Abstract

Conflicts between supply chain members emerge because individually strategic actions may not be jointly optimal. Efforts to forecast consumer demand represent a source of conflict. Coordination of forecasts require a powerful incentive alignment approach. This work proposes a smart-contract equipped consortium blockchain system that creates an incentive structure which makes coordination with respect to forecasts economically appealing to a retailer and supplier. Distortions of demand due to uncoordinated forecasting is captured by a bullwhip measure which factors both forecast error and variance. Cooperation under the system is shown to help minimize this bullwhip measure. New outcomes to supply chain participants that allow for a higher reward is provided by the system. Under a fixed payout structure, the system achieves credibility of continued cooperation thus promoting an optimal coordinated equilibrium between retailer and supplier. Blockchain technology represents a consensus formation mechanism which can intermediate the behavior of supply chain network.

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