Value Analysis by Adopting Blockchain Technology to Eliminate Information Distortion

Information distortion is very common in supply chains, especially demand information. An easily-thought way of eliminating information distortion is information sharing. However, information sharing is not widely employed to eliminating information distortion in realistic supply chains, because of conflicts of interest between supply chain partners. Although there also exist many information sharing mechanisms that can coordinate the allocation between supply chain partners, they are not easy to implement in reality due to their rigidly implementing conditions, which leads many upstream manufacturers to eliminating information distortion either by buying data from downstream retailers, which has been used in reality, or by building a blockchain-based information transparency system (BITS), which is an alternative way proposed in this paper. The main purpose of this paper is to investigate how the two alternative ways mentioned above perform in eliminating demand information distortion of supply chains. We study a two-echelon supply chain consisting of one manufacturer and one retailer for three cases: with demand distortion, eliminating demand distortion by buying data, and by building BITS. Our findings are the following: (1) Eliminating demand distortion by constructing BITS can always bring the manufacturer the additional value, but a higher information transparency of BITS is not always better to the manufacturer, and a fully transparent BITS is needed only when the demand distortion is relatively large; (2) The data purchase way of eliminating demand distortion can bring the additional value to the manufacturer only when the data buying cost is relatively small; Moreover, BITS construction can generate more additional values for the manufacturer than the data purchase way when both demand volatility and BITS construction cost are not relatively large; (3) If the retailer bears the BITS cost, the retailer prefers to actively share BITS cost rather than passively bear the cost while its supplier possesses relatively less demand distortion