- We additionally provide our novel proposed future state of interoperable supply chains using DLT-based records systems, and a gap analysis between our proposed future state and the current state which also serves as a gap analysis for many proposed, fractional DLT-based SCM solutions. The purpose of a gap analysis to locate the gaps and identify the differences between the current situation and “what ought to be” . Gap analyses have been established for some time and adopted in several fields, e.g., Mineraud, Mazhelis, Su, and Tarkoma’s 2016 gap analysis of Internet of Things platforms , Scott et al.’s 1993 gap analysis of biological diversity , or Brown and Swartz’s 1989 gap analysis of professional service quality .
2.2. Supply Chain Management
2.3. Distributed Ledger Technology
3. Emerging Technology Layers
3.2. ID Management
3.6. Privacy and Confidentiality
4. Business Implications of Improved Emerging Technology Layers
4.3. Consumer needs
4.4. Better Business Practices
- The cooperation of stakeholders in an area that has traditionally conformed to the needs of larger stakeholders. The World Economic Forum has built a multi-stakeholder community to design a framework to support decisions involving inclusivity, interoperability, and integrity .
- The development of a governance model to ensure the credibility of records inputted into the blockchain. A DRS only ensures the integrity of the records in the distributed ledger but does not prevent dishonest or inaccurate information from being inputted.
- The integration of stakeholders into existing DLT efforts rather than duplicating efforts. This is particularly important for smaller stakeholders.
- Technology adoption by laggards. For example, farmers or remote suppliers of raw materials have not adopted much technology in their processes. Addressing the reasons for this, whether related to access to technology or digital literacy will be important.
- Accurately and officially identifying actors and records in the supply chain. Currently, there exist many unofficial actors that need to be integrated using standardized digital identifiers.
- The threat of quantum computing. Quantum computing poses a real threat to the security of information stored in any network of interoperable supply chains that relies upon cryptography for security. Specifically, it poses a threat to public-key cryptographic algorithms which are a key component of the cryptographic architecture of blockchain. This poses a threat to the private keys which control a user’s digital identity and associated credentials . It should be noted that quantum computing poses a threat to all web-based systems, not just blockchain, and quantum-safe blockchains are under development [87,88].
- Blockchain technology limitations. DLT and blockchain technology are not immune to the interoperability challenge facing SCM.
- Standardization is needed to make interoperability possible. Standardization has already been recognized as a needed factor in the proliferation of blockchain , and efforts have been made in their development by the International Standards Organization (ISO), as well as industry groups including the Blockchain in Transportation Alliance (BITA), W3C, the Digital Container Shipping Association (DCSA), and the United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT). Work in standardization that still needs attention includes:
- clarifying the unclear legal implications of smart contracts and creating universally agreeable implications ;
- data harmonization by establishing standard data formats;
- standardizing protocols and technological components to support interoperability of all technologies;
- collaboratively establishing an overarching governance model for the distributed systems;
- creating a plan for managing false or inaccurate records entered in the immutable ledger and establishing configuration plans;
- identifying solutions for identifying and implementing solutions to compliance with international privacy, data localization and encryption laws;
- long-term technology plans to manage the relevancy, compatibility, and security of IoT equipment;
- strategies for addressing retention, disposition and long-term preservation of blockchain-based records.
5.1. Technology-Based Gaps: Events
- Consensus mechanisms. Some consensus mechanisms, primarily proof of work, have performance challenges, mainly the block size and block frequency, which cause latency  This impedes increasing throughput, as increasing the block size to increase throughput causes propagation delays across the network. Additionally, there can be a lag in blockchain transactions, between the time a block is approved and made available to the entire network. Both of these issues cause a negative security risk, as long delays make the blockchain vulnerable to forks and double-spending attacks .Chain splits are a potential disruptive problem facing a blockchain-based system (i.e., Ethereum and Ethereum Classic) . If this happens, the smart contracts will be duplicated onto both chains and actors will have to monitor both for a period resulting in confusion about the reliability and authenticity of records and inefficiencies in managing events.Existing Layer 2 solutions include sidechains, state channels and plasma frameworks . However, these do not address the underlying issue of consensus mechanisms. Furthermore, (1) side chains are responsible for their own security, (2) state channels move state-modifying operations (critical to SCM and the tracking of state changes) off-chain, and (3) the plasma framework periodically broadcasts their commitments to the root chain [92,93], which undermine the reliability of state-machine technology whereby only one state can exist at a time. To reduce the risk of chain splits and latency, more efficient consensus mechanisms need to be explored and adopted.Various consensus mechanisms already exist, such as proof of stake, delegated proof of stake, proof of elapsed time, proof of importance, proof of capacity, proof of authority, and consensus as a service (CaaS). Different tasks have different requirements for speed and security. A complex architecture of chains, their consensus mechanisms and their network capacity will need to be designed to increase the effectiveness of the entire network.
- Latency and throughput. Some consensus mechanisms, primarily proof of work, have performance challenges, mainly the block size and block frequency, which cause latency . This impedes increasing throughput, as increasing the block size to increase throughput causes propagation delays across the network. Additionally, there can be a lag in blockchain transactions, between the time a block is approved and made available to the entire network. Both of these issues cause a negative security risk, as the long delays make the blockchain vulnerable to forks and double-spending attacks .
- Overlap. To help manage a large architecture with several overlapping processes, blockchains and networks, data-driven state machine technology should be incorporated. State machine technology is an abstract mathematical model of a process. The process can only exist in one state at a time and moving between states is called transitioning. This gives the governing bodies flexibility in system applications without having to create, test or deploy new code. A system is needed that supports multiple state machines and can be extended with new ones.
- Complexity. Data-driven workflows should be developed to help manage the complexity of SCM. In data-driven workflows, workflows are represented using data, meaning users do not need to modify, test and support new code to add more workflows. They just add data. This is a unique feature in the decentralized platform marketplace.
- Blockchain resilience. Blockchain resilience can also pose a challenge in the far future if it is decommissioned. Centralized systems can easily be constructed and deconstructed . With blockchain, however, due to its decentralized nature, there is the possibility that it never completely shuts down . This is especially true with large-scale blockchains made up of millions of nodes. A terminated blockchain is susceptible to an attack whereby a malicious user overpowers the remaining active nodes to replace the blocks or create a significant fork . Therefore, a defunct blockchain ledger is not a reliable source of historical information needed for, i.e., auditing, data analysis, etc., and may pose future security and compliance risks.
5.2. Technology-Based Gaps: Digital Identities
- Verifiable credentials. W3C VCs will need to be developed. SSIs are the only identity system to support VCs.
- Digital wallets. To interact with a DRS, users need to hold a private key. Currently, existing digital wallets are not purpose-built wallets; they do not provide necessary advanced features because they do not have the context of how the user would interact with them. Usable wallets for SCM records systems need to be developed and should incorporate several technical components not used by other wallets including biometric identifiers for self-employed agents and contractors, cloud agents, QR code scanning, contextual user interface, credential rendering, blockchain public key, backup, device syncing, and personas—especially for logistics companies that offer several services throughout the supply chain. For enterprises, cloud services will need to be developed to provide the equivalent of digital wallets to meet organizational needs.
- Onboarding. A secure onboarding system needs to be developed. It will require reliable sources of real-world identity verification to securely and reliably onboard actors into their digital identities and a system to evaluate the reliability of different sources and combinations of information sources . Once real-world identities are authenticated, storing and mapping relationships will need to be developed between the proven identities and the digital identity .
- Quantum threat. Quantum-resistant algorithms need to be considered for the cryptography used in the system to ensure the security of digital identities . Hybrid quantum-resistant algorithms should be considered in the interim until quantum-resistant algorithms are ready so that ledger records are protected both from future and present threats.
5.3. Technology-Based Gaps: IoT
- Cost. The costs reflect two components. The increased generation of records is costly to manage. IoT networks need to support many messages (communications costs), distributed device-generated data (storage costs), processing, and analysis of the data (server costs). In addition to the increased processing and storage requirements, there is also the cost of managing a vast distribution of what will eventually be outdated equipment (IoT devices).
- Analytics. The IoT analytics concern is a result of the distributed and fractured nature of the records. The IoT network for the supply chain is made of large amounts of fragmented information. While this allows for the sale of specific valuable information, it adds challenges to collecting complete and accurate information . In addition to being fragmented, much of the data are heterogeneous; another challenge for analytics . This further supports the need for a supply chain enabled by DLTs with harmonized data formats. Additionally, redundancy is another challenge facing analytics, as the overlapping networks will result in temporal and spatial redundancies which can introduce inconsistencies and biases .
- Privacy and security issues. Privacy and security issues in the IoT space commonly stem from the simplicity of the functions in IoT objects which are unable to support robust cryptographic algorithms and security functions . The Modum.io AG pilot project, for instance, found notable issues and concluded that going forward, data in IoT sensors need to be secured with cryptographic signatures or access control mechanisms .
- Framework integration. The framework integration concern reflects the complex process of coordinating all the existing IoT objects due to their simple functions and coexistence of multiple protocols . Existing IoT interfaces and protocols are diverse and inconsistent across, e.g., data model standards, hardware protocols, network protocols, sensors, and equipment connection standards, platform standards, and third-party service providers. A single blockchain or IoT platform cannot connect to the equipment of all manufacturers . As a result, a complex architecture, with adequate bandwidths able to support the consistent flow of data between all of the networks without bottlenecks needs to be developed .
- Adoption. While IoT objects are regarded as ubiquitous, there are still gaps in the supply chain, especially among smaller organizations. The implementation of a DRS-based supply chain may pose additional barriers for some remote producers of raw materials who do not have consistent connectivity. Adoption efforts are still needed in these areas.
- Managing fragmented data. The fragmented nature of the information collected by IoT devices will be aggravated with overlapping interoperable networks. To prevent data redundancies, data formalized digital identities and data harmonization will need to be implemented into DRSs.
5.4. Technology-Based Gaps: Analytics
5.5. Technology-Based Gaps: Finances
5.6. Technology-Based Gaps: Privacy and Confidentiality
- Cryptographic solutions. To address privacy concerns, attention needs to be given to cryptographic solutions . This includes zero-knowledge proofs (ZKPs), group signatures, multi-party computation, and homomorphic encryption. However, these are still in the early phases of implementation and have no real-world, large-scale applications as of yet.
- Group signatures. A group signature scheme is also needed in the supply chain since many parties are often involved. Group signatures are a method for allowing members to sign automatically on behalf of the group. A related cryptographic primitive is called secure multi-party computation (MPC) that allows multiple parties to contribute their encrypted input to the computing function in a privacy-preserving mode. In other words, the respective inputs are never observed in unencrypted form outside of their origin and yet they can be used in computation to obtain the combined score.
- Explore alternatives. Finally, architectures that store fewer data on the chain could be more secure as vulnerabilities could be discovered in the authentication and messaging protocols used in data transmission across the network .
Conflicts of Interest
- BiTA works with a standards committee and board to set industry standards for blockchain technology. In the supply chain IoT space, they have set some standards for data and metadata regarding location components, i.e., with GPS and IoT units.
- Everledger offers a fraud detection ledger for diamonds which can be verified by insurance companies, law enforcement, and buyers to verify the provenance of the diamond. The increased visibility could be used to detect and deter fraudulent insurance claims.
- Modum’s MODlink gives the entire supply chain a way to share trusted events by joining data silos without exposing private data and is connected to existing infrastructure without intrusion. Their MODsense is an automated way of collecting, assessing, and reporting conditions of sensitive goods through the supply chain while tracking their location and reducing operational costs. Using analytics can grasp the root-cause of problems, reduce costs and limit risks.
- Mojix provides supply chain subcontracting and has integrated many RFID and IoT technologies to provide real-time location tracking which increases traceability, monitors proper transportation of goods, and detects errors early.
- OrgBook BC uses VON to verify that an organization is registered to conduct business in BC as a corporation.
- Scantrust provides secure QR codes which act as digital identities in the supply chain once printed onto the packaging of goods and “activated”. Their QR codes act as SCM tags and enable the collection of data and attributes of each product on a unit-level. The SCM tags are used for automated alerts for recalls, or “sell by” dates. Scantrust provides a Business Intelligence Dashboard, showing stakeholders end-to-end visibility into the supply chain. Google Analytics is also integrated to provide consumer information associated with the goods.
- SKUChain tracks raw materials through the supply chain and has worked with the mining industry to track conflict minerals to the mines to provide a provable clean supply chain with traceable financial events.
- SustainBlock uses encrypted transactions to store relevant information on the blockchain and track the provenance of raw materials originating from conflict and high-risk areas (e.g., conflict minerals to the retail store). They have carried out a proof-of-concept project with a mine in Rwanda in 2019 which traces conflict minerals and establishes data acceptance criteria including sovereignty, quality, and relevance of data in the supply chain.
- Things Lab uses smart card tracking IDs to prevent the introduction of counterfeit items into the supply chain. However, they identify batch production which can still be susceptible to the introduction of counterfeit productions and double-spend problems within the batch.
- TradeLens coordinates customs agencies, government planners, and financial service providers for large shipping concerns. TradeLens tracks every detail, even throughout the shipping portion of the supply chain. By tracking all the events, stakeholders can have more control over the shipment and the increased visibility of all minute events reduces the window to double-spend. It provides an audit trail for the entire shipping life cycle in the supply chain. Stakeholders can obtain access to key shipping data throughout the shipping process which can be used with AI to improve operational efficiencies. This includes timeline changes, impacted by vessel changes, weather, and harbour issues.
- Treum’s service provides transparency, traceability, and tradability through tokenization. The added transparency is centred on preventing double-spend and ensuring authenticity for organic foods and valuable trade products such as historic jerseys. The tokenization is a useful feature towards the end of the product life cycle for goods with resale potential which can be co-owned and traded, where the continued authenticity and origin of the product is essential.
- Unisot provides real-time tracking throughout the supply chain. Their Digital Twin and Product DNA solutions create digital representations of supply chain items enabling stakeholders to track and trace them quickly and securely, from origin to disposal.
- WaltonChain relies on RFID technology to integrate information from IoT devices in the supply chain to provide full traceability . These enable automation of the supply chain reducing human interference and better reliability of the events in the supply chain. This, combined with the tamper-proof record of the data, reduces the opportunity for double-spend and the introduction of counterfeits into the supply chain. They allow for child chains to be created to monitor logistics, warehousing, retail circulation, and production, which store and upload their own data to the parent chain for cross-chain queries.
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|Solution||Blockchain Technology||Proof of Origin||Proof of Quality||IoT||ID Management||Finance||Events||Analytics||Privacy and Confidentiality||Industries Covered|
|TradeLens||Hyperledger||●||●||●||●||●||SCM in general|
|Unisot||Bitcoin SV||●||●||●||●||●||SCM in general|
|Mojix||Quorum||●||●||●||Retail, oil, and gas|
|Modum||Proprietary||●||●||●||●||●||Pharmacy, medical, perishable, and construction materials|
|SKUChain||Proprietary||●||●||●||●||Aerospace, auto, agriculture, energy, mining, banking, commodities, electronics, insurance|
|Treum||Ethereum/Quorum||●||●||●||●||Food, consumer products, energy, healthcare, land, and art|
|Scantrust||Hyperledger/GoodChain||●||●||●||SCM in general|
|Things Lab||IOTA Ledger/The Tangle||●||●||●||SCM in general|
|WaltonChain||Proprietary||●||●||●||Agriculture and retail|
|Blockchain in Transportation Alliance||N.A.||●||Not specific|
|OrgBook BC||VON/ Hyperledger Indy||●||Not specific|
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