electronics

Article
Use of Blockchain-Based Smart Contracts in Logistics and
Supply Chains
Mohammed Ali Alqarni 1 , Mohammed Saeed Alkatheiri 2 , Sajjad Hussain Chauhdary 3 and Sajid Saleem 4, *

1 Department of Software Engineering, College of Computer Science and Engineering, University of Jeddah,
Jeddah 23890, Saudi Arabia
2 Department of Cybersecurity, College of Computer Science and Engineering, University of Jeddah,
Jeddah 23890, Saudi Arabia
3 Department of Computer Science and Artificial Intelligence, College of Computer Science and Engineering,
University of Jeddah, Jeddah 23890, Saudi Arabia
4 Department of Computer and Network Engineering, College of Computer Science and Engineering,
University of Jeddah, Jeddah 23890, Saudi Arabia
* Correspondence: [email protected]

Abstract: Blockchain is a disrupting technology that has the capability to completely alter the design,
activities, and product flows in logistics and supply chain networks. It provides assurance of openness,
immutability, transparency, security, and neutrality for all supply chain agents and stakeholders. In
this paper, we explore the improvements and tradeoffs introduced by using blockchains in logistics
management in terms of the sustainability of society, the environment, and economic dimensions
of the supply chain. Blockchain technology makes it much more difficult to counterfeit products by
providing indisputable and immutable proof of the provenance of the raw materials, products, and
sale to the end consumer. This can potentially enhance the trust of the consumer in the product and
financially benefit the manufacturer through the protection of their intellectual property rights. This
paper explores the benefits, applications, and issues related to the usage of blockchain and smart
contracts for logistics and supply-chain management. We focus on the implementation, deployment,
audit, and operational aspects of smart contracts in the blockchain applied to terrestrial, maritime,
and aerial logistics networks. The paper also discusses opportunities and challenges that arise due to
the use of smart contracts in these sectors.
Citation: Alqarni, M.A.; Alkatheiri,
M.S.; Chauhdary, S.H.; Saleem, S. Use
Keywords: blockchain; supply chain; logistics; internet of things
of Blockchain-Based Smart Contracts
in Logistics and Supply Chains.
Electronics 2023, 12, 1340. https://
doi.org/10.3390/electronics12061340
1. Introduction
Academic Editors: Djuradj Budimir
Global supply chains are incredibly intricate with many stakeholders, and several
and Alberto Fernandez Hilario
intermediaries and regulatory bodies [1]. The challenges faced in modern logistics and
Received: 1 November 2022 supply chains can be resolved through the use of blockchain technology [2]. Blockchain can
Revised: 27 February 2023 support significant product and supply chain information through data collection, storage,
Accepted: 2 March 2023 and operations management. Blockchain technology can streamline the process and reduce
Published: 11 March 2023 the delays involved in a complex supply chain through two significant changes: driving
efficiency and introducing new business models [3].
Blockchain can be utilized to keep track of the life cycle of a product and record the
transfer of ownership. Modern supply chains are very intricate and are constituted by many
Copyright: © 2023 by the authors.
levels of decision-making, regulatory bodies, intermediaries, and geographically separated
Licensee MDPI, Basel, Switzerland.
goods and services providers. Moreover, the customers are also geographically spread out
This article is an open access article
throughout the globe [4]. Different territories have varying regulatory policies, and the
distributed under the terms and
conditions of the Creative Commons
culture and the society of a distinct region also have an impact on how the operations are
Attribution (CC BY) license (https://
planned, managed, and performed. The uncertainty arising from these factors generates
creativecommons.org/licenses/by/ a risk that is very difficult to evaluate, assess, and mitigate. These uncertainties and
4.0/).

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Electronics 2023, 12, 1340 2 of 14

associated risks also raise inefficiencies and increase the opportunities for malicious entities
to defraud the legitimate actors and stakeholders that are part of the supply chain.
Consequently, the stakeholders lose mutual trust and are unwilling to share the
information without verification and validation. The ability to trace the origin of a product
is increasingly becoming an important feature of a product not only for the regulatory
bodies but also for the end consumer. In fact, traceability can provide a competitive edge to
the producers of high-value goods, such as pharmaceutical products, agricultural inputs,
and anything that holds value for counterfeit producers.
The ability to ascertain the manufacturing time, place, and vendor of the product with
high certitude is rewarding to both the customer and producer as it provides a guarantee
of the quality of the product and the protection of intellectual property rights [5]. Paper-
based receipts and certificates can easily be copied or modified by counterfeit agents but
digital records protected by cryptographic techniques are secure and cannot be altered.
Digital records provide security and restore trust among the intermediaries and primary
stakeholders involved in a logistical supply chain.
For example, the loss of trust and financial damage to the respective enterprises caused
by outbreaks, such as the Salmonella case related to papayas and E. Coli spread linked to
Chipotle Mexican Grill could have been reduced if the customers were able to check the
source of these products securely, so as to isolate the actual food product that was causing
the disease outbreak.
Although blockchain is being hailed as a panacea for many problems in various
domains, there are several organizational, behavioral, policy-related, and technological
hurdles and barriers that exist in the implementation and adoption of this technology. The
proposed research is focused on exploring the various issues regarding the implemen-
tation and application of blockchain to supply chain and overall logistical management
framework [6].
Blockchain can be readily customized by choosing new protocols and rules for block
generation, incentivization of nodes, consensus rules, cryptographic algorithms, and smart
contracts. Multiple actors can participate in a blockchain without undue risk and with min-
imal trust. Depending upon the application, blockchain can either be public (permissioned)
or private (non-permissioned). A private blockchain could be more suitable for a logistics
management system as multiple parties know each other, and there is a certain level of
trust present among the entities.
A smart contract could be crafted through an agreement and negotiations among the
partners and stakeholders of the logistics supply-chain system, and this smart contract
could be deployed on the blockchain to guarantee the terms of service required for smooth
operations as per the agreed-upon level of the quality of service and product. A smart
contract has the capability to automatically update the ledger if the code execution leads to
a situation where all the terms of the contract are met by the participating actors.
Blockchain technology has its origins in the digital cryptocurrency introduced by
Nakamoto in 2008. Since its inception, blockchain technology has grown tremendously
in terms of its applications and underlying procedures. Blockchain is considered to be a
revolutionary technology that could disrupt existing processes and facilitate the adoption
of new standards and techniques in the organization, management, and operations of
logistics supply chains.
Although the most popular implementation of blockchain, i.e., cryptocurrency sys-
tems, is open and public with a potentially unlimited number of nodes, the most popular
interpretation for its use in supply chain networks is in the form of a permissioned network
with a limited number of actors [7]. Limiting access to the blockchain mining process im-
proves the throughput of the blockchain, which might be a requirement for time-sensitive
operations in the supply chain network.
The supply chain is considered the most important pillar of a successful manufacturing
business since the smooth flow of all commodities and their timely availability is central to
the execution of all activities in a manufacturing concern. This is also the most complex
Electronics 2023, 12, 1340 3 of 14

activity in a business since it involves the coordination of all the teams with various
functions working to complete the industrial process while incurring the minimum possible
cost and achieving optimal efficiency. Traditionally, a supply chain is managed through
centralized ledgers, e-mails, resource planning software, and excel sheets.
This classical methodology is inefficient and vulnerable and potentially hinders the
seamless flow of commodities, limits visibility for decision-makers, and makes them
susceptible to attacks. The reason for inefficiency and vulnerability is the centralized
nature of the underlying databases that are used to store and retrieve business transactions
and activities. These challenges have amplified for modern businesses that depend upon
several intermediaries for both supply and distribution of the products with consumers
and suppliers spread across the globe.
Moreover, the desire of the consumer to be more informed about the origin of the
raw materials and the safety and sustainability of the manufacturing process has made it
compulsory to introduce transparency and traceability to the supply chain and logistics for
every meaningful manufacturing industry. Apart from the consumer, the traditional supply
chain and logistics framework are also inefficient and prone to losses owing to the lack of
information sharing between the various stakeholders of an enterprise and the participants,
including suppliers and retailers.
In summary, most of the problems in supply chain and logistics today are owing to
the lack of visibility of data and due to a lack of trust among the end users, manufacturers,
and various intermediaries. Effective sharing of information with trustworthiness among
the manufacturer, supplier, dealers, re-sellers, and consumers is critical to the efficient
functioning, success, and welfare of all the participating entities. Moreover, the availability
and maintenance of information are also vital to the efficient planning of production and
logistics activities, demand forecasting, and inventory management.
Typically, this information is spread throughout the organization, and there is no
universal ledger that contains the information about all the transactions being performed
across different participants of the supply chain. This is particularly true for transactions
that involve multiple organizations. Intermediaries are used as guarantors to complete and
verify these transactions adding latency and overhead to the process.
The primary difference between conventional databases and blockchain-based data
management is that, in the case of the latter, the data are immutable, distributed, and
decentralized in nature. For example, for a conventional database, an administrator has the
privilege to manipulate the data or control access to it. Furthermore, the centralized nature
of the database makes it vulnerable to security threats.
In this paper, we consider the use cases of smart contracts in the domain of logistics
and supply chains. Morever, we include discussions related to the advantages and dis-
advantages of smart contracts in logistics and the factors that influence their adoption in
this area.
The rest of the paper is organized as follows. In the next section, we present some
related work followed by some basics of blockchain and technical details about smart
contracts. In Section 4, the use of smart contracts deployed on the blockchain is proposed
for the supply chain and logistics sector. Section 5 presents the discussion and results, while
our conclusions are drawn in Section 6.

2. Related Work
In this section, we discuss recent related works that also investigate the application
of blockchain and smart contracts in the area of logistics and supply chain. Regarding the
search criterion for literature review, we consider both the relevance to the topic of smart
contracts and to its application to the general field of logistics and supply chain.
The authors in [8] discuss the application of blockchain in logistics by employing
‘Roger’s framework of innovation attributes’. The paper adopts a balanced approach by
identifying the potential of blockchain and smart contracts as a disrupting technology
Electronics 2023, 12, 1340 4 of 14

for the logistics sector as well as outlines the limitations of the approach along with the
expected impediments in its adoption.
The authors identify that blockchain offers a natural approach to the decentralized and
immutable record of business transactions and agreements, which are the primary entities
in a logistics network. The prospective adoption of blockchain in the logistics industry
is given as a series of four gradual transformation phases, i.e., single-use, localization,
substitution, and transformation. For all these transitions to occur, the authors anticipate
that major social, political, and regulatory changes that need to happen.
The authors in the review article [9] emphasize the need to identify useful scenarios
for the application of blockchain in the logistics industry that result in cost savings and
increase the overall performance of the processes. Blockchain technology was found to be
particularly beneficial to the transport of valuable goods whose origin tracing and quality
guarantees could yield additional benefits so that it becomes more attractive and acceptable
to the customer.
An interesting issue addressed in this article is about information privacy loss due to
the placement of agreements or other sensitive data. This vulnerability can be partially
addressed through the use of private blockchains. On the flip side, the transparency of
information leads to process efficiency and increased trust among various agents in the
supply chain. Performance issues can also arise if multiple parallel smart contracts need
to be executed on the blockchain. For logistics-related applications, private permissioned
blockchains are more suitable compared to public blockchains.
In [10], the authors advocate the adoption of the internet of things (IoT) for supply-
chain management of assets in a logistics network. The authors also propose a smart
logistics solution that employs smart contracts, logistics scheduling, and conditions moni-
toring for the management of the supply chain. A prototype of the solution is presented that
demonstrates transparency, accountability, and audibility of managerial actions performed
by various stakeholders.
The authors in [11] present a blockchain-based simulation of a hyperconnected logistics
system to demonstrate that smart-contract-based tracking systems result in performance
improvements and transparency as compared to the traditional approaches. One of the
important findings of this work is that Ethereum-based solutions limit the transaction
rate and, hence, are not scalable for real-world applications. Fortunately, other blockchain
networks, such as ETH-IO can be scaled to millions of transactions per second.
The authors in [12] explored the use of blockchains and smart contracts in an extended
supply chain network for finding and building collaborations without an established
hierarchy. Their developed framework facilitates the interaction of stakeholders through
a blockchain-based procurement and distribution unit. An algorithm for distributed
verification and validation of smart contracts is also proposed and demonstrated through
an Ethereum-based implementation.
A very comprehensive collection of challenges and their proposed solutions for smart
contract design and deployment are compiled in [13]. In particular, the authors iden-
tify 29 challenges, 60 solutions, and 20 software design patterns for smart-contract-based
systems. The proposed solution is considered for three different distributed ledger tech-
nologies, i.e., Ethereum, EOSIO, and Hyperledger Fabric.
In [4], the authors build a detailed stochastic simulation model between the manu-
facturer, wholesale retailer, and other objects and stakeholders in a typical supply-chain
scenario to study the benefits of deploying blockchain-based information sharing in terms
of a reduction in lead-time, reduction in inventory cost, and increase in average fill rate.
The designed solution consists of a software connector that enables interfacing a company’s
information system with an Ethereum-based blockchain system. The authors demonstrate
that information sharing leads to significant improvement in the overall efficiency of the
supply chain network by providing trustworthy and reliable demand forecasts.
Electronics 2023, 12, 1340 5 of 14

3. Blockchain Basics
Blockchain has been considered as a groundbreaking technology for the world of
transportation and logistics. Maersk has partnered with International Business Machines
(IBM) corporation for the application of blockchain technology for their maritime container
transportation business. One of the hurdles faced in the implementation of blockchain is
the questions surrounding its scalability and sustainability [14]. There is a great deal of
recent activity about blockchain and its myriad applications and use cases in the literature,
including various aspects of its impact on society, the environment, and the economy.
Blockchain technology consists of a distributed ledger of records or a database of all
events that are either executed or shared by participating entities. Blockchain exhibits four
properties that distinguish it from its peers:
• Decentralization.
• Security.
• Auditability.
• Smart execution.
On a higher level, a blockchain operates as follows.
• An agent that wishes to record an event, broadcasts a transaction to its peers on the
network.
• After verification and audit of the received transaction by a majority of the peers on
the network, the transaction is approved as per the agreed regulation followed by the
actors on the blockchain.
• A record of the approved transaction is maintained by several peers to ensure the robust-
ness of attacks and for improved reliability in the face of equipment or node failures.
• The transactions are typically grouped in the form of a block, which is tied to the
previous block through a hash function of its contents, thus, creating a chain of
dependence among the blocks and constituting linked records.
• An arbitrary contract could be deployed in the form of a set of instructions on each
node of the network that executes autonomously once the prerequisite conditions
are met.
Important characteristics include the immutability of the previous records, consen-
sus protocols among the participating agents, and the security provided by advanced
cryptographic protocols. Some of these properties of blockchain are shown in Figure 1.

Figure 1. Characteristics of a blockchain system.

Electronics 2023, 12, 1340 6 of 14

Figure 2 shows the interdependency of the blocks in the structure of a blockchain.

Each block contains the hash computed from the contents of the previous block. In this
way, each block depends upon all previous blocks. Any change in the previous blocks will
propagate a change in the hash of the subsequent blocks.

Figure 2. Structure of a blockchain demonstrating the dependency of each block on the previous one.

Similarly, the timestamp information recorded in the blocks ensures the auditability
of the transactions. Multiple copies of the transactions distributed over a geographical
region create an environment of mutual agreement, trust, and security for the recorded
information among the nodes in the network. Decentralization and trustworthiness of
the shared information are very important characteristics of a blockchain. Information is
available publicly, and it is mutually agreed upon by the stakeholders. Moreover, it cannot
be altered once consensus is formed. Blockchain simultaneously provides transparency as
well as confidentiality through anonymity.
There are four major participants in a supply-chain-based blockchain network:
• Registrar: provides unique identifiers to all the entities.
• Standardization organizations: defines standards and devises policies for sustainable
operation.
• Certifiers: provides certifications to the participating actors.
• Actors: the customers, retailers, and manufacturers.
Access to parts of records can be secured through digital signatures and public-key
infrastructure schemes. The records on the blockchain could be about the status, origin,
type, and standardization of the product. The product identifier on the blockchain is unique
to the physical instance of a product. The transfer of ownership of the product might be
governed by a smart contract to authenticate the negotiated requirements. Blockchain
technology can emphasize product dimensions, such as the
• Product nature.
• Product quality.
• Product quantity.
• Location.
• Product ownership.
In this way, blockchain can remove the requirements of a centralized authority, and
can lend transparency to the overall logistics operations starting from the raw materials,
including production, and extending until the sale of the product to the end consumer.
All this information is recorded along with timestamps and verifiable transactions. Thus,
blockchain facilitates the logistics of materials and information through various stages of the
blockchain [15]. This transparency and immutability enhance the trust of the customer in
the product and lead to increased customer confidence and perceived value of the product.

4. Smart Contracts
Smart contracts are computer programs that execute automatically when predeter-
mined conditions are satisfied. Smart contracts, by definition, are not necessarily based
upon blockchain. However, the term is now used almost exclusively in the context of
blockchain-enabled contracts. Smart contracts are computer programs that can be deployed
by anyone but cannot be tampered with and are updated on a decentralized ledger main-
tained as part of a blockchain [16,17]. Smart contracts can contain arbitrary logic and can be
Electronics 2023, 12, 1340 7 of 14

used in various applications where the users, events, and other smart contracts can trigger
their execution. The benefits and characteristics of a blockchain system are demonstrated
in Figure 3.

Figure 3. Important characteristics of a smart contract deployed on a blockchain system.

Currently, the most commonly adopted platform for smart-contract deployment is

Ethereum; however, other cryptocurrency blockchains (such as EOS, Polkadot, Tron, and
Tezos) provide similar capabilities. The original thought behind smart contracts was to
digitize and automate legal contracts [18].
Smart contracts can serve various purposes in a supply chain managed and maintained
through a blockchain [19]. For instance, certifier and standardization bodies can verify the
digital profiles of entities and products [20]. The digital profiles can be modified by the
actors; however, they require subsequent approval from the registrar and certifiers on the
network. The rules of the smart contract cannot be modified by individual trading partners,
and this would require consensus by the majority of the actors or certifiers.
Similarly, a smart contract deployed on the blockchain can govern the process of
procurement of a material or product from the supplier. Both partners provide information
regarding the quality, quantity, and status of the product along with the timestamp and
geographical location of the request and receipt. Smart contracts also make it possible to
improve the efficiency of business processes through continuous quality assessment. The
key-performance indicators could be ratified and recorded on the blockchain, and the smart
contract can readily evaluate the indicators and check the improvement of quality relative
to the historical record.
Thus, smart-contract-enabled blockchain promises solutions beyond simple delivery
and governance issues. A key benefit of this approach is that it can remove the dependence
on intermediaries for the verification of financial exchanges, such as payments, stocks, and
money exchanges. Financial techniques, such as reverse factoring and dynamic discounting,
could be implemented in a smart contract to further improve the efficiency of financial
flows [21,22].

5. Smart Contracts and Blockchain Enabling Sustainable Supple Chains

Blockchains are databases shared and agreed upon by a community and are char-
acterized by their distributed and transparent nature. An important recent direction of
Electronics 2023, 12, 1340 8 of 14

exploration regarding the use of blockchain in supply-chain management is the sustain-

ability of supply-chain operations in the dimensions of society, the environment, and the
economy [10]. An application of smart contracts to a supply-chain and logistics scenario is
shown in Figure 4.

Figure 4. The use of smart contracts in logistics and supply chains.

Blockchain usage in the supply chain may lead to a better assurance of human rights
and fair work practices [23,24]. For example, the history of a product recorded on the
blockchain might provide assurance regarding its origin and its ethical soundness. Smart
contracts can enforce the regulatory policies defined by the governing and standardization
bodies [11,25].
Next, we explore the benefits of the blockchain framework and its associated tech-
nologies on the logistics and supply chain networks of different product and business
categories. We consider the use of blockchain in networks that involve logistics over terres-
trial, maritime, and aerial infrastructure [26,27]. The use of these technologies is coupled
with various societal, behavioral, and organizational issues that require further research
and exploration before these technologies can be deployed in a real-world system with
stakeholders belonging to multiple echelons of decision-marking processes [28].
An important use of smart contracts and blockchain technology could be in the food
and beverage industry. Using RFIDs and blockchain, a food supply chain can provide
traceability of the products to their provenance and document their conduct of operations
based on the rules specified by regulatory and governing bodies. Another sector that could
benefit from the use of blockchain is the agriculture sector, which could prevent counterfeit
and unethical suppliers from operating and restrict supplies to authorized entities.
Similarly, blockchain technology can benefit an organization by improving its eco-
nomic and fiscal performance through the dis-intermediation and reduction of tiers in the
bureaucratic processes. This could reduce the lead times for new products by minimizing
human factors and transaction times. Blockchain ensures the safety, security, and reliability
of the stored data, thus, enhancing the transparency for all stakeholders, including the
governing bodies and the end consumer [29,30].
Currently, logistical supply chains are typically managed by an enterprise resource-
management system that is centralized and operates within the confines of an organiza-
tion [31]. All the stakeholders, which might belong to different organizations, have to rely
on this single broker and trust the security as well as trust that they accurately follow of
Electronics 2023, 12, 1340 9 of 14

the negotiated and approved processes [32]. Another disadvantage of such a system is the
centralized architecture that leads to a single point of failure and makes it vulnerable to
external and internal threats and attacks [33].
Another emergent issue in logistics is to certify the sustainability of the overall supply
chain in terms of environmental, social, and corporate viability [12]. Several issues and
problems related to supply-chain management can be solved by using a decentralized
system that is mutually trusted by all the stakeholders and that can prove the provenance
of all the goods and services in an undeniable and resilient way. Blockchain technology is a
candidate solution to all these problems [34]. Smart contracts can pay an essential role in
the management of logistics and supply chains. They can remove hurdles posed by the
traditional contract-based system by introducing anonymity, fairness, and traceability to
the system [35,36].
One important use case is in managing the supply chain for the pharmaceutical
industry. Many raw materials and products need to be checked for their origin and require
the maintenance of safe transit conditions. A smart-contract-based system can provide
provenance and traceability through various stages of the supply chain. IoT sensors
and actuators connected to smart contracts can monitor and control the environmental
conditions in transit [37].
This provides auditability and resolution of conflicts without involving an interme-
diary. As these details and conditions are stored on the blockchain, there is no chance of
tampering or editing of the contract once it has been signed and executed by the partici-
pating entities. Once the transit conditions are verified and the origin of the materials is
confirmed, payments are automatically performed by the smart contract.

6. Discussion and Results

The use of smart contracts deployed on a blockchain enables stakeholders in the
logistics supply chain to help with the decentralized tracking of containers and individual
goods, i.e., products, raw materials, and their transit. Blockchain solutions are very different
from the traditional information systems that are typically deployed within the confines of
an organization and provide a very centralized system for storing and managing supply-
chain-related transactions.
Blockchain-based smart contracts offer a distributed, decentralized, and traceable
system to record, evaluate, and execute transactions. Without involving intermediaries,
smart contracts have the potential to reduce the processing and preparation involved
in paper-based contracts, help with origin tracking, facilitate in identifying the origin of
products, store data, and operate IoT devices on the blockchain. Some supply chains,
for example, UbiMS [8] have already adopted blockchain to solve issues related to these
conventional systems. UbiMS is a pioneer system that realizes three-dimensional supply-
chain processing.
This system is able to interface many suppliers with a global consumer base completely
revolutionizing the supply-chain-management process. Enterprises and corporations can
access this cloud-based system to gain access to a global e-marketplace for the supply of
goods and related communication. UbiMS is the first decentralized global system based
upon blockchain technology that can completely alter the supply chain domain.
Since blockchain provides a reliable decentralized way to connect multiple entities
with each other, the logistics sector is one of the prime candidates to benefit from this
technology. Since blockchain can also interface easily with the internet of things (IoT), it
can manage data generated by smart devices in a distributed and efficient way. These IoT
devices could be location-based sensors, temperature and humidity sensors, and warehouse
actuators installed on logistics and supply-chain infrastructure.
For an instance, Walmart is aiming to achieve last-mile logistics efficiency using a
blockchain-based unmanned aerial vehicle (UAV) delivery network [8]. Furthermore, these
IoT delivery devices connected to the blockchain are able to perform monetary transactions
Electronics 2023, 12, 1340 10 of 14

using cryptocurrencies. Through this feature, for example, they can gain priority access to
corridors that require tolls and offer faster and safer passage between destinations.
In a recent paper [38], a blockchain-based radio frequency identification (RFID) trace-
ability system for agricultural products was analyzed to determine its benefits and dis-
advantages. Such systems, when deployed vertically through a food supply chain, can
provide greater surety of food safety by readily providing information related to the storage,
origin, processing, distribution, and supplier in the blockchain.
IBM and Samsung have collaborated to mutually develop a platform named ADEPT,
which is essentially a distributed internet of things that employs the basic principle of the
blockchain network bitcoin. ADEPT uses other well-known protocols, such as Bit Torrent,
TeleHash, and Ethereum. Bit Torrent is employed for distributed file sharing, TeleHash for
secure peer-to-peer messaging, and the Ethereum blockchain for hosting smart contracts.
Blockchain transactions can be traced and are immutable. Blockchain uses a proof-
of-work-based consensus protocol to build a chain of blocks that store information about
transactions. Many enterprises in the food business are aspiring to establish a network
of global suppliers, manufacturers, and retailers to generate an ecosystem that allows
for indisputable traceability and safety assurance of their food products. For example,
Walmart and Nestle are collaborating with IBM to employ blockchain to assure transparency,
authenticity, and trustworthiness in the food supply chain and associated logistics. This is
considered ground-breaking in achieving the dream of food safety and food security for
the increasing global population.
Cloud-based blockchains provide a swift, easy, and flexible approach for the quick
adoption and deployment of smart-contract-based solutions to an enterprise requiring
supply-chain management. Global logistics and supply chain networks can see signifi-
cant improvements in efficiency by adopting these blockchain-based solutions. In smart
contracts, various stakeholders can pre-agree on the compensation and loss assigned
to various parties based on contamination or spoilage of goods during transit, storage,
or manufacturing.
The stakeholders can also pre-decide in the contract how contamination and spoilage
will be assessed. Blockchain provides a unified view of all transactions taking place between
multiple parties involved in the supply chain of a product. By adopting blockchain,
all parties can achieve improvements in efficiency by reducing paper work, improve
warehouse management, reduce delivery costs, reduce latency, make demand and supply
predictions, and identify and resolve issues faster. This technology is expected to have a
positive impact on the global gross domestic product (GDP) and total trade volume.
The logistics industry has mostly a positive regard for smart contracts and blockchain
in terms of barriers and facilitators. However, logistics is a very traditional industry, and it is
presumed that the initial adoption of blockchain technology might be slow due to this factor.
A clear use-case development and the associated cost–benefit analysis over conventional
information technology (IT) solutions must be performed carefully to convince the people
working in logistics to adopt these new solutions.
Blockchain adds transparency to the supply chain by providing an option to perform a
query related to a transaction. Moreover, there is no single point of failure, and the data are
protected by state-of-the-art security and encryption techniques. Initial assessments lead to
several benefits of blockchain, such as reduced paperwork, the identification of counterfeit
products, help in tracking the origin of products, and easy interfacing with an IoT network.
Several authors have found widespread support for blockchain-based smart contracts in
the logistics industry, and various business processes can benefit from its adoption.
According to experts in the logistics domain, about 10% of bills of lading contain incor-
rect data due to human or printing errors, and these can lead to legal disputes. Blockchain
can potentially accelerate the digitization of these bills and help improve efficiency in
terms of reducing delays in resolving legal disputes. Smart contracts can enable digital
transformation and improve business processes. As an example, we consider Shipchain,
which is one of the pioneering adopters of blockchain in the maritime logistics industry.
Electronics 2023, 12, 1340 11 of 14

Using blockchain, Shipchain can trace its product from the floor of the factory to the
hands of the consumer. A digital cryptocurrency, called ship token, aids with process
automation. Execution of a contract and monetary transactions take place on the Shipchain
platform using ship tokens. In this business model, data and transactions are saved perma-
nently on the blockchain, thus, providing transparency and traceability to all stakeholders.
As with any program, the sequence of instructions in the smart contract is critical for the
safe and correct execution of the smart contract. For example, a smart contract that involves
payment to a party must first check the pre-conditions of the payment prior to processing
the payment.
Blockchain and smart contracts are suitable for decentralized applications that involve
problems that involve peer-to-peer transactions operating beyond the boundaries of trust.
The contract conditions and individual transactions are visible and executed by all the full
participants of the chain. The operation of the blockchain is autonomous and only guided
by the rules and stipulations within the contract. Smart contracts are more effective when
they are kept simple, auditable, and coherent.
Designing smart contracts such that they involve a single problem and involve min-
imum data access helps to achieve these objectives. One way to reduce storage for the
blockchain is to split data into on-chain and off-chain components. Off-chain data can then
be managed by higher-layer applications, while the state variable of the blockchain can
store and process the on-chain part of the data. For example, if the smart chain involves a
reference to a large legal document, it is recommended to keep only metadata on the chain
and a secure hash of the contract.
Similar to many emerging technologies, smart contracts provide several opportunities
but also face serious challenges. Blockchain-based systems may also experience threats
and vulnerabilities. One common issue identified related to blockchain is the difficulty in
scalability and the associated increase in the complexity of the transactions. Since all the
nodes in the network have to process the new blocks onto the blockchain, the distributed
architecture may not be easily scalable to the global user base in the logistics industry.
This problem is particularly serious in proof-of-work-based consensus protocols, e.g., the
protocol adopted by bitcoin.
A great deal of computing power and electrical energy is consumed in the process
of verifying the transactions and minting coins when the transaction traffic scales. This
problem is partially resolved by modern consensus protocol techniques that are more
scalable. Another issue with blockchain-based smart contracts might be the issue of privacy.
The data and contracts stored on the blockchain are accessible to every node, and all the
stakeholders might not be comfortable in sharing their propriety data or even details of a
transaction with third parties. This gives rise to serious skepticism about the adoption of
blockchain-based smart contracts.
In our opinion, the way forward is to work on permissioned blockchains where only
the nodes with the privilege to access a certain piece of information can store this data or
access it in the unencrypted form. Another related challenge is that this technology is fairly
young and it might take more research efforts to improve blockchain-based solutions to
make them more flexible and secure. In short, the opportunities and challenges together
make adoption exciting, and the pioneers in the field are already showing a competitive
advantage by adopting and customizing the smart contract and blockchain technology
according to their respective requirements.
Future regulation and refined consensus mechanisms will further improve the like-
lihood of universal adoption in various sectors, including logistics and supply chains.
Some common blockchain technologies that allow smart-contract implementation are de-
scribed in Table 1 along with their distinguishing features. Many recent implementations
use an Ethereum-based blockchain wallet system to demonstrate the implementation of
smart contracts.
Smart contract code is typically written in Solidarity language using a Remix integrated
development environment (IDE). Solidity language is specifically designed to write smart
Electronics 2023, 12, 1340 12 of 14

contracts and has features derived from Javascript, Java, and C++. Solidity language can be
compiled into a bytecode suitable for deployment on an Ethereum virtual machine. The
format of a smart contract in Solidity is similar to that of a class definition in an object-
oriented language. In other words, a smart contract has a constructor, and it can inherit
functions and data from other smart contracts. A solidity function features parameters,
visibility and access modifiers, and multiple return values. State changes are automatically
returned by the function.
An Ethereum virtual machine is a 32-byte processor optimized for computations that
involve integers, and it has a limited set of opcodes. Therefore, using integer arithmetic for
computations as much as possible leads to a more efficient code. Remix is a just-in-time
compiler commonly used for Solidity language and available with a web IDE.
The Remix environment is very helpful for the design, debugging, validation, and
deployment of a smart contract. Remix static analysis warnings are helpful throughout the
smart contract development cycle. Remix supports free run-time test environments, such
as javascript virtual machines, injected web3, and web3 providers.

Table 1. Blockchain technologies for smart contracts.

Blockchain Technologies
Ethereum Hyperledger Fabric Quorum
and Their Features
Programming language
Solidity Golang Solidity
for smart contracts
Currency Ether No No
Permission Mode Public Private Private
Consensus Algorithm Proof of Stake Proof of Elapsed Time RAFT
Developer DAO Linux JP Morgan

As discussed earlier, smart contracts are programs on the blockchain that are executed
automatically once the pre-defined conditions are met. If a contract (program) has a fault
or vulnerabilities, it could lead to hazardous situations and cause loss of property and
fiscal damages or otherwise result in loss of efficiency and subsequent failure of the overall
system. In the case of supply-chain and logistics systems, this could result in delayed
payments or repeated payments or accepting delivery of a product without first ensuring
the agreed quality of the product.
Several formal verification and testing methods, e.g., formal theorem-proving tools,
could be used to ascertain that the deployed contract is built according to the specifications
of the application and that it is free of faults and vulnerabilities [39,40]. Some common
vulnerabilities in smart contracts arise from variable overflow, integer representation,
invariant issues, etc. Formal verification of a smart contract for credibility and accuracy
using theorem-proving methods is based upon model and mathematical reasoning [41].

7. Conclusions
The logistics and manufacturing industry is always looking for ways to improve
efficiency, reduce costs, and increase transparency in transactions. Blockchain technology is
purported to be a disruptive technology that possesses the desirable traits of a decentralized
record; is mutually trusted by participating peers, is immutable, scalable, secure, and robust;
and does not require a centralized authority. Blockchain can help boost the efficiency of
the supply-chain process by transforming the paper-based slow and error-prone processes
into tamper-proof digital paperless processes. This reduces the burden on bureaucratic
procedures while still satisfying the regulatory requirements agreed upon and fulfilled
through a smart contract.
Automation helps reduce the number of stakeholders to the bare minimum and
speeds up the process. For example, a particular supply-chain process might involve
Electronics 2023, 12, 1340 13 of 14

intermediaries and stakeholders, such as insurance companies, legal services, brokerages,

and settlement services. Automating the processes makes them more lean, efficient, and
robust to variations. We considered various ways in which a smart contract could improve
the efficiency of a logistics system by providing financial gains as well as enhancing the
trust of the consumer. We also discussed various implementation and security aspects
related to smart contracts.

Author Contributions: Conceptualization, M.A.A. and S.S.; methodology, M.S.A. and S.H.C.;
software, S.H.C. and S.S.; validation, M.A.A., M.S.A. and S.H.C.; formal analysis, M.A.A. and S.S.;
investigation, M.A.A. and M.S.A.; resources, S.H.C. and M.A.A.; writing—original draft preparation,
M.A.A., M.S.A. and S.S.; writing—review and editing, M.A.A., M.S.A. and S.H.C.; visualization, S.S.;
supervision, M.S.A.; project administration, M.A.A.; funding acquisition, M.A.A. All authors have
read and agreed to the published version of the manuscript.
Funding: The authors extend their appreciation to the Deputyship for Research and Innovation,
Ministry of Education in Saudi Arabia for funding this research work (Project No. MoE-IF-G-20-14).
Data Availability Statement: Not applicable.
Conflicts of Interest: The authors declare no conflict of interest.

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