Blockchain in Logistics and Supply Chain A Lean approach for designing real-world use cases

Blockchain in Logistics and Supply Chain
A Lean approach for designing real-world use
cases
Prof. Guido Perboli
Director of ICELab@polito
guido.perboli@polito.it
Joint work with
Mariangela Rosano and
Stefano Musso

AGENDA
 BlockChain for non IT Experts
 Why the marriage?
 Use Case
G.Perboli - Blockchain in logistics and supply chain 2

BlockChain for non IT Experts
A Travelling Salesman Approach

Blockchain Technology
 Blockchain is a P2P ledger, firstly used in the Bitcoin
cryptocurrency for economic transactions. (Conoscenti et al., 2016)
G.Perboli - Blockchain in logistics and supply chain
© 2008 Satoshi Nakamoto – Bitcoin Organization
4

BlockChain characteristics
(source: Deloitte)
5

BlockChain for non-IT
 Distributed
 It is designed to be distributed and synchronized across networks
 Hard to attack by hackers
 Trustness
 If you want to sale your dog, the dog must belong to you
 All the parties must agree that they want to buy/sell a dog
 Rules to share your data
 Transactions agreed between participants in advance
 Stored in the blockchain as “smart contracts”
 Immutability of the data
 When all the parties agree and the transaction is stored in the
BlockChain, it cannot be changed
 Possibility to rebuild the story of the information

The land of blood and honey
 We can secure our data
 We can rebuild how the information was generated
 The infrastructure can be expensive
 Different technologies, different applications
 Hyperledger – IBM
 IOTA – IoT specific
 Specific expertise

Why the marriage?

The generation, transmission, use and storage of information is highly
segmented and not effectively shared among parties, resulting in inefficiencies,
lose of data and sub-optimization
Insurer Banks Inspection,
certification &
verification company
Tax & Revenue, Customs,
inspections & other authorities
Farmer Storage CustomsCross-border
examination
Logistics &
distribution
Retail ConsumerStorage
Sea PortSea Port
Air PortAir Port
In-land
transport
Shipping
Line
Cargo
Airline
Factory Packing
Different systems
are used to
communicate
between actors,
making it a highly
complex web

DIGITAL TWIN
Tagging objects
using RFID, QR,
container numbers
etc.
SENSOR DATA
GPS, temperature,
humidity,
performance etc.
IDENTITY
MANAGEMENT
Define roles such
as producer,
transporter,
customs, port
operator, bank, etc
DOCUMENT
STORAGE
Ability to store
relevant docs:
purchase order,
invoice, load list,
phyto certificate,
certificate of origin,
transport booking,
bill of lading,
manifest,
declarations, etc.
PUBLISH
EVENTS
Ex: purchase of
goods done,
container stuffed,
tax paid, good
inspected,
certificate
approved,
container loaded,
etc.
ACTIONS
Ex: push, receive,
make a query for,
discover different
events/doc/data/us
ers
Single version of the truth, data integrity, immutable records, encryption, agnostic to
internal processes/IT, permission-less innovation
Different Domains

Some scenarios
 Automotive
 Grey spare parts
 Vehicle Identity
 V2X communications
 Food & Agriculture
 Sustainable transportation
 ISO/TS 14067 requires that all the chain of a product/service is computed
in its environmental impact
 How to assess the subcontractors/parts?
 Tokens as «green» money
 Synchromodal transportation
 Need of a common network
 Digital twins
 Capacity
 DL: certified capacity
 Smart Contracts: negotiation of the real costs
 Prevent large companies from gathering data of smaller ones

Speed and scalability
 Bitcoin peaks out at around 7 TPS
 Ethereum is limited to around 15 TPS
 Quorum has stated a target of “dozens to hundreds of transactions
per second depending on configuration” in their white paper.
 Hyperledger Fabric. They claim 3500 TPS. Independent test 170
 IOTA- 180 TPS, claiming to arrive at 1600 for the end of the year
 Scalability dilemma
 Speed decreasing with the network size
 Tradeoff between speed and security

Costs
 BitCoin: 20$ per transaction (Micali)
 Small BC
 Scenario 1 – private BC
 Standard machine
1 Vmachine 32 CPU 128 Gb Ram machine
14000$/Year
 Need of at least 6 machines
 84000$/Year to start your business
 Scenario 2- shared BC
 1 Vmachine 32 CPU 128 Gb Ram machine
 14000 $/year
 9 machines
 126000$/Year to start your business

Blockchain in a Digital Strategy
14G.Perboli - Blockchain in logistics and supply chain

Use Case

Use Case – Methodology to
build the use case
Digital
Strategy
Business
Process
Modeling
Technology
Design
Which are the actors and their role?
Which are the financial and operative goals?
Key Performance Indicators
Identify the key information to migrate to Blockchain
16

Use Case – Methodology
 GUEST Methodology
 As-is-process
 Value proposition and value ring
 Solution canvas
http://www.theguestmethod.com/

Use Case – Fresh Food
 Fresh food retailer
 Application: eggs
 10 warehouses and 3 distribution centers in Western Europe

Use Case – Fresh Food
 Fresh food retailer
 10 warehouses and 3 distribution centers in Western Europe

Value Ring
 The Actor ID Card is too much detailed and complicated
 Need of an agile tool that highlights the relevant factors affecting the
relationship company business/actor.
 Introduce
 Actor influence
 Priorities
20GUEST - GO

Value Ring
21GUEST - GO
ProjectProject

Value Ring

Value Ring
 Benefits of Blockchain:
 improvement of the inbound efficiency (workforce and
capacity planning)
 reduction of expired items or waste caused by unsafe
stocking conditions
 improvement of the accuracy in the tracking of ingredients,
to ensure the compliance with health regulations
 reduction of the counterfeits and the improvement of the
customer trust.

Solution Canvas

Solution Canvas
Producer  Warehouse manager:
information to use for optimizing and planning
inbound flows
Distributor/carrier  Warehouse manager:
book the time slot, and delivery the
incoming products
25

Solution Canvas
“Token”
• the digital equivalent of the
batch of eggs
• additional parameters of
the certification
26

Solution Canvas

Expected To Be scenario
 Objectives
 Industrial Blockchain-based solution
 Cost reduction
 Inboud operations efficiency
 Waste
 Recall (e.g., sanitary problems)
 Value
 Brand image
 Increased revenues
 Actors
 Producers
 Warehouse manager
 Distributors/carriers
 Customers
• B2B retailers
• B2C final consumer

To Be scenario
 Hyperledger Fabric network over the Amazon AWS Cloud
 industrial-level implementation of the code
 possibility to easily integrate analytics and deep learning
 compatibility with the existing network of sensors monitoring the
fleet and the operations on the products (temperature).
 IBM Blockchain Platform
 IT Support Team
 3 technical experts
 2 project managers

To Be scenario
 Costs
 IT team: 130K
 HP. Average salary: 2100 month
 Costs computed as the process is mature
 BC Platform: 240K
 BC members (Retailer, Suppliers, Carriers): 21
 Cost per actor: about 1000€/month

To Be scenario
 Value
 +10% revenues
 Inboud efficiency: 45K
 875 man-working minutes per day and 2 operators could be moved to a
different area
 Accuracy of data
 Reduced waste of food: 450K
 Reduced expired items (exceeded sell-by date or use-by date) and waste
caused by unsafe stow conditions
 Potential value
 Recalls (possible contaminations): 1200K

To Be scenario
 Limits
 Need to put in the BC all the Supply Chain participants
 Which part of the process migrate to the Blockchain?
 Digital Twin
 Some limits in linking the real and the digital
 IoT
 Additional costs for introducing the sensors network data
E.g. Cold chain
 Potentially high gains

Methodology results
 4 months between the assessment of the digital strategy and the
implementation of the solution
 Increase of stakeholders' willingness to participate
 identifying and meeting their expressed needs
 emerging of unexpected benefits for some actors
 Evaluate which part of the process to migrate to the
Blockchain
 whole process and legacy system is not reasonable
 integration and scalability of the solution

References
 Perboli, G., Musso, S. and Rosano, M. (2018). Blockchain in Logistics and Supply Chain:
a Lean approach for designing real-world use cases. Submitted to IEEE Access.
 Caro, M.P., Ali, M.S., Vecchio, M., Giaffreda, R. (2018). Blockchain-based traceability in
Agri-Food supply chain management: A practical implementation, in IoT Vertical and
Topical Summit on Agriculture - Tuscany, IOT, pp. 1-4
 Gatteschi, V., Lamberti, F., Demartini, C., Pranteda, C., Santamaría, V. (2018a).
"Blockchain and Smart Contracts for Insurance: Is the Technology Mature Enough?"
Future Internet 10, 20
 Gatteschi, V., Lamberti, F., Demartini, C., Pranteda, C., Santamaría, V. (2018b). To
Blockchain or Not to Blockchain: That Is the Question, in IT Professional, 20(2), pp. 62-
74
 Leng, K., Bi, Y., Jing, L., Fu, H.-C., Van Nieuwenhuyse, I. (2018) Research on agricultural
supply chain system with double chain architecture based on Blockchain technology.
Future Generation Computer Systems, 86, pp. 641-649
 Lu, Q., Xu, X (2018). Adaptable Blockchain-Based Systems: A Case Study for Product
Traceability. IEEE Software, 34 (6), art. no. 8106871, pp. 21-27
 Mao, D., Wang, F., Hao, Z., Li, H. (2018). Credit Evaluation System Based on Blockchain
for Multiple Stakeholders in the Food Supply Chain. Int. J. Environ. Res. Public Health
15, paper no. 1627
34G.Perboli - Blockchain in logistics and supply chain

Contacts
icelab@polito.it
guido.perboli@polito.it
http://www.ice-lab.online/

Blockchain in Logistics and Supply Chain A Lean approach for designing real-world use cases

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