Enhanced Vendor-managed Inventory through Blockchain

Abstract

Vendor-managed inventory (VMI) is a commonly used collaborative inventory management policy in which manufacturers/vendors manage the inventory of retailers and take responsibility for making decisions related to the timing and extent of inventory replenishment. Several prerequisites exist for successfully implementing a VMI strategy like information sharing, trust, systems integration and long-term collaboration. However, in nowadays supply chain networks are becoming more complex, highly disjointed and geographically spread. As a consequence, the implementation of a VMI strategy may be a difficult task. In this paper, we propose a new interaction mechanism between retailers and vendors, which aims to improve their supply chain strategy and inventory policies based on a trustless and distributed mechanism. In particular, we use an autonomous trustless framework based on smart contracts and blockchain technology for governing the relationship between multiple vendors and multiple retailers. Finally, a use-case VMI scenario is presented along with several functional smart contracts. Tests performed using a local private blockchain illustrate the applicability of the proposed architecture along with the significant benefits for each participant.