Blockchain Technology in Transportation Management: A case study with Rhenus Logistics AB

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Bachelor’s Thesis

Blockchain Technology in Transportation Management

A case study with Rhenus Logistics AB

Authors:

Lina Ewald Arvid Hjortstam Jesper Wilén Supervisor:

Petra Andersson Examiner:

Hana Hulthén Term: VT21

Subject: Supply Chain Management Level: Bachelor’s thesis

Course: 2FE25E

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Acknowledgements

To our examiner Hana Hulthén and supervisor Petra Andersson, thank you for your guidance, crucial feedback and advice while writing this thesis.

We want to acknowledge Nitin Gaur, Mikael Bramstedt and Per Larsson for showing great interest, helping and encouraging us to produce this thesis.

Last but not least, a special thank you to our contact person at Rhenus Logistics AB, Chris Bode. Thank you for inspiring us on the topic of Blockchain and your encouragement throughout these last ten weeks.

Thank you!

Växjö 2021-05-31

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Lina Ewald Arvid Hjortstam Jesper Wilén

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Abstract

Purpose: In this study, areas of use of blockchain technology in transportation management will be discussed. The purpose is to contribute with theoretical research of advantages and disadvantages of blockchain technology in transportation management before an implementation at Rhenus Logistics.

Methodology: Through interviews and literature, ways of using blockchain in transportation management is researched. A case study is set up, to further analyze the research topic from the view of an individual third-party logistic company.

Findings: Results showed that for a third-party logistic provider to successfully use blockchain technology within transportation management, it is important to have the entire network onboard in the process. If so, functionalities such as track and trace, digital handling of paperwork and smart contracts could be used. The advantages of using blockchain technology for transportation management at Rhenus Logistics were found to be trust, transparency, traceability, efficiency, cost-saving opportunities and the use of smart contacts.

Identified disadvantages for Rhenus Logistics was that blockchain is costly, stakeholders are hesitant to get involved, smart contracts are not considerate of blurry lines in real life practice and there is a challenge in finding an accurate blockchain design for their business model.

Keywords

Blockchain Technology, Transportation Management, Supply Chain, Third-Party Logistic Provider, Smart Contract, Track and Trace, Trust, Transparency, Efficiency.

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In a globalized world, supply chain management has become important for business and competition (Sandberg 2015). Nowadays, logistics is not only a matter of a company’s efficient procurement and transportation. Competitive advantages emerge as a result of running effective supply chains (ibid). Jonsson and Mattsson (2016) mentions that the concept of supply chain management is similar to the concept of logistic. Within the concept of logistics Jonsson and Mattsson (2016) further describes transportation management, where the goal is to optimize the operation cost and provide satisfying delivery service.

Furthermore, transparency and security are seen as two important supporting pillars in supply chain management (Xu, Lee, Barth & Richey 2021). Seen from another perspective, drawbacks of globalisation and complex networks have caused a need for information security in supply chains (ibid).

Blockchain technology had its breakthrough in 2008 as a security function for crypto currency transactions (Sinha & Chowdhury 2020). Basically, a crypto currency such as Bitcoin, is a money exchange system free from financial intermediates such as banks.

However, the potential for further use of this digital consensus based technology has appeared (Mishra, Kukreja & Mishra 2020). For instance, a possibility to monitor and manage interorganizational relationships (ibid).

A blockchain, like the bitcoin model, is a public network distributed among participant computers around the world (Tapscott & Tapscott 2016). Thus, there is no need for intermediates such as a central database. However, the system is very secure due to encryption and its structure of permanent information storage. Information is stored in chains of digital blocks that is distributed throughout the network. If an alteration in a block occurs, the altered block is defined as invalid by the consensus of the network distributed ledger.

Accordingly, hacking a blockchain ledger, such as the Bitcoin model, requires the entire blockchain to be rewritten which is practically impossible (ibid).

Today, electronic data interchange (EDI) is a common way to effectively transfer information between two systems by using standardized formats. Information shared between a supplier

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and its customer could be order documents, delivery notifications and invoices (Jonsson &

Mattson 2016). Blockchain is said to simplify the information exchange of shipping documentation that currently happens, among other things, through EDI (Cargosmart 2018).

This would increase efficiency and trust for documentation transfer in the shipping process (ibid).

Nowadays, when arranging transports, many companies hire third-party logistic providers instead of transporting the goods by themselves (Jonsson & Mattsson 2016). A third-party logistic provider handles not only the transport itself but often provides value added services such as storage, terminal and other logistics functions as well and can be seen as an intermediary between the selling and buying part. Furthermore, Sinha and Chowdhury (2020) explains globalization has led to an increased number of business partners from all over the world. Trading across the border has made it harder for companies to handle the transportation by themselves partly due to an asymmetry in the information structure between companies. This has increased the need for third-party logistic providers who are more efficient and familiar with arranging transportation across borders (ibid).

1.2. Rhenus Logistics

Rhenus Logistics is one of the global leading third-party logistic providers with 33,000 employees across the world at 750 sites (Rhenus Group 2021a). Rhenus Logistics offers various supply chain solutions with the focus on organizing transports by land, sea and air (ibid).

By land Rhenus Logistics has various flexible solutions, both by road and railways (Rhenus Group 2021b). Rhenus Logistics coordinates transports of different amounts of goods which enables customers to order distinctly different volumes and still being able to have a low transportation cost, due to consolidation. In addition, they can also help with insurance policies, transport monitoring and customs service for example (ibid). The importance of seaports is increasing because of the international trade flow (Rhenus Group 2021c), where Rhenus Logistics offers their customers transportation of goods and cargo, as well as storage space by the port (Rhenus Group 2021d). In cooperation with global airline partners, Rhenus Logistics offers freight solutions by air as well (Rhenus Group 2021e). The company has a long experience transporting by air and has the competence to handle all the parts that are required, taking the costumer’s goods from point A to point B (ibid).

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Beyond the organization of transports, Rhenus Logistics offers several further services with the aim of optimising its customers’ supply chains (Rhenus Group 2021c). Examples of value-added services are professional installations and instructions of technical products, disposal of old home appliances and managing digital information (ibid).

1.3. Problem discussion

Blockchain can be used in complex supply chains to drive efficiency (DHL 2018). Further, third-party logistic providers have increased their involvement in supply chains since international trade flow has grown due to globalization (Sinha & Chowdhury 2020). In a supply chain the importance of relationships between suppliers, partners and customers is crucial (CSCMP n.d.). Within the supply chain, stakeholders such as third-party logistic providers, shippers, authorities, financial service providers, ports, terminals, cargo owners, might be involved in a blockchain network (TradeLens 2021b). The typical transportation management systems use functions such as, track and trace, documentation of goods, route planning, optimization of transports (Jonsson & Mattsson 2016), sending inquiries, bookings and confirmations (Fredholm 2013). To discover the potential of blockchain technology, a third-party logistic providers’ transportation management will, in combination with blockchain technology, be investigated further in this study.

From a buyer’s perspective, a third-party logistic provider is used to find a long term solution to a problem, rather than increasing opportunity (Sink, Langley Jr & Gibson 1996). Trust is mentioned by Sink et al. (1996) to be a critical factor when selecting a third-party logistic provider. Another factor of being a successful third-party logistic provider is fast adaptation to new technology (Tan, Yifei, Zhang & Hilmola 2014). Trust is an important factor between parties involved with a third-party logistic provider but according to DHL (2018) this will change due to blockchain. Trust, which is usually guaranteed by third parties who record and verify transactions, can now be eliminated when using the newly introduced technology. How blockchain will decrease the worry of trust is by storing information in a ledger-like database which can not be changed without consensus of all parties involved in the network (DHL 2018).

Trust is also mentioned by Kant (2021) as one positive benefit of blockchain technology alongside efficiency, security and reliability. Kant (2021) further explains blockchain

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technology both as a strategic resource with huge potential and a factor to sustain competitive advantages. However blockchain technology is still in an infancy stage, and Kant (2021) pushes for the need of working proactive in the development of blockchain technology to avoid falling behind competitors.

In another perspective, a product owner of Unifaun (2021) expressed that blockchain might be undesirable for business today. For a company that makes money on owning and selling data it is contradictory to use a system that shares and reveals information assets (ibid).

Likewise, Xu et al. (2021) expresses that transparency is not always desirable. Another potential disadvantage of blockchain mentioned by Mishra et al. (2020) is the, often costly, integration of blockchain. This calls for careful consideration from the company who considers to start using blockchain (ibid).

According to Batta, Gandhi, Kar, Loganayagam and Ilavarasan (2020), the transportation sector is in a primitive stage regarding the adoption of blockchain technology. Most practical cases of blockchain use are currently in a testing or experimental phase. As an example, IBM and Maersk are discovering the potential of blockchain technology by developing and testing applications of blockchain. Out of 100 transportation and logistics companies, simply 16 % of their executives say they have a distinct understanding of what blockchain technology entails and its potential effect on the transportation industry (Batta et al. 2020). With this as foundation, the topic for this research is assessed to be relevant, interesting and include potential contributing implications.

Rhenus Logistics is chosen as a third-party logistic provider to be the studied case throughout this bachelor’s thesis. Rhenus Logistics is not unsatisfied with their current systems and implies that a system is absolutely necessary for the operators handling their daily job.

However, Rhenus Logistics points out that there is always room for improvement. Today the communication between partners varies depending which partner they communicate with.

EDI-connections is one way of communicating and is commonly used at Rhenus Logistics, aligning with the goal of avoiding email communication which entails manual data input. On the other hand, setting up an initial EDI-connection with their partner requires quite a lot of communication and coordination efforts for Rhenus Logistics. The company is currently not using blockchain in their transportation management processes. Blockchain as a topic has been discussed within Rhenus Logistics but has not been in focus so far. The expectations

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Rhenus Logistics has for the potential use of blockchain in the future is to apply the advantages of the technology to their daily business (Product Manager Road Freight for Nordic countries, Rhenus Logistics 2021). This thesis will firstly investigate how blockchain could be used within transportation management and more specifically at third-party logistic providers. Secondly, in order to clarify what Rhenus Logistic should expect when in the future using blockchain, company specific advantages and disadvantages of the technology will be presented.

1.4. Research questions

1. How can Blockchain technology be used within transportation management at third-party logistic providers?

2. What are the advantages and disadvantages of using blockchain technology for transportation management at Rhenus Logistics?

1.5. Purpose

In this study, areas of use of blockchain technology in transportation management, will be discussed and summarized. Also, since blockchain technology is a part of Rhenus Logistics' future, the purpose is to contribute with theoretical research before implementation. The intention is to provide a study that will demonstrate the potential advantages and disadvantages of using blockchain technology at Rhenus Logistics.

1.6. Research delimitations

This study will be limited to the principles of blockchain technology and not delve into the technical aspects of the subject. Throughout this study, most information on transportation management is sourced from literature on supply chain management since transportation management is a part of the supply chain. In transportation management, road transport is seen as a part of the shipping industry. The case study performed on Rhenus Logistic, refers to Rhenus Logistics AB. The empirical data and thereby the analysis and conclusions are based on Rhenus Logistics AB.

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1.7. Disposition

Introduction Background on research topic and chosen company will be introduced. A problem discussion will lead to two research questions and the purpose of this thesis

Methodology The method chapter will present this study’s research approach

Theory The theory chapter will include secondary sources that build the theoretical frame of the study

Empirical Data Empirical data will include interviews with Rhenus Logistics, IBM and Bluebarricade Analysis The analysis will compare the theoretical

framework with the collected empirical data and analyse this to answer the research questions asked

Conclusion and findings This study will conclude by answering the research questions asked in the introduction Table 1. Disposition of thesis.

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2. Methodology

2.1. Scientific view

The scientific, or epistemological, view is a question about how you define valid truth (Bryman & Bell 2011). Moreover, the authors discuss whether or not all studies, independent of which discipline the study objective is within, should or could be studied with the same procedures and principles. Furthermore, Bryman and Bell (2011) mentions three main scientific views which will be described below.

Positivism can be seen as a natural science epistemology, where your senses confirm a phenomenon which motivates it to be seen as general knowledge (Bryman & Bell 2011).

With a theory basis you can formulate hypotheses which will make it possible to take a stand and assess rules of law. This is, by the authors, described as the principle of deductivism.

Likewise, positivism is aligned with the principles of inductivism in the approach that you gain knowledge by gathering facts to provide for the laws of regularities. Furthermore, science must, within this epistemology, be conducted in an objective manner (ibid).

Positivism is not suitable for this case study as blockchain as a technology can not be confirmed by natural science.

Realism is the second epistemology explained by Bryman and Bell (2011). This scientific view shares with positivism the beliefs that natural- and social sciences should be conducted in the same way when it comes to gathering and explanation of collected data. Likewise, the perception that there is an external reality which scientists should aim their attention towards, is the second view realism shares with positivism. When describing realism the authors sort it into two categories. When realism is used by scientists as a general term what they really mean is empirical realism, which means you can understand reality using appropriate methods. Empirical realism ignores the fact that there are underlying structures and mechanisms that cause observable phenomena. Critical realism is explained by the authors as the second form of realism. The approach of critical realism is that, to be able to understand and change phenomena, you need to identify the underlying structures which are the source of its occurrence. From a critical realism point of view, a phenomena can have many possible interpretations depending on the scientist. Together with enabling the use of theoretical terms, which can not be observed in reality, critical realism differs from positivism in the way research is being conducted (ibid).

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Interpretivism, the third epistemology described by Bryman and Bell (2011), is seen as an alternative to positivism. To be able to capture the subjective meaning, in accordance with the hermeneutic approach, interpretivism advocates a scientific strategy which takes into account the difference between humans and objects of natural science (idib). The interprevististic approach is not suitable for this case study since it does not research a subjective interpretation but instead a technology.

This study is conducted with a scientific view of critical realism whereas the approach builds on a theoretical framework about blockchain as an underlying structure for phenomena such as security and transparency. Further, aligning with the scientific view of critical realism is the use of theoretical terms which can not be observed in reality. For the researchers adopting a critical realist approach there is an understanding of a distinction between the object of blockchain technology and the terms used to explain and understand it.

2.2. Scientific approach

By choosing the scientific approach you also choose in which way the relationship between theory and research will be conducted during your study (Bryman & Bell 2011). Below the most common scientific approaches are mentioned.

A deductive approach is described by Bryman and Bell (2011) as research guided by theory.

This view is the most commonly used when it comes to the relationship between theory and research. The procedure of conducting deductive research starts with gathering theory.

Further, data is collected and from the data collection you will be able to present your findings and compare it with your theoretical gatherings (ibid). The path of proof is another way to describe a deductive approach (Ericsson 2019).

When research instead results in an outcome of theory, an inductive approach is used (Bryman & Bell 2011). Unlike deduction, using an inductive approach begins by doing observations which further on will result in gaining new theory. Even though Bryman and Bell (2011) state the usefulness in clarifying the approach when it comes to defining the relationship between theory and research the authors also state the fact that this is not a clear-cut. Furthermore, Bryman and Bell (2011) instead suggest the approach in this matter to

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act as a tendency rather than a distinction. Ericsson (2019) explains induction as the path of discovery.

Ericsson (2019) describes an abductive approach as a third potential scientific approach. This approach could be seen as a crossing between deduction and induction and is described by the author as the golden middle way. Conducting a abductive study as a hermeneutic orientated researcher implies that the starting point is theory, moving on to empirical gathering and ending with theory again. Starting with empirical gathering, then theory and at last empirical gathering again is the abductive approach as a positivist oriented researcher (ibid).

This study had a deductive scientific approach, started with gathering theory to further collect empirical data on the research topic. The findings were then compared with the theory to discover if there were any correlation or not, and by this be able to answer the research questions.

2.3. Research method and design

Business research methods consist mainly of two research strategies (Bryman & Bell 2011).

On one hand, the quantitative method presumes an objectivistic ontology and epistemology.

In line with a natural science view, the quantitative paradigm considers research to be independent from social influence thus research can be performed in an objective manner. On the other hand, the qualitative method assumes a constructivist ontology and a subjective epistemology. In contrast to the quantitative approach, the qualitative method considers research to be influenced by social interaction and construed by social actors. Despite the fact that quantitative and qualitative strategies are very different, Bryman and Bell (2011) explains that the ontological and epistemological connections should not be considered deterministic.

There are multiple ways to conduct a business research design (Bryman & Bell 2011).

Experimental design or true field experiments is uncommon in business research although it can serve as a yardstick for non-experimental design. Cross-sectional design has quantitative characteristics. This concept emphasizes elements such as quantifiable data, from more than one case, at a single point in time used to detect patterns of association. Unlike cross-sectional design, longitudinal design maps change over time. However, longitudinal

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design is relatively expensive and time-consuming and for that reason not as common in business and management research. Another type of research design is the comparative design. It entails a comparison of two or more contrasting cases. However, the cases should be conducted using the same method. The objective is to better understand social phenomena through comparison of the contrasting cases (ibid).

Furthermore, a case-study design is a very popular approach in business research (Bryman and Bell 2011). Unlike other research designs it entails a bounded and detailed analysis of a single case that can be a single organization, location, person or event. Moreover, a case can be defined as critical, unique, revelatory, representative and finally longitudinal, where representative entails exploring an ordinary form of organization (ibid). Yin (2018) adds that a case-study design is suitable when the research questions are stated in a way that are seeking an explanation of how a phenomenon works.

This thesis was written as a qualitative case study with Rhenus Logistics. The case study design has representative characteristics, exploring an ordinary form of organization.

Continuous contact with Rhenus Logistics was handled by email, phone and video calls.

Performing a case study suits the research questions of discovering and explaining blockchain technology.

2.4. Data collection and interview design

Primary data is what the researcher themself collect, in qualitative research it can be data collected through observations or responses in an interview setting (Bryman & Bell 2011).

Collecting primary data is normally time-consuming and costly to produce. Secondary data collection entails analysing data collected by other researchers, such as transcribed interviews or statistics. It can be used as a complement to primary data and will therefore make the data collection less time-consuming and less costly for the researcher. On the other hand, searching for suitable data and documents to analyze may also be time-consuming. The quality of secondary documents can be valued on four criteria: authenticity, credibility, representativeness and meaning. The authors further explain how analysing secondary data from a qualitative research will have its difficulties when the analyst might not be able to interpret the social setting in which the data was produced (ibid).

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Surveys are commonly used in quantitative research and are more often concerned with numbers rather than words (Bryman & Bell 2011). Currently, blockchain in a logistic context is still in an early research phase (Batta et al. 2020). For that reason surveys were inconvenient for this study.

Structured interview is more often conducted in quantitative research when the research questions are clearly specified (Bryman & Bell 2011). This type of interview is standardized for all interviews and aims for high reliability and validity. In qualitative research, interviews are usually conducted as unstructured or semi-structured with an interest in the respondents’

point of view. An interview not conducted as structured will give the respondent room to explore the topic which will give the researchers a sense of what the individuals perceive as relevant and important. Qualitative interviews have the advantage of being flexible and allowing follow up questions. Unstructured interviews may start with a single question which follows with response and follow-up questions, similar to a conversation. Semi-structured interviews commonly follow an interview guide which contains questions on specific topics to be discussed. These questions can be seen as a list of examples which the interviewer does not have to follow strictly but can add to during the course of the interview if needed. Most of the questions on the list should be asked in the same manner and all topics are covered in all of the conducted interviews (ibid).

This study collected primary data through three interviews conducted in a semi-structured way, encouraging the researchers’ analysis method of pattern matching and cross-case analysis. Semi-structured interview was found more suitable by the researchers since certain topics and questions needed to be addressed rather than an open discussion in an unstructured setting. Before conducting the interviews, an interview guide was prepared which described what topics each interviewee would need to answer. The interviews were conducted by a video call where the audio was recorded to be analyzed. The data collection was summarized in table 2.

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Interview type Respondent Date Time Place Semi-structure Director for

financial sciences and digital assets, IBM

05.05.2021 25.00 min Zoom video call

Semi-structure Co-founder of BlueBarricade Blockchain Technology AB

10.05.2021 1.00 hours Zoom video call

Semi-structure Product Manager Road Freight for Nordic countries, Rhenus Logistics AB

17.05.2021 1.00 hours Zoom video call

Table 2. Data collection.

2.5. Selection

Probability sampling includes the types random, systematic and stratified and the respondents are selected by a random equal probability (Bryman & Bell 2011). Furthermore, there are three types of non-probability sampling described by Bryman and Bell (2011). Convenience sampling entails choosing the sample based on what is available and accessible for the researcher. Snowball sampling is when, from contact with one or more persons related to the research topic, contact is established with further people related to the topic. Snowball sampling has an issue of not being representative for the population. However, this sampling type is used in qualitative research and whether or not there is a need for it to be representative, will be discussed under generalization. Quota sampling aims for a representative sample of categories in proportion to the population, categories can be gender, age or ethnicity (ibid).

Contact with the respondent at Rhenus Logistics and the two other respondents were contacted by email after researching their suitability to the research questions and could therefore be compared with convenience sampling. One interview with a product owner at Unifaun was conducted at an early stage of the study to gain a broader understanding on the topic.

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To answer the first research question “How can Blockchain technology be used within transportation management at third-party logistic providers?”, two interviews were conducted with representatives from tech-companies supplying blockchain solutions. The first interview was conducted with the director for IBM financial sciences and digital assets. The respondent was earlier in his career handpicked as founding director of IBM blockchain labs, to assemble a team from scratch and gain knowledge and understanding for industry-specific applications within blockchain. The second interview was with the co-founder of Bluebarricade which is a partner to IBM. With the profound knowledge within the field of blockchain, these respondents were assessed to be appropriate sources for the researchers’ gathering of empirical data. The gathered data from these semi-structured interviews was compared to the theoretical framework and discussed in chapter five.

For the second research question “What are the advantages and disadvantages of using Blockchain technology for transportation management at Rhenus Logistics?”, an interview with Rhenus Logistics’ product manager road freight for the Nordic countries was conducted shedding light on how the company works today and what value blockchain technology potentially can bring to their transportation management process. The first interview with IBM, conducted primarily for the first research question, had some foundation to answering the second research question since some of the necessary knowledge regarding the blockchain technology was lacking for the Rhenus Logistics representative.

2.6. Data Analysis

Yin (2018) presents five techniques for analysing case studies. First off, Yin (2018) describes pattern matching as one of the most desirable analytic techniques for case study analysis. The technique works in the way that it compares the empirical pattern from the specific study with the predicted pattern made before collecting any data. If the patterns are the same the internal validity of the study is strengthened (ibid).

The second technique, explanation building, aims to analyze the data collected by gathering an explanation about the specific case (Yin 2018). Moreover, time-series analysis is mentioned as the third analytic technique for case studies. The technique analyses the collected data to be able to highlight trends and patterns which need to be tracked over time.

Further, the increasingly useful technique of logic models is explained by Yin (2018). The

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model stipulates a chain of events over an extended time-period with the aim of explaining how a complex activity arises (ibid).

Finally, the fifth technique explained by Yin (2018) is cross-case synthesis. The technique stands out from the others with the procedure of analysing the synthesis of two similar studies separately. The aim at the next stage is to identify similarities and differences in between the studies. This technique can only be applied on the analysis of multiple-case studies and the earlier described techniques could be used both with single- or multiple-case studies (ibid).

In this study, cross-case analysis is used as the method of analysis for research question one and pattern matching for research question two. After gathering theory and empirical data for research question 1, the response from two additional interviews, external from Rhenus Logistic, were cross case analyzed with the theoretical framework. The amount of data from the interview with Bluebarricade was limited so a separate case-analysis before the cross-case was considered insignificant for this study. After the gathering of the theoretical framework for research question 2, the researchers predicted a pattern moving forward which included key concepts, principles and themes within blockchain and identified theoretical advantages and disadvantages. Further, when gathering empirical data in the form of an interview and continuous contact, the researchers connected these predicted patterns and identified keywords to Rhenus Logistics. This was made in order to strengthen its internal validity.

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Figure 1. Analysis model.

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2.7. Research quality criteria

To ensure the quality of the research design, Yin (2018) suggests conducting four common tests to establish said quality. The first test explained proves construct validity. The test is of extra importance in case studies where criticism often is expressed regarding if the correct operational measures are being studied. Furthermore, there is criticism that the researchers often have a preconceived subjective judgment of the subject at the beginning of the research as well. Conducting a construct validity test means checking if multiple sources of evidence have been used in the study and having the key participants of the case study review the report draft before being published. If these tactics are being used it will be able to answer if the criticism for case studies is justified in the specific case (ibid).

Moreover, Yin (2018) continues with explaining a test to prove internal validity. Proving internal validity is of extra importance in explanatory case studies. The research design together with the internal validity fails if the researchers state that a causal relationship between two variables are being determined without the knowledge of the fact that a third variable has caused one of the studied variables in the first place. To avoid this and to prove internal validity the author suggests testing by doing pattern matching of the variables, using logical models as well as addressing alternative rival explanations of the relationship between variables (ibid).

Further, Yin (2018) moved on with the concept of external validity. The question asked about external validity is whether or not the result of the study can be seen as generalizable beyond the specific study. To secure external validity the author suggests the use of theory when it comes to single-case studies and using replication logic if you are conducting a multiple-case study (ibid). Bryman and Bell (2011) adds the importance of choosing the right people and companies to participate in the study, as an important factor, to obtain external validity.

Reliability is explained by Yin (2018) as if a researcher conducts a study with the same procedure as another researcher has done before the result of the study should be the same.

Further, this could be tested by using the study protocol from the tested study and see if the same chain of evidence is maintained (ibid). Internal reliability means that the research team is agreeing on what they observe (Bryman & Bell 2011).

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To strengthen these criterias in this study, following measures were taken. To strengthen the reliability and thereby make it easier to replicate this study, the interview guides used can be found in the appendices. Throughout the study and collecting data, the research team took objectiveness in consideration, comparing notes and discussing the approach so that all agreed, this led to the internal reliability being strong. For internal validity the researcher made sure the empirical data and the theoretical ideas developed in the findings were aligned.

In the selective selection of respondents and organizations to participate in this study, the external validity is being obtained.

2.8. Generalizability

Bryman and Bell (2011) suggest that criticisms towards generalizability in qualitative research are made by quantitative researchers who say that observations or interviews conducted with a small group of individuals in a limited area or organization are restricted.

They argue that the findings from the produced data can not be generalized to other research areas or settings (ibid). Yin (2018) described this as statistical generalizability, a common way of generalizing. The findings can apply to a population, by using for example a survey.

This however, is not suitable for case studies whereas the findings can not often represent a large population due to its small sample size (ibid). Bryman and Bell (2011) further state that the findings of qualitative research is instead to be generalized towards theory, rather than to be generalized towards population. Yin (2018) describes this as analytic generalization.

Bryman and Bell (2011) therefore argue that the quality of generalizability is dependent on the inference of the qualitative data.

For this research it can be difficult to apply the findings of advantages and disadvantages for using blockchain technology to other organizations than this study of third-party logistic provider, Rhenus Logistics. Instead, it is how the findings of this study will contribute to the theoretical base of blockchain technology within transportation management, that is important in accordance with analytic generalization.

2.9. Ethical consideration

Ethical awareness is critical in business research (Bryman & Bell 2011). Issues and debates regarding ethics are described in the following main principles. First, there is a general agreement that direct or indirect harm to participants is unacceptable. Harm can emerge by

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not fulfilling confidentiality and anonymity. Furthermore, lack of informed consent is mentioned as another principle which highlights the importance of giving the participants enough information about the study so they can either approve or deny participation. This is especially debated regarding experiments and intensive observations and is similar to the principle of deception. Deception entails giving false pretenses. For ethical consideration, it is important to explain the study in a correct manner, avoiding deception. The last principle, invasion of privacy, clearly states that in research there is no special right to violate a participants privacy and the participants are therefore justified to refrain from answering (ibid).

In this study the researchers have adapted their method to coincide with the ethical considerations mentioned. The interviewed participants were informed of the study's purpose and research process and were made aware of the option not to answer specific questions and/or denying participation at any stage of the process. The respondents also got the possibility of being anonymous.

2.10. Description of the work process

The work on this thesis has been carried out equally between the researchers. All three researchers have been present at all conducted interviews. Hjortstam acted as moderator during the interviews, asking questions. Wilén and Ewald were responsible for recording and taking notes during the interviews. The methodology chapter were conducted by Hjortstam and Ewald, while Wilén searched for suitable literature and scientific articles for the theoretical framework. Keywords used when searching for scientific articles, mainly through Emerald Publishing, were: Blockchain, Blockchain Technology, Blockchain in Transportation. Further process of writing, analyzing and the correction of the work has been made collectively through work sessions in person.

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2.11. Summary of methodology Scientific view Critical realism Scientific

approach

Deductive approach

Research method and design

Qualitative case study

Data collection and interview design

Primary data

Semi-structured interviews

Selection Convenience sampling Analytic

techniques

Cross-case Pattern matching Research quality

criteria

Construct validity, external validity, internal validity and reliability Generalizability Analytic generalization

Ethical consideration

No harm, no lack of informed

consent, no deception and no invasion of privacy

Table 3. Summary of methodology.

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3. Theory

3.1. Transport management

In transportation management the goal is to optimize a company’s operation cost and to accommodate the customers requirements for delivery service (Jonsson & Mattsson 2016).

Further, the authors explain transport management systems, TMS, which enable the achievement of these goals. Functionalities such as tracking and tracing, documentation of goods, route planning and optimization of transports are mentioned to frequently be included in an TMS (ibid). Fredholm (2013) explains that another designation of TMS is TA-systems which stands for transport administration systems. These systems are usually purchased by specialized suppliers and could be bought both as an independent system, be integrated with a business system or be cloud based. Fredholm (2013) adds, to the list of functions available through a TMS, the possibility to send out inquiries, bookings and confirmations. Further, the possibility to post agreements on the TMS enables the system to calculate freight cost and automatically send out invoices based on the information included in the system (ibid).

Supply chain management entails an integration of all logistics elements, including transportation management, between organizations (Stöth 2011). A supply chain focuses on networking, enabling efficient flows and transports, when turning raw materials into a finished product. Important factors in a well operated supply chain are information technology solutions and contracts defining the parties’ responsibilities and liabilities (ibid).

In transportation management within a supply chain, organizations should strive for low cost and good service towards the end customer (Sandberg 2015). Further, making processes, both internal and external, visible is described as the key strategy to reach these goals (ibid).

Sandberg (2015) mentions you should aim towards what is best for the entire supply chain rather than for an individual company. Martin Christopher further expresses it in the following way: “The real competition is not company against company but rather supply chain against supply chain.” (Christopher 2005, p.18).

3.1.1. Logistics and information technology

In addition to supply chain as a strategy to achieve competitive advantage, Boody, Boonstra and Kennedy (2009) explain how strategy can be affected by information systems. As a

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supportive function, information systems can support inter-organizational relationships and contribute to business competition opportunities such as cost reduction (ibid).

Processes in logistics should be continuously improved (Fredholm 2013). This concerns not only the internal but also external processes. In practice, information systems tend to be standardized to fulfill inter-organizational functions and therefore not optimized for internal processes. Further, Fredholm (2013) describes e-business as all activities made by electronically mediated information between involved actors with the goal of supporting all kinds of business processes. Commonly used when sending standardized information between companies’ systems is electronic data interchange, EDI. The usage of EDI can streamline the administration routines by being able to both send and receive files automatically.

3.1.2. Contracts and shipping documents

When transporting goods, the delivering and receiving quittance from the right person may cause disputes (Stöth 2011). These conflicts can be solved with detailed contracts defining the terms and conditions. Furthermore, International Chamber of Commerce, ICC, has composed a set of standards for terms of delivery called Incoterms which is used as a complement to the full contract. Incoterms are mainly used in international trades where involved parties beforehand know how to interpret the terms (Stöth 2011).

CMR and Bill of Lading are both documents used in the shipping industry (Stöth 2011).

CMR is short for Convention relative au contrat de transport international de Marchandises par Route and it regulates international road transport. The CMR-convention regulates international transports where either the dispatching or receiving country acknowledges this convention. For example, Sweden is regulated by this convention and therefore all transports in and out of the country are bound by these regulations (Stöth 2011). Bill of lading is a legal document, used for ocean freight, that includes details such as type and quantity of goods, destination and terms of transportation. The document must accompany the transported goods all the way to its destination and serves as a shipping receipt to make sure the shipment is accurate (Investopedia 2021). Blockchain, can according to DHL (2018), replace the traditional bill of lading document which could lead to cost reduction and process efficiency throughout the supply chain.

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3.2. Blockchain in transportation management 3.2.1. Blockchain design

There are three different types of blockchain explained by Xue, Dou and Shang (2021). These are public-, private- and consortium chains. Choosing the type of chain most appropriate differs depending on the structure of the organization implementing blockchain. A public chain is considered completely decentralized making it possible for anyone becoming a node in the chain, obtaining and sharing information. Secondly, Xue et al. (2021) explain a private blockchain as a more centralized chain compared with the public blockchain. This type of chain is only accessible for specified, certified nodes which need permission for being able to add and take part of the information within the chain. As a third option, consortium chain is mentioned as a crossing between above mentioned chains. Organizations need to be given access to take part of the chain and once they have received access the majority of the organizations need to accept new data before it could be added to the chain (ibid).

3.2.2. Smart contract

Sinha and Chowdhury (2020) investigate contracts in international business and develop a framework for a blockchain technology-based smart global contract. In a smart contract, stakeholders are connected as nodes and transactions are registered in blocks saved in the blockchain transaction protocol. In addition, smart contracts can be described as an “[...]

automatic logic agreement approach [...]” (Tsiulin, Reinau, Hilmola, Goryaev & Karam 2020, p. 207). The contract system uses algorithms to verify, execute and respond according to pre-defined logic. Moreover, Mishra et al. (2020) describe smart contracts as technology based and programmed for automatic contract execution triggered by discrete events. Based on a distributed ledger, smart contracts increase speed and efficiency as a result of less disagreements and processing time which reduces monitoring and transaction costs (ibid).

Furthermore, Sinha and Chowdhury (2020) give an Incoterm example “[...] under the free-on-board (FOB) contract, the seller is responsible for putting the goods on the ship, and the buyer manages the rest of the journey” (Sinha & Chowdhury 2020 p. 229). In this case the customer could benefit from real-time tracking of the consignment. Global contracts require traceability and blockchain technology enables real-time tracking of the flow (ibid).

3.2.3. Blockchain in transportation management - advantages and disadvantages

DHL (2018) mentions several advantages for adapting a blockchain technology solution. A few of them are transparency through the supply chain and for its’ stakeholders, traceability

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of goods at transport, more efficient process handling of paper format documents and contracts. For stakeholders in a supply chain to share information with each other requires trust which blockchain technology can heighten because of its security measures. Blockchain can also be seen as a single source of truth by providing the same confirmed information to all parties in the network. Cost-savings can be made by blockchain enabling a more efficient handling process of transport administration and trade documents. Blockchain can also enable the use of smart contracts which entails the system confirming, among other, time of delivery and that the conditions of transportation were met. This requires that the relevant information from the supply chains can be recorded in the system. Thereafter the system can automatically send the correct payment invoice to the other party (DHL 2018). This works as an advantage for the transportation process by reducing errors and disputes. International trading is often very complex, involving parties with distinct priorities and usage of different business systems. Blockchain works as a beneficial technology for this issue when increasing efficiency as mentioned above (ibid).

In recent years, positive and negative aspects of blockchain in supply chains have been widely discussed in academic literature (Hirata, Lambrou & Watanabe 2020). Kant (2021) studies blockchain as a strategic resource and expects that technological improvements, such as blockchain, creates competitive advantage for organizations. However, there are technological constraints that might need to be taken care of before implementation (ibid). Xu et al. (2021) investigate how blockchain technology can preserve confidentiality and transparency at the same time. However, they conclude that high levels of transparency in supply chains may not always be desirable and it is negatively associated with confidentiality (ibid). Mishra et al. (2020) discover blockchain as a governance property which promotes trust in interorganizational relationships. However, managers need to carefully consider their approach as blockchain integration decisions often are costly (ibid). Through the use of blockchain, stakeholders can receive security and efficiency (Batta et al. 2020). Blockchain can enable the information exchange to be transparent by showing the same information to all parties and more efficient by reducing the amount of paper documents. By faster handling of paperwork and faster process of custom clearance Batta et al. (2020) suggest it will result in reduced time and effort in delivery of goods. It will also enable and improve same-day deliveries. Another advantage is that blockchain technology can detect eventual deviations from delivery terms, for example temperature in a truck or the origin of the goods. This results in greater trust between stakeholders. Another value adding factor to the transportation

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process is traceability, where physical goods can be traced digitally in real time. The track and trace function of blockchain can, compared to the traditional tracking techniques, aid the detection of frauds and counterfeit products. Regarding barriers for blockchain adoption, 60 out of 100 transportation and logistics companies believe there is a lack of coordination and an ecosystem is not yet developed (ibid). All articles mentioned above explain that blockchain is in an early stage in terms of theoretical research and adoption in practice (Batta et al. 2020; Hirata et al. 2020; Kant 2021; Mishra et al. 2020; Xu et al. 2021). Theoretical advantages and disadvantages are summarized in table 4 and 5.

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3.3. Blockchain solutions in practice 3.3.1. IBM

Today, IBM is offering the leading blockchain platform to a variety of different industries.

Taking part of IBMs blockchain platform enables the connected companies to both join existing blockchain networks as well as building their own (IBM 2021a). In designing your own blockchain network you are able, through blockchain architecture, to choose which different types of functionalities you would like to have within your designed blockchain framework and which actors that should have access to it (IBM 2021b). Further, three different types of interaction are available through applications in IBMs blockchain platform.

The simplest form of interaction on the platform is querying for information within the blockchain ledger. Secondly, possibilities to add new information and transactions to the blockchain ledger is conceivable. The third type of interaction explained is to, through an application on the plattform, getting notifications when new information or transaction is added to a blockchain ledger which the company is connected to (IBM 2021c).

3.3.2. Chaincode and channels

Looking at the blockchain platform provided by IBM, fundamentally, a blockchain network consists of peer nodes, called peers. Peer nodes are owned by organizations who decide network structure, host ledgers and smart contracts. Chaincode is the underlying infrastructure that includes business logic and smart contracts. Furthermore peers are joined into channels which are separate ledgers for subsets of peers. Thus, smaller groups of network members can store transactions separately (IBM 2021d).

3.3.3. TradeLens

TradeLens is partly developed by IBM as a platform supported by blockchain. TradeLens as a platform enables information sharing and collaborations within transportation management which reduces trade friction as well as promoting global trade. Bringing all the involved parties onto a single and secure platform streamlines information sharing in real time together with for example handling trade documents, such as electronic bill of lading, and filling customs declarations (TradeLens 2021a).

The TradeLens platform works in the way that required documents for handling a shipment are being created within the blockchains’ architecture framework. Further, this document is made accessible for the parties which need the information through, what TradeLens calls, a

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permissioning model. This model chooses which parties that could add, view or update information in different stages of the transportation process. When unplanned activities in the transportation process, such as for example a route change appears, all the required documents could efficiently be updated in the TradeLens platform, notifying the concerned parties. The platform can involve all the stakeholders within the supply chain, such as, third-party logistic providers, shippers, authorities, financial service providers, ports, terminals, cargo owners, intermodal operators etc. (TradeLens 2021b).

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4. Empirical Data

Respondent Professional title Organization

Respondent 1 Director for financial sciences and digital assets

IBM

Respondent 2 Co-founder of

BlueBarricade Blockchain Technology AB

Respondent 3 Product Manager Road

Freight for Nordic countries

Rhenus Logistics AB Table 6. Respondents for empirical data gathering.

4.1. How can Blockchain technology be used within transportation management at third-party logistic providers?

4.1.1. IBM

4.1.1.1. Blockchain in transportation management - Area of use and challenges

Respondent 1 starts by describing core questions of what would lead to the reasoning for implementing blockchain. He states that an organization and supply chain need to identify what processes require time, money and resources. He further states that the supply chain needs to realize what they value and what the problem they want to solve is.

The main area of use of blockchain within transportation management is, according to respondent 1, the track and trace function. Being able to track and trace a transport of goods leads to transparency and accountability. Where there is spoilage of goods, blockchain will aid by facilitating how to prove it. According to respondent 1, track and trace depends and varies for different kinds of goods, and is especially important for perishable goods, such as meat, and valuable goods, such as gold. The information gained from the track and trace function needs to be shared with participants in the supply chain. Incoterms will clarify what party is responsible and can be held accountable for eventual spoilage or damage. In an example about shipping meat through the USA, a tracking device measuring temperature can make the transport company accountable for spoilage and not the packing company, which is the common party to get blamed today.

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A reason why a third-party logistic provider wants to use blockchain is that the supply chain is often blamed for delays and spoilage which is something they try to avoid. As mentioned above, blockchain will help prove where the problem occured. Another reason to use blockchain is that transportation uses a big amount of original documents between parties and transportation should, according to respondent 1, be a part of an ecosystem encouraging digitalization. Since documentation is often paper driven today they can easily be swapped and manipulated. An additional reason why blockchain and specifically the track and trace function is useful is because of fraud, financial crimes and taxation.

Respondent 1 expresses costs as the greatest benefit from using blockchain. Reduced cost can be achieved by a more efficient handling of paper documents and a decrease of paper delays.

Soft cost that is a benefit following the use of blockchain is receiving a good reputation, this from having complete transparency and a clean business.

One of the biggest challenges with implementing blockchain, respondent 1 explains, is the organization’s business model, where the projects fail 90 % of the time due to lack of business model. Another challenge, explained by respondent 1, is combilling consortiums.

The whole network needs to be onboard with the idea of implementing blockchain and realizing the value of it. A few costs associated with implementing blockchain, according to respondent 1, are systems, on-boarding experience and on-going costs. This needs to be taken in consideration when discovering the technology's value to the supply chain. A technical challenge is translating the business problem to a suitable technical blockchain architecture.

4.1.1.2. Blockchain solution and network

Regarding the type of network most suitable for third-party logistic providers, respondent 1 says that this used to be the debate four or five years ago, permission and permissionless.

Permission is like private networks and permissionless is like public networks. However, he concludes that the debate is pointless since the Internet is one massive network and there is a possibility to create VPNs, which entails secure networks. For example, an organization can not have 15 private networks because the cost of implementing them would be high.

Respondent 1 suggests that creating a public private model, where the public network is used as a utility, and creating a fence, which gives privacy and security, is a good medium for software innovation and software updates.

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Regarding having in-house competence of blockchain technology, respondent 1 answers that most big corporations already have a business and he would not expect a transportation company to become a blockchain expert overnight. IBM and a few of their competitors both offer software that lets the customer create nodes for the architecture in the cloud, but also services on implementation of technological platforms. Maintenance can be done by the IT department of the transportation company. Support of access and integration to existing business process systems are provided by IBM and their competitors.

When IBM sells a blockchain solution it is, according to respondent 1, not often to one specific company but rather to a consortium. The benefit of selling directly to a consortium is that they usually already are in, for example, a SCM-business network which helps the engagement in implementing blockchain. Respondent 1 continues explaining that IBM has tried selling blockchain solutions to individual companies, but failed, comparing it with trying to sell the fax-machine only to one customer. The most efficient way of handling the costs of blockchain, respondent 1 explains, is for one company to buy the solutions and afterwards charging the involved parties accordingly. In fact, IBMs platform enables a built-in charge mechanism for this very purpose.

When asked whether or not IBM sells blockchain solutions directly ready for use, respondent 1 explains a system called blockchain trusted supply, BTS. It is a solution with track and trace functions directly ready for use at the buying party. The critical aspect of BTS, Respondent 1 further explains, is who runs the network. His opinion is that it should be a neutral party which could maintain the network and successfully make sure the applications within the blockchain are up and running.

Even though a main characteristic of blockchain is transparency, respondent 1 explains information within the blockchain could be kept private between specific actors in the chain through stage channels. This information will be kept private until the actors choose to share it with the other actors in the blockchain network. In these private channels, smart contracts can be integrated by chaincodes. Chaincode is a hyperledger fabric term and it is basically code running on chain. Respondent 1, adds that it is the same thing as smart contracts and can be applied to all the channels. In a smart contract, delivery terms can be programmed.

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Regarding including third parties to solve disputes between involved parties, respondent 1 expresses that it all comes down to whether or not there is established trust. Some authorities and inspectors must have access to the blockchain information since it is required by law but other third parties, such as banks or insurance companies, require trust to be invited to the blockchain network. An advantage with allowing certain third parties access, is that they can investigate eventual disputes without the need to ask for information.

For an organization to successfully implement and use blockchain respondent 1 says it is not technology anymore, as most people think, but rather that the organization using blockchain has an appropriate business model. For organizations using blockchain respondent 1 states the importance of understanding that it is impossible to change the business overnight. He further explains blockchain as a long term investment and when choosing to adapt to the technology the organization must realise that transactions and information is stuck in the blockchain, meaning they can not easily change it back to the way it previously worked.

4.1.2. Bluebarricade

4.1.2.1. Blockchain in transportation management - Area of use and challenges

When considering the use of blockchain in transportation management, respondent 2 highlights the importance of identifying the purpose of using blockchain before investing in a long term solution. Discussing areas of use for blockchain within transportation management respondent 2 mentions simplifying the custom clearance process as one of the main areas that could lead to a potential benefit and the advantage of efficiency. Further, track and trace is also mentioned as an area of use where goods are tracked during transportation. Respondent 2 expresses the fact that two parties can view the same information in real time will be a benefit of blockchain.

4.1.2.2. Blockchain solution and network

Regarding the type of network most suitable for a third-party logistic provider, respondent 2 believes that the development is heading towards a hybrid type of network, similar to a consortio network. This hybrid model contains a main node which configures the network and invites other nodes as decentralized clients within the network.

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Regarding smart contracts, respondent 2, raises the discussion regarding trying to automate the monitoring functions through the contract. He further problematizes the possibility to do such because of the need of having a very active control, from all involved parties, within the smart contracts. Together with the belief that legislation may complicate the procedure, respondent 2 is sceptical regarding the usefulness of smart contracts.

Blockchain in transportation management - Areas of use and challenges

Resp. 1 Resp. 2

Finding the purpose and problem before implementing the technology

Track and trace Custom clearance Avoid blame

Digital document handling

Blockchain solution and network Resp. 1 Resp. 2 Smart contract

Hybrid / public private model as a blockchain design

Business model as a challenge Legislation as a challenge

= mentioned by the respondent

Table 7. Cross-case summary of empirical data 4.1.

4.2. What are the advantages and disadvantages of implementing Blockchain technology for transportation management at Rhenus Logistics?

Respondent 3 explains that Rhenus Logistics do not use blockchain technology within their transportation management process today. Further, he speculates that the more parties involved in the blockchain, the more effort is required. Still, respondent 3 believes that in the long run all parties need to be involved to gain the maximum benefit out of blockchain.

Respondent 3 opens up for exploring the technology initially internally within Rhenus Logistics.

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Furthermore, respondent 3 problematizes the introduction of new technology, in this case blockchain. His belief is that in the beginning no stakeholder will want blockchain due to uncertainty and cost of implementation. In the long run, when competitors start using blockchain, respondent 3 speculates organizations will gain interest in the technology in order not to fall behind and lose potential monetary benefits. In addition to the potential monetary benefits, respondent 3 believes that insurance companies will be delighted with the introduction of blockchain technology within transportation management due to data within the chain being secure and can not be deceptive.

When asked about trust in the transportation management process today, respondent 3 explains that he generally is satisfied with the trust between Rhenus Logistics and their partners. Although, he emphasizes the importance of trust as lost trust can lead to lost business which in extension leads to losing income. Today, he further explains, new customers are often asked about their satisfaction after the first few transports in order to gain trust from their side.

Today, according to respondent 3, information transparency is ensured through the usage of EDI. Without EDI he further explains the aim to ensure transparency manually. It is done by receiving information through for instance, email or phone and further mediate the information to the customer. In essence, partners of Rhenus Logistics which do not offer transparency, complicates the ambition of providing transparency to further stakeholders due to the need of collecting information instead of receiving it automatically in the first place.

Respondent 3 also believes that transparency always can be improved for example by being able to access the drivers geographical location with a gps-device and in that way prove that goods were delivered when the driver said it was. However, when it comes to transparency, respondent 3 states that some information is not desirable to share as it is not relevant to all parties or should be kept private between Rhenus Logistics and a specific partner.

To ensure security in the transportation process, respondent 3 explains it depends on what you transport and where the transport takes place. Further, he expresses that in a normal process, there are usually so many parties involved in a transport that it is hard to ensure 100 percent security. Due to various parties involved in the transport, respondent 3 highlights the importance of trust between all parties within the supply chain. During his years at the company, the respondents can barely remember any security breaches at all. For the future,

Blockchain Technology in Transportation Management: A case study with Rhenus Logistics AB

Bachelor’s Thesis