Blockchain Enabled Multi-echelon Supply Chain Financing (BEMS)

• Applicant: Professor Dr. David Wuttke
• Subject Area: Management and Marketing
• Term: since 2022
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 503765651

Over the past decades, virtually all firms have improved their supply chains to facilitate efficient product and information flows from raw materials to end customers, that is, across multiple echelons. More recently, some firms started using supply chain financing, but encounter substantial and often insurmountable risks when financing more than their direct suppliers due to information asymmetries and inefficient verification processes. Recent blockchain applications show how this new technology can solve both problems. If all firms are willing to, they can effectively apply blockchain to share all required information securely, create trust in the reliability of data, and use smart contracts to guarantee execution. Besides the technical feasibility, however, a key managerial question that is still open and that I seek to address is whether all firms in a supply chain are better off by sharing the required information and should thus engage in blockchain-enabled multi-echelon supply chain financing when this becomes available in their supply chain. For suppliers, information sharing can weaken their bargaining position. For buyers, lack of information sharing exposes them to elevated risks. Finding the optimal balance to make both players better off is part of my research project. On a more fundamental level, this research question relates to how value is created in this new financing scheme given the various risks and whether this value can be shared among participants to lead to a Pareto improvement. In this research project, I will take a management perspective and provide a comprehensive analysis of optimal strategies for firms that consider using blockchain to facilitate the financing of their upstream supply chain. I will gain deep qualitative insight into the mechanisms of current solutions, develop and analyze a novel game theoretical model to provide structural insight into the underlying dynamics and incentive conflicts, and examine behavioral motives that arise in the realm of data sharing and trust. On a broader level, I will contribute to our understanding of how technology transforms established processes, such as enabling firms rather than banks or governments to financially support other firms. Introducing blockchain to facilitate multi-echelon supply chain financing could be an important step towards more transparent supply chains, where firms can trace their money and, if desired, use such superior knowledge to foster a more sustainable and compliant behavior in their supply chain.

• DFG Programme: Research Grants
• International Connection: France
• Cooperation Partner: Dr. Andreas Gernert