) to run smart

contracts. Because the environment exist on the Blockchain in the form of virtual machine, the

smart contracts are completely outlying from the network, file system processes on node

machine. The complete language called Turing was created to write Smart contract on

Ethereum. Nevertheless, solidity programming language has now become standards with

capabilities of Smart contract. A contract is written in a solidity language, compiled into

Ethereum virtual machine byte code, and then deployed at a specific Ethereum address. A

special JavaScript RPC- library is used alongside of web API.3. Because the Smart contract

programming started with solidity and Ethereum, but it is still discipline under development.

The below Figure 5 provides a simplified view of how Ethereum will meets to these conditions.

The system of the blockchain is extended by a virtual machine, which can execute the program

code. This program code is stored in the blockchain using smart contracts and can be created

by the users of the network (Ethdocs, 2017a).

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Figure 5: Elements of smart-contract technology (own representation)

According to (Dannen, 2017), the Ethereum can thus be understood as an extension of the

Bitcoin concept. Ethereum also has a digital currency like Bitcoin. The further extensions of

the blockchain concept by Ethereum, which are essential for the implementation of the

approach, are the subject of the further development of this chapter. It also explains in more

detail what smart contract are, how the virtual machine of Ethereum works, and how to achieve

the benefits of the concept mentioned in this section.

2.2.2.2 Creation of Smart contracts and dApps – platform specific

programming languages There are four different programming languages like Solidity, LLL, Serpent and Mutan are

available to create smart contracts. These languages specially developed for ethereum virtual

machine on existing languages. Solidity is a majorly used language since it is existing on

JavaScript (Ethdocs, 2017a). The smart contract script will be written from one of these

languages. And then compiler is designed to respective language. Compiler is used to compile

code in byte code. i.e. the EVM-readable commands.

Both processes described so far can be carried out offline and independently of the blockchain.

The created byte code can be communicated to the blockchain during a transaction in order to

initiate the mining of the smart-contract. For this, one of eight different ethereal client

applications is used (Ethdocs, 2017b). If the transaction is transferred to the network, its

contents, including the contained byte code, are checked. If the test is successful and there is

sufficient gas, it is linked to the blockchain by mining. From this point onwards, the smart-

contract is stored as an account in the blockchain and can be called up by means of transactions.

Since smart-contracts can communicate with each other by means of messages, it is possible to

form an application from several contracts and thus perform services similar in scope and

function to conventional computer programs. The blockchain can serve as a backend, which

performs the functions of the application. For this reason, applications implemented on the

blockchain are called dApps, i.e. decentralized apps. Both the results of the function execution

as well as the user input can be implemented thanks to an in Ethereum interface to external

surfaces such as e.g. Websites are offered (Dannen, 2017).

The data structure of the Ethereum blockchain is described in this section by two features. On

the one hand it is explained how data is stored within a block. On the other hand, the linking of

the blocks is displayed one below the other.

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The structure of a block header of the Ethereum blockchain is analogous to that of a bitcoin

block. It includes features such as time stamp, block number, a reference to a previous block,

nonce, and difficulty. The main difference lies in the way data is stored. Bitcoin blocks contain

a hash tree, which contains all transactions of the block. By calling up all the transactions,

information such as the credit balance of an account can be calculated in the future. According

to (Buterin, 2014), Ethereum also includes such a tree, but adds two more to it. The resulting

Ethereum blockchain structure is shown in Figure 6.

Figure 6: Simplified block structure in Ethereum blockchain (own representation)

The event tree stores the results of all events triggered by the block's transactions. For example,

Changes in variables of a smart contract. The state tree stores the status quo of the blockchain

prevailing at the time of the block generation. This includes existing accounts as well as their

credit balances, data and, in the case of Smart Contracts, their scripts.

Thus, in the Ethereum blockchain, not only all transactions but also, contrary to the original

concept, states are stored. The advantage of this approach is the fast irretrievability of states

without the necessity of reconstructing the relevant transactions, which primarily benefits the

processing speed of inquiries with strong growth of the blockchain as well as the support of

thin clients without complete ledgers (Ethdocs, 2017a).

Solidity contracts are likely to process the ownership of the valuable tokens; execution of

contracts occurs on Blockchain, meaning that all the members can view it and access the source

code. The security guidelines that Solidity has been used are:

Damage control: To avoid damage, the limited amount of tokens should be stored in

Smart contract, because if the source code or compiler contains bug, the tokens will

struck in the contract.

Modularity: The Smart contract should be kept as simple as possible. The length of

functions and local variables should be limited, in order to keep the contracts as clear as

possible. If the contracts are more modular, it is easier to improve system of Smart

contract.

Checks-Effects: Firstly, the functions in the contracts should perform precondition

check. Secondly, changes to state variable should be made. Lastly, interaction with other

contracts should occur.

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2.3 Supply Chain Management Supply chain management is one of the most vital aspects of directing business. Many people

outside the related community (in research and industry) do not comprehend to this because a

normal consumer only experiences its consequences (Martin, 2015). Earlier, there were times

when the item that the customer wanted was not available in their nearby store; sometimes the

consumers will get a great ’deal’ at the end of the season; sometimes there were sudden surge

in prices of commodities like gas due to shortages; also there were cases when the e-commerce

site promised availability but were unable to deliver the required product or delivered the

incorrect product and there have been incidences when a customised product was delayed to a

great extent. All the above-mentioned and a few other experiences which consumers have had

on a routine basis were direct consequences of supply chain principles on which the firms relied.

The term ‘Supply Chain Management’ was coined by Keith Oliver in 1982, Supply chain

management has evolved from formerly being understood as only logistics to an intricate

multifunctional business responsibility that ranges from purchasing and demand forecasting to

delivery and after-sales service (Martin, 2015). Supply chain management is all about dealing

with the supplier base, determining the outsourcing commodities and from which suppliers, and

managing relationships with those suppliers.

A supply chain is a set of articles that are involved in designing of products into semi-finished

and finished distributing them to end users (Tan, 2001). Supply chain management is the

process in an effective management of the process from end-to-end, starting from design of the

product or service till the time when it is sold, then consumed, and finally disposed by the end

user. This entire process comprises of product design, purchasing, planning and forecasting,

production, delivery, realisation, and post-sales support (Tan, 2001).

The issues faced by supply chain management can be classified into two broad categories –

configuration and coordination. Configuration-level issues are related to high-level designing

and rudimentary infrastructure of the supply chain. Coordination-level issues are related to the

tactical decisions and the day-to-day supply chain operations.

The issues like configuration and coordination are co-dependent. The issue configuration can

be regarded as a long-term strategic decisions. The issue like coordination can be regarded as

medium to short-term decisions. Generally, the organizations will develop strategies for

undertaking the configuration-level decisions and then apply constrains to the coordination

decisions.

2.4 Supply Chain Coordination

The theory of coordination is applied to this thesis to give a theoretical basis to consider how

organisation can together manage the business processes across the supply chain (Malone and

Crowston, 1994).The management of dependencies between activities is called coordination

((Malone and Crowston, 1994). The main purpose of coordination is to achieve collectively

objectives and goals but individuals will not meet. The main issue like information sharing will

affect the coordination capability (Anand and Mendelson, 1997).

Coordination mechanism creates a platform, so that every stakeholders in the supply chain

network together create value and improve performance of the supply chain (Lewis and

Talalayevski, 2004). Coordination mechanism can be achieved by sharing decision

responsibility, information sharing and synchronization of logistics (Lee, 2000). Sharing

decision responsibility and information will help every stakeholder in the supply chain network

which can organize their work and resources effectively. Synchronization of logistics refers to

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organising the supply chain according to needs of the organisation: customer demand, inventory

management, production targets.

The two approaches like centralise decision making and decentralise decision making will

achieve the coordination. Firstly, centralise decision making applies to optimise the overall

network. Secondly, decentralise decision making applies to coordination mechanism (Sahin and

Robinson, 2002). Ideally centralise decision making necessitates the decision maker to have all

access of relevant information in the supply chain performance which isn’t the scenario in

reality (Li and Wang, 2007).But decentralisation thrives on local and asymmetric information

which improves the performance of individuals and its target, therefore having better advantage

than centralise decision making.

In order to achieve better performance, it is necessary to share responsibilities. This can be done

in two ways. Firstly, complementarity which rely on how supply chain stakeholders jointly

increase value. Secondly, coherency which rely supply chain stakeholders on common

understanding. The coordination may focus on organizational linkages, this is required to

reward or penalize decision maker to reach their common targets. The coordinating collective

learning means sharing knowledge and capabilities across the organisation (Simatupang et al.,

2002).

The main focus of this thesis is on the coordination of operational linkages in a supply chain

which deals with information sharing and synchronising logistics processes. The latter

coordination mode, synchronising logistics processes is also called asset flow coordination.

Coordinating information sharing among supply chain stakeholders aims to give relevant,

timely and accurate information available for decision makers without lack of transparency,

reliability and traceability.

The main challenges of coordination in supply chain are:

Transparency

Traceability

Time delay

2.4.1 Transparency Modern companies, organizations and enterprises tend to be operationally overly complex. The

complexity can be eliminated partially but not completely eliminated (Shalloway, Beaver et al.

2009). The cooperative work involves a lot of interactions with the many teams, which has a

lot of dependencies, a coordination is required to escalate the problems that arrives. (Loch and

Terwiesch 2005). The effective management in the organization having a lot of

interdependencies, which is coordination (Malone and Crowston 1993). The transparency in

information on asset is very much important, since every stakeholder in the organization uses

information to make better decisions (Davenport and Prusak 2000).

In automotive manufacturing business, the important information pertaining to operations

management are like production schedule, quality data, inspection data, cycle time, tact time,

lead time, maintenance schedule, variants of products, machinery involved in machining,

customer requirements in terms of tolerance, run at rate, etc. All this information is important,

but all of these are probably not necessary when interaction between some certain departments

is concerned. Moreover, at critical stations like quality inspection and logistics (production

scheduling) it is important to know the stakeholder involved as well, since decision making is

19

dependent on the designation of the personnel in the official hierarchy. An efficient information

disclosure strategy must be a stepwise built up, first, the type of information that needs to be

shared must be identified, then depending on how confidential, risky and how valuable the

information is, a befitting response must be made (Marshall et al. 2016). The hiding of specific

information in the organisation, which information privacy will plays major role in transparency

(Marshall et al. 2016)

2.4.2 Traceability Most of the researchers define traceability is the follow the asset movement through supply

chain as (Bosona and Gebresenbet, 2013). A system that has good traceability must allow both

tracking and tracing. The other definition of the tracking is the process by which asset is

monitored by keeping all documents and records at each and every stage (Kelepouris,

Pramatari, and Doukidis, 2007; Bosona and Gebresenbet, 2013; Pizzuti and Mirabelli, 2015).

Traceability can also be expressed by three basic characteristics of a system in which it exists:

1. unique identification of units, assets, products and batches,

2. information about the time and place, like when and where the units are transferred,

3. Linking of the units to their movements.

There are internal and external are the two different categories in the traceability (Moe, 1998;

Thakur and Donnelly, 2010). The Internal traceability is defined as the capability to visible and

track the assets within the organizations (Moe, 1998; Karlsen et al., 2010). The external

traceability defined as the capability to visible and track the assets between the organizations

(Moe, 1998; Karlsen et al., 2010). To enable quick and accurate tracing, traceability should be

able to address to both internal and external aspects with clear links in between them (Bertolini,

Bevilacqua, and Massini, 2006; Donnelly, Karlsen, and Dreyer, 2012; Hu, Zhang, Moga, and

Neculita, 2013).

As far as the current work is concerned, internal traceability is of importance. It is vital to

understand the fact that external traceability is a consequence of having a system which is

successful in internal traceability. This is basically due to each and every person is accountable

for collection and communication of the information, which is pertaining to their own processes

and the assets. This means that, a system with internal traceability acts as a prerequisite that

enables the way to external traceability (Senneset, Foras, and Fremme, 2007). Although, an

important disadvantage of traceability is that it does not lead to direct economic benefits, it

requires funding and initial investments (Donnelly and Olsen, 2012). The visibility of

information can also be used for the marketing departments in the organization, to visualize the

quality and safety standards of the assets (Liao, Chang, and Chang, 2011; Storoy, Thakur, and

Olsen, 2013). The advantages of traceability in the organisation is to improve the supply chain

performance and reduces the logistic cost by enable real time information of assets throughout

the supply chain (Regattieri, Gamberi, and Manzini, 2007; Hong et al., 2011; Karlsen, Dreyer,

Olsen, and Elvevoll, 2013).

The efficient traceability system means there should be clear connection between information

flow and asset flow (Bosona and Gebresenbet, 2013). Three main pillars of traceability are

identified:

1. Product identification: marking of asset/product/unit with a unique identification

number (Regattieri et al., 2007; Karlsen et al., 2010; Aung and Chang, 2014).

2. The data to trace: information required to be traced

3. Product routing: identifying and marking the material flow route (Folinas et al., 2006;

Regattieri et al., 2007).

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2.4.3 Time delay According to Manos and Manikas real time decision are the best and also it will not disrupt the

quality of the decisions.

The real time of taking operational decisions are fast: most of the operational decisions are

repetitive, structural. Having a new software tool which analyses real-time data would make

automated decisions faster. Hence, saving time and increasing productivity by reducing the

non-value activity time.

The view are personal but the same operating picture: One of the disadvantages of ERP system

software is that they mostly have a common user interface and hence does not highlight the

information as per the requirements of the user. For a user to make faster decisions it is essential

to have quick access and a single window visibility to the critical information pertaining to his

work area. If the user must look up and invest time in extracting the required information, then

there is loss of productive time.

The decision management is the best: Decision-making systems are generally being

implemented using rule engines and analytic software tools. As companies nowadays are

aiming to rely more on real-time analytics, they are beginning to exercise Decision

Management, together with their Data Management as well as Business Process Management

activities.

2.5 Literature Framework

Figure 7: Framework for literature review (Own representation)

In this section a representation of the extensive literature review is presented and shown in

figure 7. Firstly literature review on information sharing is presented in order to understand the

different types of information sharing in the supply chain. This in turn helps in understanding

the importance of information sharing activities in the supply chain. Secondly this thesis mainly

focuses on the concept of Distributed ledger technology. In particular, the blockchain

technology literature review is presented this is done to understand the concept of blockchain

platform and block chain application (smart contract). This is helps to clarify the technology

features and the working mechanism and the potential applications.

Lastly, an overview on supply chain management is presented in order to get a basic

understanding of the concept. Since the thesis focuses on supply chain activities between the

departments. And the theory of supply chain coordination is presented which answers questions

like how coordination in information sharing will improve the supply chain performances in

the organization and how decentralized decision making will help in achieving the performance

of every individual in the organization. Also presented are the main challenges in supply chain

coordination which is transparency, traceability and time delay. This thesis mainly focuses on

solving these three challenges by the use of smart contract interface.

21

In the aim to answer research question how smart contract will bring asset transparency,

traceability and time-delays in the process of decision making in a business to business setting?

For this firstly, the extensive literature review on the theoretical concepts of smart contract is

done to understand the How smart contract is implemented and executed. This literature review

helps us how smart contract interface is created. Secondly, literature review on transparency,

traceability and time-delays is done to understand their importance.

22

3.0 Method This section presents method that was used to collect, process and utilize information required

to answer the research questions of the project. Firstly, research approach is presented

followed by how data is gathered and examined. In the last section, explains how the gathered

information is used to device a solution to resolve the problems mentioned earlier.

3.1 Research Approach To answer the research questions, a qualitative method will be used (Arvidsson, 2017) describes

how qualitative data is data that cannot be measured and counted, and is generally expressed in

words rather than numbers. Therefore a qualitative method is suitable for this study and has

therefore been used. The qualitative method is chosen because of the nature of the problem.

Figure 8 elaborates on the methodological approach adopted in this research and it identifies

the main steps that need to be taken in order to answer the research questions. To answer the

research questions, relevant literature was explored and explained in the previous chapter. Now

the fore coming chapter explains the approach adopted in this thesis towards answering the

research questions.

Figure 8: Research approach (own representation)

3.2 Research Method A pre-study was conducted to understand the current situation and identify the issues related to

information sharing activities between departments at Scania. The data was collected through

interviews. A lot of informal communication and meetings with executives at Scania along with

database searches to acquire relevant articles was performed.

This gathered information from the empirical interviews provided a framework on which the

smart contract interface is built. The empirical interviews revealed which are the important

information that need to be shared on the interface and also the challenges that they are facing

sharing of information between departments.

23

Based on the information received, a smart contract interface is developed that allows fast, fair

and easy access to information which is relevant to the stakeholders involved in the three

departments. This is done by using six vital steps that are used to develop a smart contract

interface. These six steps helps in creating a smart contract interface. The information flow and

sharing mechanism is explained by the use of sequence diagram. A sequence diagram is later

made to give a clear representation of the information flow and how it works. Lastly,

observations are made to check the conditions using smart contract interface. The observations

pave way for the solutions of the three research questions asked.

3.3 Data Gathering The data gathered for this study were obtained from interviews within the chosen departments

at Scania. The data was also gathered from secondary sources, which are presented in this

section.

3.3.1 Literature Review The literature review was performed to give a profound understanding and knowledge within

the area of research. Firstly, literature review was done to get a basic overview on supply chain

management, information sharing system. Secondly, based on the information gathered from

primary sources, literature review was done on the identified issues like transparency,

traceability and time delay. Lastly, since the main objective of this research was to see the

potential of Smart contracts, the literature relevant to this technology was also explored. The

resources used were: wide-ranging searches in credible data bases like Google scholar and

KTHB primo. Additionally, information was also gathered from internal company websites and

related articles.

3.3.2 Interviews The primary source of information relevant to the business setting in this thesis are the formal

interviews. Interviews were conducted in the departments of Assembly, Machining and

Logistic. This was done to understand and gather the current asset information flow and supply

chain operations between departments. A questionnaire was drafted to record responses which

are consistent to a given set of questions. Following this approach allowed insights into what is

important for one department or a personnel and what is not. The interviews were based on the

literature review. Later, interviews were conducted with the employees in selected departments

at Scania with matching knowledge and recommended profiles.

Interview A- Assembly department

Employee working as a System Analyst

Interview B-Machining department

Employee working as a production planner

Interview C-Logistic Department

Employee working as a Logistic developer

Interviews were conducted in a semi - structured approach, which were conducted whenever

the topic and information deemed essential in the thesis. To be able to get the most out of the

information from the interviews, the questions were sent in advance to the interviewees. This

was done mainly due to prepare them and bring related material to meeting. To make it more

24

efficient, interviews were recorded to make sure that gathered information is secured. Answers

from each interview can be found in Appendix 1.

3.4 Steps to create smart contract Interface

Figure 9: Steps for developing smart contract interface (own representation)

25

3.5 Research Ethics The research is conducted in the automotive company Scania. Through this research I fully

compiled with the research ethics. The research is followed by the four ethical codes presented

by Swedish research council. The four principles like information, consent, good use and

confidentiality is serve as ethical guidelines for research (Vetenskapsrådet, 2002). Firstly,

information was full filled. Before every interview I elaborated the purpose, methodological

approach to participants. The sharing of this information I ensured that participants felt

comfortable being part of this research study. Secondly code consent was full filled as no

participants in the interview was any way forced to participate in the research. Thirdly code

good use was full filled as the data collected in this study will not be used for any other purpose

of the research. Lastly, confidentiality code was full filled by recorded information from the

interview is deleted. The shared information is considered as confidential and that it would be

treated fully anonymous in the master thesis report.

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4.0 Problem Description In this chapter, the business setting on which the project work has been done is explained. To

highlight the changes that the smart contract interface has brought to the setting have also been

elaborated. The business setting before and after the implementation of the smart contract

interface have been elaborated and compared. Moreover, special emphasise is given to the

shortcomings in the existing system that are tackled by the smart contract interface.

Figure 10: Asset flow and Information flow between departments

Figure 10 shows the existing operational working of the three departments considered in this

project. The flow of material and information from one department to the other is represented

by the arrows. Firstly, as per the production target and lead time to receive the material delivery,

the assembly department issues an order to the machining department to supply material for

assembly considering the lead time and the delivery schedule. A copy of the same order is also

sent to logistics department, as a notification to plan for material movement and storage to

ensure smooth functioning overall. The order is identified by an order number and contains

information relevant to the production batch that is to be manufactured like product type,

quantity, delivery deadline and product quality (technical specifications). Once order is

received in machining department, the received order is notified to all the sections in the

machining department via ERP. This order contains same details as the original order but with

additional criteria for raw material quality (from the supplier). As per the received order, the

raw material section then delivers material to production section. This material is then

processed, machined and manufactured in way such that it is ready to be assembled in the final

product at the assembly line. During the production of the batch the material is also stored

internally as WIP (work in progress or machined parts). When the entire batch is ready to be

supplied to the assembly department the for the final product assembly, the logistic department

is informed by the machining department and then the logistics department takes over the

responsibility of storing the ready to assemble material in warehouse and deliver to the

assembly department as per the production plan. The information is conveyed to logistics

department by machining via email (Interview A, B and C).

27

The above-mentioned system has a few shortcomings which were identified during the

empirical interviews (Interviews A, B and C) with the officials who are working in the above-

mentioned departments. These shortcomings are:

1. Manual updating of material status amongst the departments and sections which causes

time delays, miscommunications among departments and sometimes there is loss of

important information as well.

2. Poor quality raw material input to the production section due to unclear quality

requirement definition.

3. Difficult to track and trace the asset flow for a product since there is no interface that

stores the information in an organized way. Therefore, it is almost impossible to track

the origin of a failure or discrepancy.

4. Problem with verification of information that is available, like – what is the information

source? Who exactly updates the information and how does it reflect the real time status

of the product during operations? Moreover, the quality of information that is available

plays a main role in driving the decision-making process.

5. The conditions like raw material quality limit and product quality limit should be

specified from the customer(Assembly department)

6. There is no provision for real time data validation in the current setting.

7. There is no provision of in-process control – like traceability of in process quality

inspection results.

4.1 Implementation Firstly, essential data on asset that are required by the each sections in the departments are

mapped and shown in Figure 11. The set conditions like information of the asset should be

entered from the specified owner address of the departments. The information of raw material

quality limit and asset quality limit should be entered by the specified limit by the customer

(assembly department). Once information of the asset is entered by each section in the

departments, every other sections in the departments gets notified. These conditions and data

in the each section is written in the smart contract code as shown in Appendix 2.Thirldy, deploy

smart contract code in the Ethereum virtual machine (EVM). Lastly, execute the smart contract

code by clicking manual option.

Figure 11: Data for creating smart contract interface (own representation)

The Smart contract is created in which all the conditions necessary for structured and traceable

flow of material are incorporated. These conditions allow creation of new blocks in the

Blockchain and controls their connection to the existing blocks. How the conditions specified

in the Smart contract control the blocks is explained later in this section. In Figure 12, the

generation, creation and connection of blocks in a Blockchain is explained. All the nodes in the

Blockchain represent all the sections along with their departments. This connection of nodes

forms a network and all the information is stored in each node. This is called distributed ledger.

28

Figure 12: Generation of new blocks and connection of blocks in represented in Sequence Diagram (Own

representation)

The initial block in the Blockchain is called as the Genesis block which is represented by B0.

A new block B1 is created when the order is generated by the assembly department. B1 is

generated if and only if the smart contract requirements are fulfilled by the user while generating

the order. The required input conditions that the user must input to successfully create a block

are shown in Figure 13 for all the blocks (see block 1 for B1).

Figure 13: Input conditions for generating Block (Own representation)

Creation of B1 is notified to all the departments (nodes) of the Blockchain. When B1 is received

by the raw material department then the raw materials section supplies material to the

production section. This raw material is received by an outside supplier by the raw materials

Rawmaterial Section

Production Section

WIP Section

Warehouse & Logistic Section

CustomerPlace order

Section

B2

B1

B3

B4

B5

B0 + B1 + B2 + B3

B0 + B1 + B2

B0 + B1 + B2 + B3 + B4 + B5

B0 + B1 + B2 + B3 + B4

B0

Assembly Department

Logistic Department

Machining Department

Send Transaction

Send Transaction

Send Transaction

Send Transaction

Send Transaction

Query

Query

Query

Query

Query

Query

Query

Query

Query

Query

Query

Query

29

section. After the successful delivery of material from raw materials section to production

section the raw materials section takes up the responsibility to send a transaction to the next

department (node) containing the information pertaining to the delivery of the material. If this

transaction contains correct and authenticate information, it will lead to generation of another

block B2 which is then added to the existing Blockchain which consists of B0+B1. But, before

adding the block B2 to the existing Blockchain a set of queries is generated, these queries check

whether the information in the transaction sent by the department is coming from a previously

specified authenticate source or not. The queries will also check if the block contains all the

required information as per specifications in the Smart contract. Once, these conditions are

satisfied then and only then will the new block B2 be added to the existing Blockchain. Once

the block gets added, the Blockchain becomes B0+B1+B2 and the successful creation of new

block (B2) is notified to all the nodes. This process is repeated by the subsequent nodes to create

add B3 and B4 to the Blockchain. The nodes responsible for creation of B3 and B4 are

production section and WIP section respectively. Eventually, when the material is delivered to

the customer (assembly department, also the last node in the Blockchain network). Then the

last transaction is sent, which after satisfying all the queries, results in creation of block B5.

Likewise, if every condition is satisfied by all the departments in the process the final

Blockchain pertaining to a given order would be like B0 + B1 + B2 + B3 + B4 + B5.

4.2 Result from the smart contract interface

4.2.1 Observation on transparency This section explains how transparency is achieved for the test case considered in section 4.0.

Here in Figure 14, Block 1 has three conditions which need to be satisfied in order for the

information to flow for Block 2. Since the three conditions are satisfied, highlighted in green,

the information from Block1 is cleared to Block 2. Similarly, in Block 2 there are two conditions

that need to be satisfied in order for the information to flow to Block 3. But one of the

conditions is not satisfied, hence the information is rejected from Block 2. The Blockchain

thereby gives a clear understanding about the conditions necessary to transfer information from

one Block to another thereby making the whole process transparent.

Figure 14: Input conditions for generating Block (Own representation)

If both the conditions in Block 2 are satisfied the information flows to Block 3 as shown in

Figure 15. In block 3 there are two conditions which need to be satisfied. Upon failure of

satisfying either one of the conditions the information is rejected from Block 3.

Figure 15: Input conditions for generating Block (Own representation)

30

Figure 16 shows that in Block 5 the condition is satisfied, hence the information is rejected.

Figure 16: Input conditions for generating Block (Own representation)

Figure 17 shows all mandatory conditions are satisfied thereby accepted the final information

flow. This whole process makes the information flow transparent.

Figure 17: Input conditions for generating Block (Own representation)

4.2.2 Observation on traceability This section explains how traceability is achieved by considering an example which is taken

from the test case. There are different suppliers S1, S2, S3, S4, S5, and S6 in the raw material

section, machines in the production section are M1, M2 and M3, storage locations in the WIP

section are SL1, SL2, SL3 and SL4, logistics in the warehouse and logistic section are L1, L2

and L3. Before implementation of smart contract, if there is a faulty product found in the

assembly department, it is difficult trace back where it happened, who did it, which end fault

had happened(interview A,B and C). This as shown in Figure 18.

Figure 18: Traceability of asset before implementation of smart contract (Own representation)

31

After implementation of smart contract, it is easy to trace back the asset. Real time visibility of

asset will help in identifying which end the fault happened. This has shown in Figure 19

Figure 19: Traceability of asset after implementation of smart contract (Own representation)

4.2.3 Observation on time delay This section explains how better decision making and planning with help of smart contact is

achieved. For tracing real time decisions it is necessary to modify conditions with the help of a

smart contract interface that track asset on a real-time basis and provide information to make

real-time decisions and planning. This process can be done in a faster and more efficient way

as the software provides the user with ease of modification in the conditions that derive the real-

time decisions. Moreover, the change in conditions is to be notified across the management

hierarchy to allow quick request approvals and instant implementation of the changed

conditions. Smart contract interface allows this provision in a very easy way.

The major condition in this smart interface are:

Raw material quality limit

Product quality limit

Owner address

For instance when order is placed by the assembly department. It contains the details of quality

limits of the product and raw material and owner address. The changing in conditions will be

notified to all the departments. Below Figure 20 shows how notification is appear in the

departments

32

Figure 20: Notification in the smart contract interface

To prevent real-time mistakes and to maintain the quality of the assets in manufacturing

business, if any automated or user defined decision leads to degradation in quality then the

software should be able to highlight that in the notification. This would not only prevent the

quality of the product from going bad but will also allow better decision making.

4.3 After Implementation of smart contract

Figure 21: Asset flow and information flow through smart contract between departments (Own representation)

A Smart contract interface is made and implemented. The flow of information in a Blockchain

is represented in Figure 21. Smart contract interface is made in which all the conditions are

incorporated for information sharing and controlling of asset flow amongst the departments and

sections (tracking and traceability, allowing material from a specified source to a specified

destination). As the order is generated by the assembly and sent to the machining department,

a notification triggered by the order is sent to all the involved departments and sections (like

logistics, production, storage and warehouse). The material is allowed to flow from one

section/department to the next if and only if the conditions in the smart contract are satisfied

like quantity, quality and delivery time, etc. As soon as the material is transferred from one

section to another, a notification is generated and circulated across all the involved sections and

departments (transparency, tracking and traceability in real time) – as shown in the interface.

Relevant information is made available to the concerned departments to fasten the process of

decision making.

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5.0 Discussion This current structure of the interface results in addressing of the problems of transparency and

traceability. The blocks contain information pertaining to node by which the block was

generated. Once all the blocks for all the nodes are connected and the Blockchain is complete

then the information is available to every node and is accessible to people with authority. This

helps in accessing the required information quickly which leads to reduction of delays in

decision making.

How are Smart contract used to bring transparency across departments in a business to

business setting? Smart contract can improve transparency by recording the origin of the goods. When the

information such as the production date, quality limits, quantity and the origin of a product is

stored in the Blockchain it can be easily verified anytime. This assures every involved

department stakeholder that the raw material is coming from a trustworthy source and is

following a pre-defined production plan, which is highly essential in a business setting. Every

involved department stakeholder can have more assurance that are working on a legitimate

product. The transparency in information on asset is very much important, since every

stakeholder in the organization uses information to make better decisions (Davenport and

Prusak 2000). This recommendation should be considered, since the transparency in the

information will help in better decision making.

The information that needs to be shared must be identified, then depending on how confidential,

risky and how valuable the information is, a befitting response must be made (Marshall et al.

2016). Creation and sorting of a digital identification on the Blockchain by smart contracts

helps with transparent attestation across the entire network of departments while keeping the

information discrete from outsiders at the same time. Departments and their sections are now

able to easily verify that other sections have the required certifications to perform their duties.

Reputation and reliability of the raw material provider is recorded and managed on the

Blockchain. This allows the managers to take informed decisions while choosing a supplier for

a new part and it also motivates the involved departments to work hard to maintain a good track

record.

The important benefit of having a Blockchain is that "Blockchain ledgers establish a shared,

secure record of supply chain information flows - a single version of the truth across networks

for supply chain transactions, processes, and partners”. Apart from the information related to

the product, transportation and accounting (e.g. purchase order, receipt, and shipment

notification) is stored on the Blockchain and is accessible to relevant parties. This accessibility

and openness of the information helps in ensuring that all parties are on the same page.

Moreover, it also reduces the chances of conflict amongst the involved parties. Even if any

disputes arise, then they can be resolved quickly since there is a common database for reference.

The privacy of information is important in the supply chain (Marshall et al. 2016). The digital

identity in the smart contract will reduce concerns about information privacy. The every

stakeholder in the network has a digital identity that is given permission to access specific

information. Then the information is regulated by a smart contract. This creates a more trusted

network for sharing information.

As mentioned in the problematization, if the information pertaining to an asset like when and

where it was manufactured, which departments as well as the officials were involved at that

time, etc., then it should be shared as well, so that who so ever wants to access that information

can access it without any hassle. Right now, there is manual updating of material status amongst

34

the departments and sections, the information is shared in a specific manner with other

departments but is not available to everyone. This lack of availability of information among

departments and sometimes there is loss of important information as well. Thus, an open smart

contract interface is created for information sharing, where the information is decentralized so

that everyone who is authorized to get the information can access it anytime.

How are Smart contract used to bring traceability across departments in a business to

business setting?

Smart contract improve traceability within the departments by tracking the inventory at every

step throughout the production process, which starts at raw material source and ends at the end-

user (in this case, assembly department). This objective of traceability can be accomplished by

assigning identification numbers to the assets like serial numbers, radio frequency identification

(RFID) tags, or smart sensors. The latter way of identification is mostly promising here,

particularly due to the rapid growth of loT and connected devices. Smart sensors have the

potential of providing ample of data such as location, surrounding conditions and even product

quality details (like quality inspection stats). All this collected information when stored against

an identification number can be used for real-time updates on asset status. For efficient

traceability, marking of asset with a unique identification number (Regattieri et al., 2007;

Karlsen et al., 2010; Aung and Chang, 2014). This recommendation should be considered for

the efficient traceability. The information is helpful to the department managers who will be

able to make better and quicker decisions.

The result of traceability in this thesis shows that how smart contract helps in asset routing

when the fault asset found. The ability of tracing the chain of custody of any asset’s inventory

throughout the various departments becomes particularly helpful when asset is being recalled

for rework due to quality or safety concerns. Earlier, it was difficult to track and trace the

material flow for a product since there was no interface which stored the information in an

organized way. Now, the information is stored in a structured way and covers the entire domain

of material flow. This would specifically help in narrowing down to the origin of a quality flaws

in the system. For effective traceability, asset routing is very much important which is

identifying and marking the material flow route (Folinas et al., 2006; Regattieri et al., 2007).

How are smart contract used to share asset information that improves the decision making

and planning procedure across departments in a business to business setting?

Use of smart contracts enhances the efficiency and hence reduces the time delay in two aspects:

decision making and planning. The efficiency of decision making gets improved since the smart

contracts are executed on a distributed ledger which help in simplifying complex multi-party

systems that are present in typical business to business setting. Given the self- executing nature

of smart contracts, they can be used to automatically execute the "contractual rights and

obligations, including the terms for transaction of assets and information" .This would eliminate

the cumbersome paperwork that is generally required and reduces time wastage. The decision

making is improved by programming the contracts in such a way that it is executed only when

a given milestones are fulfilled, parties can now trust each other more and not have to worry

about unfulfilled obligations. Thus, allowing quicker and better decision making.

The other way time delay is reduced is through improved planning. A better plan is in close

relation to a better and faster decision-making process. This is a result of relying on a trust-

worthy computer code which can be customized to perform contract agreements, which

prevents the creation and approval of numerous physical documents, which are then supposed

to be maintained by each department and supplier (if involved). Moreover, the use of smart

contract interface also helps in lowering the costs and the amount of manual effort that is

35

required. Furthermore, to have a database where identity and reputation is easily verifiable

results in saving of costs associated with conducting certification checks and building new

trusted business relationships. According to Manos and Manikas argued that the real time of

taking operational decisions are fast: most of the operational decisions are repetitive, structural.

Having a new software tool which analyses real-time data would make automated decisions

faster (Manos and Manikas, 2010).

In Blockchain technology, the information is available to each and every stakeholder which

means that every stakeholder in the network can easily track asset in the supply chain. With the

blockchain being decentralized, the information is stored in a decentralized way which means

everyone in the network have a copy of information. Once the information is stored in the

blockchain which cannot be changed or altered. If there is any hacking of information, everyone

in the network will get a notification so that everyone can take their individual decisions to

avoid hacking. According to Sahin and Robinson (2002), decentralise decision making helps in

better coordination.

One strong argument in this thesis is Smart contract will allow complete surveillance awareness

of situation by using continuous intelligence: continuous (monitoring) systems record all the

information and events. These systems make it easier to detect a threat (in terms of poor quality

and low productivity). Moreover, they notify the stakeholder and other systems about the

altering situation, allowing them to tackle and avoid the threats in a proactive manner.

As pointed out by other research works in the area, Smart contracts are capable of building on

the progress already achieved by Electronic Data Interchange (EDI) software via more efficient

and real-time status tracking. Smart contracts have made business to business transactions more

transparent and trusted, along with the secure recording of product specifications and making

them accessible to all involved departments.

36

6.0 Conclusion The Potential of using Smart Contract in business to business setting was analysed to resolve

few perennial problems related to the supply chain. The supply chain management in a well-

established organization was studied which gave an idea how asset and information was shared.

The motive of this exercise was to check ways to identify flaws and improve the existing

system. The three main challenges in the supply chain coordination are transparency,

traceability and time delays which were tried to be resolved in this thesis. The thesis work shows

how Blockchain technology works on the concept of decentralized system which is beneficial

to eliminate the need for central authority which in retrospect eliminate issues of transparency,

traceability and time delay. A smart contract system was established in a small scale which

involved selected departments in an organization. Methodology to set up a smart contract

interface in a business to business setting is investigated in this thesis which can be broken into

six principle steps. Upon implementation an observation study has been done in order to show

how transparency, traceability and time delay in decision making is achieved by using smart

contract interface. The challenges pertaining to lack of transparency, traceability and significant

time-delays while in the process of decision making were resolved by using the smart contract.

The Blockchain gives a clear understanding about the conditions necessary to transfer

information from one Block to another thereby making the whole process transparent. The

Blockchain enables ease to trace back the asset therefore making it traceable. By the use of the

in-built feature of Blockchain to give instant notifications of rejections in material time delays

were reduced.

The use of smart contracts which allows self-executing contractual agreements deployed on the

blockchain can help to increase transparency, traceability and efficiency across a supply chain.

They can be used to provide transparent credentialing and reputation management, track the

flow of assets through a supply chain, and automatically execute the logistic activities. This

will lead to create trust among partners and reduces time and cost inefficiencies associated with

verification checks. It also speeds up the supply chain and absolutely makes it more agile in

managing risks and disruptions, since real-time data can be used to guide decision-making.

The thesis work at Scania throws light on how Blockchain technology, which works on the

concept of decentralized system, is beneficial to eliminate the need for central authority. The

thesis shows the benefits of direct interactions between departments. This benefit is achieved

by creating a tamper-proof process for creating and storing data. The thesis describes how the

block-based system in congruence with a smart contract approach with a freely programmable

and decentralized virtual machine allows the execution of individual program codes within the

Blockchain. This combination of two technologies creates a decentralized system, which

executes program scripts in a tamper-proof manner, stores data in a change-resistant and

verifiable manner. This creates the basis for the fraud-proof interaction of unknown individuals,

secure and independent data storage and reliable automation processes without the presence of

an administrative organization. The developed smart contract interface in conjunction with the

Blockchain use cases in data exchange to examine the advantages of Blockchain and smart-

contract technologies.

The coordination theory states that the management of dependencies between activities helps

to achieve collectively objectives and goals. This thesis emphasis the use of smart contract in

conjunction with Blockchain technology to achieve the conditions set by the coordination

theory. Currently, there are critical challenges which exist in maintaining coordination within

the departments. With so many stakeholders involved, the asset flow becomes complex and

37

thereby leads to inadequate sharing of information. Without an efficient method to keep track

of data in real-time, the data exchange is ill equipped to manage risk and respond to disruptions

quickly. In this thesis smart contract interface helps particularly in improving the transparency,

traceability and reduces time delay in decision making and planning across the departments.

Due to the readily available detailed description of asset from its origin in the block, a

transparent system was brought in order. Along with it since information can be back tracked

data traceability became relatively easy. The efficiency of decision making is improved since

the smart contract are executed on a distributed ledger which help in simplifying complex multi-

party systems that are present in typical business to business setting. Due to customized

computer code to perform contract agreements, which prevented the creation and approval of

numerous physical documents, the time delay was significantly reduced. This can be attributed

to efficient planning while setting up the smart contract. By mitigating the lack of transparency,

traceability and time delay due to the usage of smart contract and Blockchain technology the

objectives of coordination theory, depending on decentralization to achieve goals, are met.

Since Blockchain technology is still young, much of the anticipated benefits provided by the

technology will take a difficult path to achieve as the number of departments included in the

Blockchain increases along with their transactions. The huge hype around the Blockchain

technology can lead to misunderstandings and misconceptions on the real benefits and also

potential use-cases. However, Blockchain is not the solution for all sorts of problems in supply

chain. This research shows that some use-cases might have a positive outcome in terms of

process optimization. However, to assess the real advantage the benefits have to be compared

with the costs of Blockchain implementation.

The sustainability gains in the form of better human rights, fair work practises and reducing

environmental impact. In this thesis argues that smart contract interface provides a transparency

and traceability of supply chain. This will help to ensure asset safety, efficient recalls and the

elimination of counterfeits. In case of human rights and fair work, a clear history of transaction

of asset will help customer (assembly department) to be assure that assets are coming from the

specified sources. This have been recognized as being ethically sound. In case of environmental

impact, there is lot more work to be done. But in this thesis one of the scope of smart contract

interface is to assure raw material asset quality in real time, in turn helps reducing recalls and

rework, this will helps in resource savings. With the new technology, avoiding intermediaries

may lead to massive layoffs in the future. Since smart contract technology pushing development

forward in the supply chain and organization should take responsibility and find a new areas to

work.

38

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Appendix 1: Assembly Department - Interview A

Interviewee A, works with system analyst for Scania, and is responsible for information

sharing activities.

The discussion started with outlining current asset flow and information flow between

departments. The interviewee tells that they will send an order of required assets with quality

specification and quantity to machining department (manufacturer) and copy of same order will

send to logistic department. The orders are sending via ERP to respective departments.

The interviewee pointed that there is no information sharing system in the machining

department. It is difficult to track and trace where the asset in the machining department. They

are unable to check real time verification and validation on quality specification that they

specified when they placed order. There is no real time information of the assets, this leads to

problem for them to make decision making and planning activities. The interviewee is also

pointed that when they found faulty assets, it is difficult for them to trace back where and which

end the fault was happened. Since there is no real time visibility of asset, it is difficult to

coordinate with other departments.

Machining Department - Interview B

Interviewee B, works with production planner for Scania, and is responsible for production

and planning activities.

The discussion started with outlining current asset flow and information flow in the machining

department. The interviewee pointed that they don’t have internal information system, they only

have ERP system, and this will be used to send and receives an order from assembly department.

Firstly, when they receive an order from assembly department, they will communicate

internally to raw material section in order to take material for the production. In this Raw

material data manually updated in the excel system. And then material is taking to production

section, here once product is finished, quality data is updated manually to the system. Once

product is finished, they will share information via ERP to logistic department and assembly

department. The interviewee pointed that, they have different suppliers in the Raw material

section, if there is any faulty Raw material found, it is difficult for them to track and trace the

supplier data in current system, traceability is the big issue. Since there is no real time visibility

of asset, it is difficult to coordinate with other departments. And also it is difficult to take

decision, this leads in time delay in planning and scheduling.

Logistic Department - Interview C

Interviewee C, works with logistic developer for Scania, and is responsible for logistic and

planning activities.

The discussion started with outlining the current asset flow and information flow. The

interviewee pointed that, firstly, they receives the information from assembly department, when

the order is placed. And, once product is finished in machining department, they will get

information via ERP in order to pick up products. Then will pick up products and stored in our

warehouse. Lastly, deliver same products to assembly department.

The interviewee pointed that currently they are not able to coordinate with the departments,

since they are not getting real time information of asset. Currently, they are facing challenges

in making decisions for forecasting, scheduling and planning. They are facing huge problem in

faulty products, since they are not able to find it out in which end problem was happened. They

are facing big problem in asset identification number, since at each and every finished asset that

they receive from the machining department is different from the assembly department order

numbers.

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Appendix 2:

pragma solidity ^0.4.18;

contract AssetTracker {

event OrderPlaced(uint256 id ,address owner);

function AssetTracker(address _machiningAddress, address _logisticAddress , address

_assemblyAddress) {

contractCreatorAddress=msg.sender;

machiningAddress=_machiningAddress;

logisticAddress=_logisticAddress;

assemblyAddress =_assemblyAddress;

}

address public contractCreatorAddress;

address public machiningAddress;

address public logisticAddress;

address public assemblyAddress;

modifier onlyContractCreator() {

require(msg.sender == contractCreatorAddress);

_;

}

modifier onlyMachiningAddress() {

require(msg.sender == machiningAddress);

_;

}

modifier onlyLogisticAddress() {

require(msg.sender == logisticAddress);

_;

}

modifier onlyAssemblyAddress() {

require(msg.sender == assemblyAddress);

_;

}

function changeStatus(uint256 _id, uint256 _status) internal {

assetStore[_id].status=_status;

}

function setContractCreator(address newContractCreator) onlyContractCreator{

contractCreatorAddress=newContractCreator;

}

function setMachiningAddress(address newMachiningAddress) onlyContractCreator{

machiningAddress=newMachiningAddress;

}

function setLogisticAddress(address _logisticAddress) onlyContractCreator{

logisticAddress=_logisticAddress;

}

function setAssemblyAddress(address _assemblyAddress) onlyContractCreator{

assemblyAddress=_assemblyAddress;

}

struct macRawMaterial {

45

uint256 macRawMaterialID;

string macRawMaterialOrigin;

uint256 macRawMaterialQuality;

uint256 macRawMaterialQuantity;

}

struct macProduction {

uint256 macMachineNumber;

uint256 macQualityOfProduct;

uint256 macQuantityOfProduct;

}

struct macShipment {

uint256 macLocationIdOnRack;

string macLocationName;

}

struct logDepartment{

uint256 logLocationIdOnRack;

string logLocationName;

}

struct Asset {

string name;

string description;

// possible statuses 00,10,20,21,22,30,11

uint256 status;

uint256 ProductID;

address customerAddress;

// to be set while order placement , to be set 10

uint256 productionQualityLowerLimit;

uint256 rawMaterialQualityLowerLimit;

logDepartment logDepartmentVariable;

macShipment macShipmentVariable;

macProduction macProductionVariable;

macRawMaterial macRawMaterialVariable;

}

mapping(uint256=>Asset) assetStore;

mapping(uint256=>address) public assetIdToOwner;

// not effective as the whole array isnt returned

//mapping(uint256 => uint256[]) public departmentToAssetId;

uint256 public last=0;

// keeps in account the ownershipCount of department

mapping(uint256 => uint256) public ownershipCount;

// asset id to status

mapping(uint256 => uint256) public assetIdToStatus;

function placeOrder(string _name , string _desc, uint256 _productionQualityLowerLimit,

uint256 _rawMaterialQualityLowerLimit){

Asset memory _asset=Asset({

name:_name,

description:_desc,

46

status:20,

ProductID:last,

customerAddress:msg.sender,

productionQualityLowerLimit:_productionQualityLowerLimit,

rawMaterialQualityLowerLimit:_rawMaterialQualityLowerLimit,

logDepartmentVariable:logDepartment(0,"null"),

macShipmentVariable:macShipment(0,"null"),

macProductionVariable:macProduction(0,0,0),

macRawMaterialVariable:macRawMaterial(0,"null",0,0)

// macRawMaterialID:0,

// macRawMaterialOrigin:"null",

// macRawMaterialQuantity:0,

// macRawMaterialQuality:0

//macMachineNumber:0

//macQualityOfProduct:0,

//macQuantityOfProduct:0,

//macLocationIdOnRack:0

//macLocationName:"null",

//logLocationIdOnRack:0

//logLocationName:"null"

});

//assetStore[last].logDepartmentVariable=logDepartment();

assetStore[last]=_asset;

assetIdToStatus[last]=20;

ownershipCount[20]++;

// assembly guy takes order , transferrs order to machinning guy

assetIdToOwner[last]=machiningAddress;

//departmentToAssetId[20].push(last);

last++;

OrderPlaced(last,msg.sender);

}

function addDetailRawMaterialStakeHolder(uint256 _id,uint256 _rawMaterialId,uint256

rawMaterialQuality,uint256 rawMaterialQuantity,string origin) onlyMachiningAddress{

// check ownership and status.

require(assetStore[_id].rawMaterialQualityLowerLimit<=rawMaterialQuality);

require(assetStore[_id].status==20);

require(assetIdToOwner[_id]==machiningAddress);

// write data

assetStore[_id].macRawMaterialVariable.macRawMaterialOrigin=origin;

assetStore[_id].macRawMaterialVariable.macRawMaterialQuality=rawMaterialQuality;

assetStore[_id].macRawMaterialVariable.macRawMaterialQuantity=rawMaterialQuantity;

assetStore[_id].macRawMaterialVariable.macRawMaterialID=_rawMaterialId;

// change status to next stakeholder

changeStatus(_id,21);

assetIdToStatus[_id]=21;

ownershipCount[20]--;

ownershipCount[21]++;

47

}

function addDetailProductionStakeHolder(uint256 _id,uint256 _machineNumber,uint256

_macQualityOfProduct,uint256 _macQuantityOfProduct) onlyMachiningAddress{

require(assetStore[_id].productionQualityLowerLimit<=_macQualityOfProduct);

require(assetStore[_id].status==21);

require(assetIdToOwner[_id]==machiningAddress);

assetStore[_id].macProductionVariable.macMachineNumber=_machineNumber;

assetStore[_id].macProductionVariable.macQuantityOfProduct=_macQuantityOfProduct;

assetStore[_id].macProductionVariable.macQualityOfProduct=_macQualityOfProduct;

changeStatus(_id,22);

assetIdToStatus[_id]=22;

ownershipCount[21]--;

ownershipCount[22]++;

}

function addDetailShipmentStakeHolder(uint256 _id,uint256

_macLocationIdOnRack,string _macLocationName) onlyMachiningAddress{

require(assetStore[_id].status==22);

require(assetIdToOwner[_id]==machiningAddress);

assetStore[_id].macShipmentVariable.macLocationIdOnRack=_macLocationIdOnRack;

assetStore[_id].macShipmentVariable.macLocationName=_macLocationName;

changeStatus(_id,30);

assetIdToStatus[_id]=30;

ownershipCount[22]--;

ownershipCount[30]++;

assetIdToOwner[_id]=logisticAddress;

}

function addDetailLogistic (uint256 _id,uint256 _logLocationIdOnRack,string

_logLocationName) onlyLogisticAddress {

require(assetStore[_id].status==30);

require(assetIdToOwner[_id]==logisticAddress);

assetStore[_id].logDepartmentVariable.logLocationIdOnRack=_logLocationIdOnRack;

assetStore[_id].logDepartmentVariable.logLocationName=_logLocationName;

// order ready to be delivered

changeStatus(_id,11);

assetIdToStatus[_id]=11;

ownershipCount[30]--;

ownershipCount[11]++;

assetIdToOwner[_id]=assetStore[_id].customerAddress;

}

/** getters **/

function getAssetOverview(uint256 _id)constant returns(string,

string,

uint256,

48

uint256,

address,

uint256,

uint256

)

{

return (assetStore[_id].name,

assetStore[_id].description,

assetStore[_id].status,

assetStore[_id].ProductID,

assetStore[_id].customerAddress,

assetStore[_id].productionQualityLowerLimit,

assetStore[_id].rawMaterialQualityLowerLimit

);

}

function getAssetRawMaterialInformation(uint256 _id) constant

returns(string,uint256,uint256,uint256){

return (assetStore[_id].macRawMaterialVariable.macRawMaterialOrigin,

assetStore[_id].macRawMaterialVariable.macRawMaterialQuantity,

assetStore[_id].macRawMaterialVariable.macRawMaterialQuality,

assetStore[_id].macRawMaterialVariable.macRawMaterialID

);

}

function getAssetProductionInformation(uint256 _id) constant

returns(uint256,uint256,uint256){

return (

assetStore[_id].macProductionVariable.macMachineNumber,

assetStore[_id].macProductionVariable.macQualityOfProduct,

assetStore[_id].macProductionVariable.macQuantityOfProduct

);

}

function getAssetShipmentInformation(uint256 _id) constant returns(uint256,string){

return(

assetStore[_id].macShipmentVariable.macLocationIdOnRack,

assetStore[_id].macShipmentVariable.macLocationName

);

}

function getLogisticInformation(uint256 _id) constant returns(uint256,string){

return(

assetStore[_id].logDepartmentVariable.logLocationIdOnRack,

assetStore[_id].logDepartmentVariable.logLocationName

);

}

function tokensOfStakeholder(uint256 stakeHolder) constant returns (uint256[]){

uint256 assetCount = ownershipCount[stakeHolder];

if (assetCount == 0) {

49

// Return an empty array

return new uint256[](0);

} else {

uint256[] memory result = new uint256[](assetCount);

uint256 totalLocks = last-1;

uint256 resultIndex = 0;

// We count on the fact that all cats have IDs starting at 1 and increasing

// sequentially up to the totalCat count.

uint256 lockId;

for (lockId = 1; lockId <= totalLocks; lockId++) {

if (assetIdToStatus[lockId] == stakeHolder) {

result[resultIndex] = lockId;

resultIndex++;

}

}

return result;

}

}

}