Preparing construction supply chains for blockchain technology: An investigation of its potential and future directions

doi:10.1007/s42524-020-0110-8

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Abstract：

Blockchain, a peer-to-peer, controlled, distributed database structure, has the potential to profoundly affect current business transactions in the construction industry through smart contracts, cryptocurrencies, and reliable asset tracking. The construction industry is often criticized for being slow in embracing emerging techno-logies and not effectively diffusing them through its supply chains. Often, the extensive fragmentation, traditional procurement structures, destructive competition, lack of collaboration and transparency, low-profit margins, and human resources are shown as the main culprits for this. As blockchain technology makes its presence felt strongly in many other industries like finance and banking, this study investigates the preparation of construction supply chains for blockchain technology through an explorative analysis. Empirical data for the study were collected through semi-structured interviews with 17 subject experts. Alongside presenting a strengths, weaknesses, opportunities, and threats analysis (SWOT), the study exhibits the requirements for and steps toward a construction supply structure facilitated by blockchain technology.

Keywords blockchain smart contract supply chain management project management construction

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	Algan TEZEL
	Eleni PAPADONIKOLAKI
	Ibrahim YITMEN
	Per HILLETOFTH

引用本文:

Algan TEZEL,Eleni PAPADONIKOLAKI,Ibrahim YITMEN, et al. Preparing construction supply chains for blockchain technology: An investigation of its potential and future directions[J]. Front. Eng, 2020, 7(4): 547-563.

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https://journal.hep.com.cn/fem/EN/10.1007/s42524-020-0110-8 OR https://journal.hep.com.cn/fem/EN/Y2020/V7/I4/547

Fig.1 Role of blockchain technology in the development of the digital transformation in the AEC industry.

Fig.2 Encrypted and chained data blocks are distributed over multiple nodes in blockchain.

Fig.3 Types of blockchain by trust and anonymity.

Fig.4 Potential applications versus challenges facing the adoption of blockchain technology in AEC.

Fig.5 Sequential phases of the adopted research methodology.

Tab.1 Identifiers (ID) and profiles of interviewees and interview details

Strengths	Weaknesses
Technical	Structures
-Increased security in data storage and retrieval -Increased data traceability -Increased data transparency -Smooth handover of data -Data interoperability Ecosystem -Demonstrable outcomes in other sectors, such as FinTech and LawTech -Clear and time-stamped accountability chain -Immutability and tamper-less ledger of transactions -Able to skip the intermediaries (middlemen) -Authenticity of product, certificate and information -Tokenized ecosystem (utility or security token) consisting of solution engineers is a potential use case -Streamlined procurement and payment processes -True democratization of data and open-book procurement	-Private blockchains are more prone to be modified/hacked -Robust data validation (proof-of-stake) systems are necessary -Private blockchains cannot communicate with each other -Scalability of blockchains -Trade-offs in public versus private blockchains (transaction speed, cost, level of trust/security, and data storage capacity) Skills -Lack of awareness at senior management level -Lack of skilled human resources Industry adoption -Lack of blockchain-based commercial or procurement frameworks -Lack of substantial exemplary use cases -Lack of understanding of requirements for different application opportunities -Lack of legal foundations/regulations -Lack of industry standards for blockchain -Insufficient evidence on the business case -Perceived high-risks and hesitation -Lack of incentives for small players -Volatile cryptocurrency values for public/semi-public blockchains -Need for expanding/integrating legacy digital systems in the industry with blockchain
Opportunities	Threats
New applications -The IoT will be of the prime beneficiaries of blockchains -Facilitate creating decentralized common data environments -Facilitate the creation of true DAOs -Facilitate alliancing/partnering-based procurement arrangements by enabling true open-book accounting -New forms of crowdfunding of assets are possible with blockchain Industry adoption -Large and public clients will be the primary beneficiaries of the technology -The trust layer just above the Internet for digital transactions -Accelerate the digitalization in the industry by overcoming concerns relating to security, ownership, and IP rights -Facilitate various applications in commercial, supply chain, and operations management in construction -Reduced commercial transaction costs -Information resilience (opportunity): Blockchains’ immutable nature will render information resilience a key subject in the industry -Facilitate easier and correct taxation and insurance calculations Competition -Small- and medium-sized enterprises (SMEs) can form trust-based commercial/procurement frameworks on blockchains -SMEs can receive credibility and visibility from participating in blockchains -Direct payments to supply chain tiers by overcoming gatekeepers for interrupted value flow Business environment -Stronger government involvement to legitimize the implementation and usefulness -Faster financing and allocation of payments in projects -Protected IP rights -Increased capital movement and investments -New business model enablement -True sharing economy	Public action -Energy management and use -Powerful organizations and governments trying to dominate and control the blockchain environment Technology maturity -Limited view to the technology over cryptocurrencies -The current “noise” and hype—a too optimistic picture of the technology -Not knowing when to use the technology for what purpose Acceptability -Information resilience (threat): Blockchains’ immutable nature increases system sensitivity to low-quality information. The need for trust will not disappear and information input will be focused on -Lack of governance in P2P transactions -Lack of involvement from professional institutions in policy-making -Traditional culture and lack of innovativeness -Legal, operational, and contractual fragmentation in the industry -Readiness of supply chains for true information transparency and streamlined/automated value transactions Competition -The existing digital difference between large organizations and SMEs may worsen -As a disruptive technology, increasing data transparency and P2P transaction possibilities may annoy some third-party intermediary organizations and service providers in the industry that may prompt them to undermine or control the technology

Tab.2 SWOT analysis based on empirical data about blockchain technology in construction

Fig.6 Conceptual framework for the preparation of construction supply chains for blockchain in the AEC industry.

Theme	Research area	Implementation for blockchain in AEC industry
Use cases	Cross-comparison with other industries and sectors	Blockchain implementations and translating them into the AEC industry
	Linking the models with digital passports (ID) on blockchain	Elements within a building’s BIM model linked to entries in the product passport blockchain, making it easy to retrieve information about the materials contained in various components and products (assets) when they reach end of life
	Identification of key asset information/document types to be blockchained over lifecycle	Blockchains can be used to trace key asset information, maintaining a record of ownership for each asset over lifecycle
	Creating a framework for BIM and blockchain integration for the AEC industry	Development of a blockchain-aided BIM for sustainable building design and construction coordination and collaboration in multiple building life cycle stages
Business models	Demonstrating the business case for blockchain	Business roles and strategies (including business models) to fully exploit the technology
	Devising blockchain-based models for project management and governance	Business management process governance builds on appropriate and transparent accountability in terms of roles, responsibilities, and decision processes for different programs, projects, and operations; the blockchain might change governance toward a more externally oriented model of self-governance based on smart contracts
	Devising models for creating co-operatives on blockchain-based governance and commercial management systems	Blockchain technology supports novel data ownership and governance models with built-in control and consent mechanisms for commercial management systems
	Investigating the potential for DAOs in the AEC industry	DAO in the form of smart contracts include challenges involving security issues, unclear legal status, and technical limitations, as well as future trends regarding parallel blockchain
Procurement	Dynamics of trust in AEC supply chains	Collaboration and information sharing through changing the trust relationship by using blockchain
	Models for incentivizing the industry for good practice through blockchain	Providing and recording rewards over blockchain for every correct and on-time delivery
	Devising models for payment, tendering and procurement supported with blockchain	Smart contracts enabling a fair, transparent, and independently verifiable (auditable) tendering scheme
	Creating a framework for IoT and blockchain integration for the AEC industry	An integrated IoT platform by using blockchain technology to increase the effectiveness of supply chain in AEC
	Devising new procurement and tendering models on blockchain	Blockchain can revolutionize how the supply chain is valued and compensated, increasing the transparency and traceability of payments
Skills/Structures	Understanding types of critical project data that should be blockchained Data/information resilience for immutable blockchain	Protection of critical project data for managing data
	Understanding the provenance and ownership matters that can be blockchained	Blockchain-enabled devices allows for supply chain tracking of materials and services in real-time. Ownership can be recorded for many types of assets such as buildings and can be made explicit for shared BIM models, thus increasing trust among parties
	Identification of macro- and micro-level requirements for the penetration of blockchain in the AEC industry	From macro- and micro-level perspectives, the competitive forces and rivals existing in the AEC market

Tab.3 Potential research areas for blockchain in AEC industry

Fig.7 Potential research areas of blockchain in construction supply chain.

Fig.8 Potential use cases of blockchain in construction supply chain throughout the lifecycle.

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