Improved supplier-managed inventory order assignment platform enabled by Blockchain Technology

This study aims to propose a novel supplier-managed inventory model called Block-SMI, which is based on blockchain technology. Block-SMI is a customer-supplier collaboration architecture that utilizes blockchain technology to divide the main service integration problem into smaller sub-problems, each dealing with a smaller portion of the service/demand pool. Block-SMI aims to utilize the capabilities of blockchain technology to address the limitations of centralized approaches. Centralized approaches often struggle with large-scale problems and struggle to derive near-optimal solutions efficiently. By leveraging blockchain technology, Block-SMI seeks to overcome such challenges and achieve more efficient and effective solutions. Block-SMI operates under the same hypothesis as the supply chain collaboration model and seeks to address the challenges of scaling by utilizing the decentralized and distributed nature of blockchain technology. In this paper, the application of Blockchain technology and its potential for successful SMI implementation are investigated. The framework includes a mathematical model for multiple supplier-customer order fulfillment which is embedded in the blockchain framework. Some cases are studied to evaluate the performance of the proposed model compared to the literature, discussing the details of its blockchain framework.

Design/methodology/approach:

 First, a mathematical model has been formulated and developed. Then, the mathematical optimization of NLP with an objective model has been developed. The proposed model has been solved by GAMS software and a genetic algorithm. The problem has been solved in a centralized network using a genetic algorithm to provide the total cost value of supply chain management.

The objective function of Block-SMI aims to minimize the overall inventory cost within the entire supply chain management. This cost includes the expenses borne by both the supplier and the customer. This objective function is evaluated by all solvers and customers, and it is used to guide the matching process of customer demand with suitable suppliers. The aim is to find an optimal solution that minimizes the overall inventory cost while meeting the customer's requirements and ensuring that the supplier's capabilities are utilized effectively. By minimizing the total inventory cost, Block-SMI aims to reduce the overall cost of supply chain management and improve efficiency. To evaluate the effectiveness of Block-SMI, several scenarios were conducted. These scenarios involved comparing the proposed method with a centralized mechanism that was commonly employed to handle similar types of problems. By comparing the performance and outcomes of Block-SMI with the centralized approach, this study aimed to assess the advantages and benefits of utilizing the decentralized blockchain-based solution. The characteristics of Block-SMI were further described and analyzed, and the results demonstrated that Block-SMI is an effective solution for supplier-managed inventory problems, especially for large-scale scenarios.

Research limitations/implications:

 The most important limitation of the model, which can be seen as a development, is that the potential of the smart contract has not been used in the field of optimization.

Practical implications:

 Applying the proposed approach from the point of view of managerial insights, highlights the fact that the application of Blockchain technology enables the platform for managing the solvers’ contribution to the assignment of supplies to customers as new service provider business models. From the point of view of business model competency, solvers as assignment service providers must increase their competencies for better performance in solving their sub-problems. As a solver uses more time to proceed with its algorithm and get a better answer to increase its reward, other solvers may announce their solutions with overlap sooner. This causes persuades the solvers to restart the sub-problem formation.

Social implications: 

The framework applies a reward policy mechanism to both promote the near to optimum assignment for solvers and also benefit them from the yielded optimality with the blockchain token model. Finally, the proposed frameworks enable the detection of possible conflicts among the solvers for overlapping sub-problems and avoid the announcement of in-feasible assignments regarding supplier capabilities and customers. The findings imply that the yielded optimality of consolidated sub-problems is better from the point of view of solving time and resulting from optimality.

Originality/value: 

The proposed new mathematical model innovatively has investigated the supplier-managed inventory platform based on blockchain technology and uses the results to optimize time and cost reduction between stakeholders.