Blockchain adoption or contingent sourcing? Advancing food supply chain resilience in the post-pandemic era

doi:10.1007/s42524-022-0232-2

Front. Eng

2023, Vol. 10

Issue (1) : 107-120 https://doi.org/10.1007/s42524-022-0232-2

RESEARCH ARTICLE

Blockchain adoption or contingent sourcing? Advancing food supply chain resilience in the post-pandemic era

Xiutian SHI¹, Siru CHEN¹, Xiaofan LAI²(

)

¹. School of Economics and Management, Nanjing University of Science and Technology, Nanjing 210094, China
². Institute of Big Data Intelligent Management and Decision, College of Management, Shenzhen University, Shenzhen 518060, China

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Abstract

In the post-pandemic era, food supply chains and firms therein are facing unprecedented severe challenges, because once infection is detected, numerous products must be recalled or abandoned, and both suppliers and retailers in the supply chain suffer enormous loss. To survive under the pandemic, retailers have adopted different sourcing strategies, such as contingent sourcing, which, in turn, affect the upstream suppliers and hence the resilience of the whole supply chain. With the rapid development of digital technologies, retailers nowadays can utilize blockchain as a reliable and efficient way to reduce product risk and hence advance the resilience of food supply chains by improving product traceability and inspection accuracy, and making sourcing transparent. In this paper, we develop a game-theoretic model to investigate the interrelation between the retailer’s decisions on blockchain adoption and sourcing strategies. We consider that a retailer originally orders from a risky supplier while conducting an imperfect inspection to detect infected products before selling. The retailer may speculatively keep on ordering from the risky supplier or adopt contingent sourcing by ordering from an alternative safe supplier. The retailer also has an option to implement blockchain to improve the inspection accuracy and product traceability. We derive the optimal retail prices under different sourcing strategies with and without blockchain adoption and then analyze the incentives for sourcing strategy and blockchain adoption. Then, we identify the conditions of an all-win situation for food retailer, supplier, supply chain resilience, and consumers with/without government subsidy. Finally, we extend to consider the situation that some consumers have health-safety concerns and preferences for blockchain adoption.

Keywords food supply chain blockchain contingent sourcing supply chain resilience

Corresponding Author(s): Xiaofan LAI

About author:

Changjian Wang and Zhiying Yang contributed equally to this work.

Just Accepted Date: 30 December 2022 Online First Date: 14 February 2023 Issue Date: 02 March 2023

Cite this article:

Xiutian SHI,Siru CHEN,Xiaofan LAI. Blockchain adoption or contingent sourcing? Advancing food supply chain resilience in the post-pandemic era[J]. Front. Eng, 2023, 10(1): 107-120.

URL:

https://academic.hep.com.cn/fem/EN/10.1007/s42524-022-0232-2
https://academic.hep.com.cn/fem/EN/Y2023/V10/I1/107

Fig.1 Model of supplier’s type, infected risk, and inspection efficiency.

Probability of inspection result	Retailer’s updated belief of supplier’s type
$P r o b {X = R} = e s e r$	$P r o b {Y = r \| X = R} = 1$
$P r o b {X = R} = e s e r$	$P r o b {Y = u \| X = R} = 0$
$P r o b {X = U} = 1 − e s + e s (1 − e r)$	$P r o b {Y = r \| X = U} = e s (1 − e r) 1 − e s + e s (1 − e r)$
$P r o b {X = U} = 1 − e s + e s (1 − e r)$	$P r o b {Y = u \| X = U} = 1 − e s 1 − e s + e s (1 − e r)$

Tab.1 Probability of inspection result and retailer’s updated belief

	Sourcing strategy	Optimal retail price ( $p j i$ )	Retailer’s optimal profit ( $Π j i$ )
Without blockchain (N)	(O, O)	$12$	$14 (1 − e s η) − e s η K$
	(A, A)	$12 (1 + Δ)$	$14 (1 − Δ) 2$
	(O, A)	$12 (1 + e s e r Δ 1 − e s η (1 − e r))$	$[1 − e s η (1 − e r) − e s e r Δ] 2 4 [1 − e s η (1 − e r)] − e s η (1 − e r) K$
With blockchain (B)	(O, O)	$12 (1 + c b)$	$14 (1 − c b) 2 (1 − e s η) − T b$
	(A, A)	$12 (1 + c b + Δ)$	$14 (1 − c b − Δ) 2 − T b$
	(O, A)	$12 (1 + c b + e s Δ)$	$14 (1 − c b − e s Δ) 2 − T b$

Tab.2 Optimal retail price and profit under each strategy

Variable cost for blockchain operations ( $c b$ )	Marginal cost of sourcing from a safe supplier ( $Δ$ )	Penalty cost for detected infection (K)	Blockchain adoption	Optimal sourcing strategy
$0 < c b < (1 − e s) (1 − 1 − e s η) e s + (1 − e s) (1 − 1 − e s η)$	$Δ < c b 1 − e s$	$K > K 0$	×	(A, A)
	$Δ < c b 1 − e s$	$K ? K 0$	×	(O, A)
	$c b 1 − e s ? Δ < Δ 1$	$K ? K 1$	×	(O, A)
	$c b 1 − e s ? Δ < Δ 1$	$K > K 1$	√	(O, A)
	$Δ 1 ? Δ < 1$	$K > K 2$	√	(O, O)
	$Δ 1 ? Δ < 1$	$K ≤ K 2$	×	(O, A)
$(1 − e s) (1 − 1 − e s η) e s + (1 − e s) (1 − 1 − e s η) ? c b < 1$	$Δ < Δ 2$	$K ? K 0$	×	(O, A)
	$Δ < Δ 2$	$K > K 0$	×	(A, A)
	$Δ 2 ? Δ < 1$	$K ≤ K 2$	×	(O, A)
	$Δ 2 ? Δ < 1$	$K > K 2$	√	(O, O)

Tab.3 Optimal decisions of blockchain adoption and sourcing strategy

	Sourcing strategy	Consumer surplus
Without blockchain (N)	(A, A)	$18 (1 − Δ) 2$
Without blockchain (N)	(O, A)	$18 (1 − e s e r Δ 1 − e s η (1 − e r)) 2$
With blockchain (B)	(O, O)	$18 (1 − c b) 2$
With blockchain (B)	(O, A)	$18 (1 − c b − e s Δ) 2$

Tab.4 Consumer surplus under sourcing strategies without/with blockchain

Sourcing strategy	Optimal retail price ( $p ~ j B$ )	Retailer’s optimal profit ( $Π ~ j B$ )
(O, O)	$12 (1 + θ 2 + c b)$	$14 (1 + θ 2 − c b) 2 (1 − e s η) − T b$
(A, A)	$12 (1 + θ 2 + c b + Δ)$	$14 (1 + θ 2 − c b − Δ) 2 − T b$
(O, A)	$12 (1 + θ 2 + c b + e s Δ)$	$14 (1 + θ 2 − c b − e s Δ) 2 − T b$

Tab.5 Optimal retail price and profit under each strategy with blockchain adoption considering consumers’ preferences

Variable cost for blockchain operations ( $c b$ )	Marginal cost of sourcing from a safe supplier ( $Δ$ )	Penalty cost for detected infection (K)	Blockchain adoption	Optimal sourcing strategy
$0 < c b < θ 2$	$0 < Δ < Δ ~ 1$	$K ? K ~ 1$	×	(O, A)
	$0 < Δ < Δ ~ 1$	$K > K ~ 1$	√	(O, A)
	$Δ ~ 1 ? Δ < 1$	$K > K ~ 2$	√	(O, O)
	$Δ ~ 1 ? Δ < 1$	$K ? K ~ 2$	×	(O, A)
$θ 2 ? c b < θ 2 + (1 − e s) (1 − 1 − e s η) e s + (1 − e s) (1 − 1 − e s η)$	$Δ < c b − θ / θ 2 2 1 − e s$	$K > K 0$	×	(A, A)
	$Δ < c b − θ / θ 2 2 1 − e s$	$K ? K 0$	×	(O, A)
	$c b − θ / θ 2 2 1 − e s ? Δ < Δ ~ 1$	$K ? K ~ 1$	×	(O, A)
	$c b − θ / θ 2 2 1 − e s ? Δ < Δ ~ 1$	$K > K ~ 1$	√	(O, A)
	$Δ ~ 1 ? Δ < 1$	$K > K ~ 2$	√	(O, O)
	$Δ ~ 1 ? Δ < 1$	$K ? K ~ 2$	×	(O, A)
$θ 2 + (1 − e s) (1 − 1 − e s η) e s + (1 − e s) (1 − 1 − e s η) ? c b < 1$	$Δ < Δ ~ 2$	$K ? K 0$	×	(O, A)
	$Δ < Δ ~ 2$	$K > K 0$	×	(A, A)
	$Δ ~ 2 ? Δ < 1$	$K ? K ~ 2$	×	(O, A)
	$Δ ~ 2 ? Δ < 1$	$K > K ~ 2$	√	(O, O)

Tab.6 Optimal sourcing strategy and incentive for blockchain adoption with consumers’ preference

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