IDEAS home Printed from https://ideas.repec.org/a/inm/ormsom/v25y2023i6p2021-2037.html
   My bibliography  Save this article

Blockchain-Enabled Deep-Tier Supply Chain Finance

Author

Listed:
  • Lingxiu Dong

    (Olin Business School, Washington University in St. Louis, St. Louis, Missouri 63130)

  • Yunzhe Qiu

    (Department of Information Management, Peking University, Beijing 100871, P. R. China)

  • Fasheng Xu

    (Whitman School of Management, Syracuse University, Syracuse, New York 13244)

Abstract

Problem definition: For many supply chains, deep-tier suppliers, due to their small size and lack of access to capital, are most vulnerable to disruptions. We study the use of advance payment (AP) as a financing instrument in a multitier supply chain to mitigate the supply disruption risk in a traditional system (with limited visibility) and a blockchain-enabled system (with perfect visibility). The main goal of this paper is to shed light on how blockchain adoption impacts agents’ operational and financial decisions as well as profit levels in a multitier supply chain. Academic/practical relevance: Traditionally, because of the limited visibility in the deep tiers, powerful downstream manufacturers’ financing schemes offered to their immediate upstream suppliers are not effective in instilling capital into the deep tiers. Advancements in blockchain technology improve the supply chain visibility and enable the manufacturer to better devise deep-tier financing to improve supply chain resilience. Methodology: We develop a three-tier supply chain model and take a game-theoretic approach to compare how blockchain-enabled deep-tier financing schemes affect a financially constrained supply chain’s optimal risk-mitigation and financial strategies. Results: We find that although improved visibility via blockchain adoption can help the manufacturer make informed supply chain financing decisions, whether it can benefit all supply chain members depends on the financing schemes in use. Blockchain-enabled delegate financing increases risk-mitigation investments and benefits all three tiers of the supply chain only when the tier 2 supplier is severely capital-constrained with the working capital below a threshold. Because delegate financing endows the intermediary tier 1 supplier with leverage over the manufacturer, the inefficiency inhibits an all-win outcome when the tier 2 supplier is not severely capital-constrained. Blockchain-enabled cross-tier direct financing exhibits a compelling performance as it always leads to win-win-win outcomes (and is thus ubiquitously implementable) regardless of the suppliers’ working capital profile. Managerial implications: Our insights help firms assess opportunities and challenges associated with enhancing supply chain visibility via blockchain adoption.

Suggested Citation

  • Lingxiu Dong & Yunzhe Qiu & Fasheng Xu, 2023. "Blockchain-Enabled Deep-Tier Supply Chain Finance," Manufacturing & Service Operations Management, INFORMS, vol. 25(6), pages 2021-2037, November.
    • Handle: RePEc:inm:ormsom:v:25:y:2023:i:6:p:2021-2037
    DOI: 10.1287/msom.2022.1123
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/msom.2022.1123
    Download Restriction: no
    File URL: https://libkey.io/10.1287/msom.2022.1123?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bae, Sang Hoo & Saberi, Sara & Kouhizadeh, Mahtab & Sarkis, Joseph, 2025. "Examining blockchain's role in supply chain finance structure and governance," International Review of Financial Analysis, Elsevier, vol. 99(C).
    2. Rogalski, Timo & Schiereck, Dirk, 2025. "When is blockchain worth it? Value and risk drivers of corporate blockchain announcements," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 154097, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    3. Liao, Changhua & Lu, Qihui & Ghamat, Salar & Cai, Helen Huifen, 2025. "Blockchain adoption and coordination strategies for green supply chains considering consumer privacy concern," European Journal of Operational Research, Elsevier, vol. 323(2), pages 525-539.
    4. Yan, Ji & Gui, Qinchang & Jiang, Sitong & Yu, Zihao & Fernandes, Kieran & Tian, Kun & Xia, Senmao & Gong, Yu, 2025. "How does blockchain application impact on supply chain alliance?," Technovation, Elsevier, vol. 143(C).
    5. Li, Ling & Yan, Shiyi & Peng, Shuxia & Hou, Pengwen, 2025. "The interplay of blockchain and channel structure with consideration of cyber-security in a platform supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 197(C).
    6. Leng, Aolin & Sun, Maolin & Shi, Jinzhao, 2025. "Risk control strategies for inventory pledge financing on cross-border e-commerce platforms empowered by the digital economy," Omega, Elsevier, vol. 133(C).
    7. Xue, Jing & Li, Guo & Ivanov, Dmitry, 2025. "Digital transformation in the blockchain era: Balancing efficiency and resilience in operations management," International Journal of Production Economics, Elsevier, vol. 282(C).
    8. Li, Dengjia & Ma, Chaoqun & Li, Hao & Yang, Jinglan, 2024. "The adoption of blockchain and financing constraints: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 96(PB).
    9. Xie, Xiaofeng & Xu, Xun & Zhang, Chong & Zhang, Fengying, 2025. "Enhancing a triple capital-constrained supply chain performance: Alliance financing, profit distribution, and information structure," International Journal of Production Economics, Elsevier, vol. 281(C).
    10. Li, Yuanyuan & Zhang, Yindan & Geng, Liping, 2024. "Digital finance, financing constraints and supply chain resilience," International Review of Economics & Finance, Elsevier, vol. 96(PA).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormsom:v:25:y:2023:i:6:p:2021-2037. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.