Improving Vendor-managed Inventory Strategy Based on Internet of Things (IoT) Applications and Blockchain Technology

Vendor-managed inventory (VMI) is a widely used collaborative inventory management policy in which manufacturers/vendors manage the inventory of retailers and take responsibility for making decisions related to the timing and extent of inventory replenishment. There exist several prerequisites for a successful VMI strategy implementation like information sharing, trust, systems integration and long-term collaboration. However, in nowadays logistics flows, complex processes, high number of participants and complex distribution channels impede the successful adoption of VMI strategies. In this paper, we propose a new interaction framework based on smart contracts and blockchain for governing the relationship between the vendor and the buyer. A use-case VMI scenario is presented along with a functional smart contract. Tests performed using a local private blockchain illustrate the applicability of the proposed architecture along with the significant benefits for each participant.