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International Comparative Research on Iot-Based Supply Chain Risk Management

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International Comparative Research on Iot-Based Supply Chain Risk Management International Comparative Research on IoT-based Supply Chain Risk Management A/Prof. Yu Cui Graduate School of Business Administration and Economics, Otemon Gakuin University, Osaka, Japan Email: [email protected] Prof. Hiroki Idota Faculty of Economics, Kindai University Prof. Masaharu Ota Graduate School of Business, Osaka City University International Comparative Research on IoT-based Supply Chain Risk Management ABSTRACT In this paper, we firstly discuss current status and problems of food supply chain, which has been attached more importance in supply chain studies in recent years. And then, a review and analysis of the research on traceability systems for IoT-based food supply chains will be conducted. In the latter part, we introduce and explain the establishment of food supply chains in Thailand and China and their respective traceability systems with case studies. Moreover, we conduct a systematic analysis regarding the changes and effects the blockchain made on supply chains. Furthermore, through a case analysis of Japan, explicit speculation and forecast would be made on how blockchain affects the development of traceability systems of IoT- based food supply chain. Keywords: Food Supply Chain, Risk Management, IoT-based Traceability System, Blockchain INTRODUCTION In 2011, Thailand suffered a severe flooding which occurs once in 50 years. Its traditional industrial base - Ayutthaya Industrial Park was flooded and nearly 200 factories were closed down. In the same year, Japan’s 311 Kanto Earthquake also caused serious losses to the manufacturing industry and numerous supply chain companies in Japan. And recently, scandals involving data falsification in automotive, steel and carbon fiber have caused great impact on a large number of related supply chain companies and they are faced with the dilemma of supply chain disruption. In China, Sanlu Milk Powder Incident and Shanghai Fuxi Incident caused by the fact that information on manufacturer's irregular and unethical behavior was not shared with other enterprises in the supply chain in time, giving rise to serious losses to supply chain companies and leading to public's distrust. In particular, information asymmetry and insufficiency on food supply chain brought serious risk and hidden dangers to supply chain node enterprises. Therefore, how to prevent the above mentioned various types of supply chain crises and properly deal with them after the occurrence so as to promptly restore supply chain to normal and re-establish the trust of public are urgent issue. In this context, establishing an IoT-based traceability system across the supply chain is most essential for implementing resilient supply chain. In this paper, we will first discuss current status and problems of food supply chain, which has been attached more and more importance in supply chain research in recent years. After this, a review and analysis of the research on traceability systems for IoT-based food supply chains will be conducted. In the latter part of the paper, we will introduce and explain the establishment of food supply chains in Thailand and China and their respective traceability systems through examples. After this, we will conduct a systematic analysis regarding the changes and effects the blockchain, which has become widely known as a result of the focus on fictitious cryptocurrency - bitcoin made on supply chains and especially, food supply chains. In the end, through a case analysis of Japan, explicit speculation and forecast will be made on how blockchain affects the development of traceability systems of IoT-based food supply chain. THE DEVELOPMENT OF FOOD SUPPLY CHAIN In 1996, Zuurbier et al. first proposed the concept of food supply chain on the basis of supply chain, and considered food supply chain management as a vertical integration mode of operation conducted by organization of agricultural products and food production and sales for the purpose of reducing logistics cost of food and agricultural products and improving quality stability and level of logistics services (Zuurbier, 1999). The research on food supply chain management has gone through several phases: the first phase is business flow management phase, and research scope covers business flow phase from output of agricultural products and food processing enterprises to their delivery to consumers. The research content is usually concluded in marketing category. The next phase is integrated logistics management phase. The logistics management of agricultural products is separated from marketing and extended upstream to the process of production and processing in enterprises manufacturing agricultural products and food, emphasizing market-oriented production and cost control on the entire procedure of logistics. In the last phase, regarding integrated supply chain management phase, research scope extends further to the most upstream enterprises of agricultural products, the purpose of which is to follow and trace security issues regarding quality of agricultural products and food, so problems can be detected and solved effectively. Current Researches of Traceable Food Supply Chain The emergence and development of food supply chain is an inevitable result of continuously enhanced demand of food consumption in recent years. Consumers are also paying more and more attention to the quality and safety of food. To meet consumers' demands on types and quantities of food and agricultural products, enterprises are constantly exploring and developing new technologies, nevertheless, when consumer demands being fulfilled, excessive use of new technologies and methods hazard human body and thus causes food quality and safety issues inevitably. Reason for this is information asymmetry between buyers and sellers in the market. In detail, when consumers purchase food or agricultural products, they lack product's hygiene, environmental and safety information. Therefore, it is necessary for enterprises to inspect and test products in all the phases of production procedure and disclose the information to consumers in time. According to the definitions made by Codex Alimentary Commission and the International Organization for Standardization, traceability system can be expressed as: “a technical tool to assist an organization to conform with its defined objectives, and is applicable when necessary to determine the history or location of a product or its relevant components.” (ISO, 2007). Food safety depends on every node in supply chain. Therefore, it is essential for every node firm to store relevant information of food production process for future reference. Traceability systems include internal traceability system and external traceability system. The former one refers to the tracing of products and relevant information within certain organizational chain of supply chain, such as quality traceability system of wholesalers’ commodities, which is often a quality assurance system embedded in an organization. While the latter one is a vertical retrospective one across the entire supply chain, referring to the tracing of data and transaction process at every node. Gandino et al. (2009) studied the impact of Radio Frequency Identification (RFID) on food supply chain traceability. Regattieri et al. (2007) established a conceptual framework model for traceability systems. Alfaro and Ràbade (2009) studied the inventory management of traceability system. Narsimhalu, et al. (2015) studied performance evaluation and optimization of traceability systems. IoT-BASED TRACEABLE FOOD SUPPLY CHAIN Widespread application of Internet of Things (IoT) technology has made a profound impact on food supply chain. The so-called IoT refers to a huge network constructed through the combination of a variety of information sensing devices such as RFID devices, product electronic codes(EPCs), infrared sensors, global positioning systems, laser scanners and other devices with the Internet (Yan et al., 2012). Its purpose is to have all items connected to the network for better identification and management. Wireless network is connected through electronic tag RFID, EPC, sensors, two-dimensional code and other interfaces installed on various objects, so as to intelligentize objects and realize communication between human beings and objects. In the meantime, communication and dialogues among objects can also be actualized. Therefore, IoT is widely applied in fields including transportation and logistics, medical system, intelligent environment, personal and social applications. From the perspective of risk management, it is necessary to identify potential major risk factors in the chain, and to analyze in depth the causes and manifestations of various risk factors. With analyzing the causal relationship between this key factor and other risk factors, effective measures to control risk might be sought from the causation, accordingly, various countermeasures for risk control are put forward for the purpose of risk prevention. Based on IoT technologies, historical production process of products is automatically sensed and recorded through RFID, and the information is integrated into traceable network so that the entire process of recording and monitoring products from procurement, production, processing, storage, packaging and distribution can be achieved, network tracking can also be conducted in the application terminal at any time through IoT. INTRODUCTION OF BLOCKCHAIN Along with the development of IoT technologies and the advent Big Data era, realization of decentralized
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