Supply chain management under VMI strategy using internet of things and smart contracts

Today, providing products in supply chains (SCs) with minimum delays and costs is a challenging issue which attracts the attention of many researchers. Additionally, as SC becomes more complex, its coordination is getting more difficult. Some products such as tire play a critical role in the safety of people, and a part of accidents occur due to defects of the tire. Releasing used products into the environment causes many environmental and health problems; that is why, governments make laws to prevent it. Vendor-managed inventory (VMI) is a strategy for coordinating partners in a SC in order to deliver required products to downstream echelons with the least delay. In this paper, we are going to show how to implement VMI in business-to-business and business-to-customer relations in a multi-echelon SC by using novel Industry 4 technologies including Internet of Things (IoT) and smart contracts. Since the implementation of the VMI strategy requires accurate and timely data, such as inventory levels, point-of-sale data, and maybe returned products data, we have recommended using IoT technology as a tool for receiving timely data. Furthermore, we have proposed a smart contract for implementing and executing the VMI rules and conventions in an automated system for increasing the clarity of operations and making trust among SC members. The addressed IoT-based system architecture is described along with the Ethereum blockchain-based smart contract structure. The smart contract was developed utilizing Solidity language in the Remix IDE environment. The contract is tested by using sample data and the results are reported.