Smart Contracts and Blockchain for Supply Chain Quality Management

This chapter proposes a digital transformation game of supply chain quality management being inspired by the food supply chain, with a focus on the ham industry. Consumers’ willingness to visit a retailer’s store and purchase ham of a certain brand (goodwill) depends on the difference between the product quality and the consumers’ reference quality as well as on price. In the ham industry, both quality and price determine consumers’ purchasing intentions while firms agree on the best contractual configuration to adopt by choosing between either a wholesale price contract (WPC) or a revenue sharing contract (RSC). The parameter contracts are defined through a blockchain technology, which finds the best way to coordinate a supply chain. Also, the blockchain ensures the product quality, visibility, and traceability. Our findings demonstrate that supply chain coordination depends on three major ingredients: the consumers’ quality evaluation, the price impact on the stock of goodwill, and the sharing agreement that firms negotiate. When the first two are inactive, firms coordinate through an RSC in most of the cases, whose parameters are defined by a blockchain, leading to the use of smart contracts. Instead, when consumers’ evaluation and/or the price impact on goodwill play a role, the RSC seldom leads to coordination and the firms’ preferences change completely. In fact, the firms’ strategies become more short-term oriented, focusing on sales rather than the accumulation of goodwill. Although the RSC leads to lower prices and larger sales, it considerably lowers the firms’ profits, highlighting serious doubts about its possible application in some supply chain contexts, although a blockchain technology is used.