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W34667

JWELL: INTEGRATION OF BLOCKCHAIN INTO ITS WAREHOUSE

MANAGEMENT SYSTEM

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Jue Wang, Shuting Xiang, Huangen Chen, and Jing Chen wrote this case solely to provide material for class discussion. The authors
do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain
names and other identifying information to protect confidentiality.

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organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western

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Copyright © 2024, Ivey Business School Foundation Version: 2024-02-13

On January 9, 2018, Xie Hai, general manager of Chengdu Jwell Co. Ltd. (Jwell), and Yuan Chen, general
director at Jwell, along with other colleagues involved in the digital transformation of Jwell’s warehouse
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management, held an internal meeting. Since its founding in July 2013, Jwell had provided trading services for
the commodity steel industry through its dual brands, the off-line platform Dahai Industrial Technology
Comprehensive Industrial Park (Dahai Industrial Park, or Dahai) and the online platform Jwell. Jwell’s digital
transformation journey began in 2015 with the launch of its e-commerce platform. However, despite ongoing
efforts in digital transformation, Jwell faced increasing challenges in managing its warehouses. Issues such as
the lack of real-time sharing of information about cargo and financial data and insufficient support for security
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in e-commerce transactions significantly impeded Jwell’s further development. As part of the ongoing digital
transformation of its warehouse management system, Jwell faced key decisions in terms of deciding which
initiative to implement and determining how to implement it. The process of selecting and implementing this
initiative would be a crucial aspect of the company’s digital transformation and industrial upgrading.

JWELL
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Jwell was founded in July 2013 by Pangang Group Investment Co. Ltd. (Pangang Group), a large state-
owned enterprise in China. It was designed as a service platform for the steel industry, focusing on providing
users with transaction, payment, and billing services for commodities such as steel, vanadium, titanium,
and chemicals. Prior to the founding of Jwell, the renowned consulting company Accenture helped Pangang
Group design a strategic plan involving the initial development of the off-line platform Dahai, followed by
that of the online platform Jwell.

In April 2014, Jwell launched its off-line platform, Dahai Industrial Park, located in the Qingbaijiang
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District of Chengdu. The park offered services for steel transactions, including plate and coil storage, shear
processing, and cargo freight, with the goal of establishing a base for physical storage and processing
logistics in southwest China. Starting with an initial annual cargo throughput of 1.3 million tons, Dahai had
increased this to 8 million tons by December 2016. In June 2017, Dahai Industrial Park was recognized as
one of the top 10 innovation parks in China’s logistics industry.

In July 2015, Jwell launched several e-commerce platforms, including Jwell Steel ([Link]), Jwell

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Transportation Network ([Link]), Jwell Vanadium Network ([Link]), and Jwell

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Titanium Network ([Link]). These platforms were involved in the steel, vanadium, titanium,
logistics, and intelligent manufacturing businesses. Jwell aimed to become the largest steel e-commerce
platform, transportation network logistics services platform, and vanadium and titanium cross-border e-
commerce platform in southwest China.

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Unlike the traditional one-way off-line-to-online (O2O) business model, Jwell adopted the online-merge-off-
line (OMO) approach to build an integrated platform business model with OMO capabilities. This model
targeted the entire industry’s 3C (complex, customer, and cash) ecosystem. The online platform provided
customers with a diverse range of mobile terminals for transactions, an accurate analysis of their needs, and
guided access to Dahai’s off-line production and storage facilities (see Exhibit 1). It promoted Dahai’s
development by offering strong support in data analysis and technological advancements. Jwell gradually
developed its strategic framework through off-line layout, online expansion, and online/off-line co-
construction and sharing of online and off-line resources. This business model made Jwell one of China’s few

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profitable e-commerce companies, with a total gross shipment exceeding 13 million tons by December 2016.
In 2016 alone, Jwell recorded $5.761 billion in transactions, $0.50 billion in revenue, and a total gross shipment
of over three million tons. Jwell’s operating income experienced rapid growth, increasing from approximately
$12.97 million in 2014 to $1.38 billion in 2017 (see Exhibit 2). In April 2017, Jwell was selected as one of
China’s one hundred top commodity e-commerce enterprises, ranking sixth in the steel e-commerce sector.
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THE STEEL INDUSTRY

As highlighted in a report, “The global steel industry was facing an unprecedented level of overcapacity,
which was significantly distorting the world market and posing a threat to the viability of many steel
producers worldwide.”2 This excess capacity triggered an import crisis in the global steel industry, with
overcapacity continuing to grow. Consequently, circulation costs rose, the growth of demand slowed, and
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slim profit margins or even losses became the new normal across the steel industry.

Driven by popular demand, China’s crude steel production witnessed an average annual growth of 5 per
cent, increasing from 680 million tons in 2011 to 800 million tons in 2015 and reaching a historical peak of
820 million tons in 20143 (see Exhibit 3). However, in response to the overcapacity issue, in 2016, China
initiated supply-side reforms in its steel industry, targeting a reduction in steelmaking capacity of 100–150
million tonnes (Mt) over the following five years.4 In the same year, a significant reduction of approximately
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67 Mt in steelmaking capacity was achieved.5 The combination of these reforms and capacity reductions
played a key role in reversing the industry’s prior trend of losses. However, the industry still faced
fundamental challenges related to overcapacity, which hindered price increases and growth in profits.

Overcapacity and Intense Competition

Since 2000, the global steel industry had witnessed an increase of over 1.2 billion tons in crude steel
capacity, resulting in a worldwide capacity of 2.3 billion tons, which by the end of 2015 exceeded demand
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by half a billion tons, thus creating an overcapacity crisis. In the United States, steel manufacturers utilized
less than 65 per cent of their capacity, leading to the layoff of 12,000 workers in 2015.6

Similarly, in China, steel producers experienced a decline in the utilization of their crude steel capacity,
dropping from 81 per cent in 2011 to approximately 70 per cent in 2015.7 This intensified the vicious
competition within the industry.

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Mismatch between Storage and Production Capacity

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The production capacity of the steel industry increased due to the expansion of production lines and process
optimization. This exacerbated the issue that the capacity of the steel mills to store finished products could
not match the capacity of the production lines to produce steel.

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Low Degree of Specialization and Informatization in Warehousing Logistics

In China, the lack of an overall plan for the logistics of the steel industry caused several issues, such as an
unreasonable layout, simplistic approaches to logistics management, and poor supply chain coordination.
The disorderly competition in the logistics market resulted in high logistics costs and overall inefficiency.
Due to a low degree of specialization and informatization in warehouse logistics, meeting the requirements
of modern logistics became challenging. The majority of steel enterprises still relied on communication by

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telephone, manual operations, and manual loading and unloading in most of their logistics operations, with
paper-based information transmission being the primary method. There was significant room for
improvement to reduce logistics costs in the steel industry, including feasible solutions that enhanced the
integration of production and marketing through improved supply chain informatization.8

JWELL’S CURRENT WAREHOUSE MANAGEMENT SOLUTION

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Jwell was currently managing its warehouses through a smart warehouse chain based on digital warehouse
technology. Given the nature of steel materials and products as commodities, steel transactions required
large warehouses for storage and advance disbursement, resulting in high risks. Improper management
could lead to damage during transactions, information issues could cause cargo backlogs, and crises of
confidence could result in economic losses. Consequently, warehouse management became extremely
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challenging. To address these challenges, Jwell initiated the development of a digital intelligent
warehousing system in 2015 as part of its business transformation.

Jwell’s smart warehouse served as a simple complement and extension to its existing crane positioning
technology9 and unmanned technology.10 The system incorporated the following components: 1) a full-life-
cycle steel identification system that used quick response codes and radio frequency identification labels,
2) a steel security, monitoring, and positioning system that employed high-definition cameras for digital
warehousing, and 3) an intelligent vehicle delivery and location tracking system that utilized licence plate
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recognition and GPS technology.

With these technologies in place, Jwell’s warehouse could automatically receive, identify, sort, organize, and
consign goods. Cargo owners could monitor their goods remotely in real time using over six hundred cameras
with 360-degree swivel high-definition capabilities. In addition, Jwell offered an immersive cargo storage
experience using virtual reality (VR) devices. The warehouse management system served as the core, enabling
standardized and efficient unmanned operations for all systems within the storage area. The storage rooms
were connected through big data forms, eliminating the need for traditional interface management.
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As the steel industry expanded its advanced production lines and optimized its production processes,
production capacity in the industry continued to increase. However, the major steel mills’ capacity to store
finished materials did not keep pace with the significant increase in production line capacity, putting
pressure on Jwell’s storage capacity. Moreover, Jwell needed to further enhance its storage system, as it
encountered various challenges in warehouse and logistics management.

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Delayed Documentation of Cargo Ownership Information

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Insufficient information sharing between Jwell’s smart warehouse and the cargo owners often resulted in
confusion and disputes regarding the ownership, condition, and other crucial details of the cargo. For instance,
when a cargo owner mortgaged goods to a third party but also requested the warehouse to release them, Jwell
was frequently unaware of the change in ownership and would proceed with the delivery of the goods.

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Subsequently, the third party would demand compensation from Jwell’s warehouse, leading to further disputes.

Insufficient Financial Information Sharing at Jwell’s Warehouse

Inefficient information sharing between the warehouse and relevant financial departments within Jwell often
hindered credit checks and other transactions. For example, when owners requested Jwell to deliver goods on
credit, the warehouse took significant time to confirm the loan security and coordinate with the financial

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department. This cumbersome process delayed the delivery of goods, significantly reducing Jwell’s service
quality. In both cases, the lack of effective information sharing between the smart warehouse and relevant
stakeholders created operational inefficiencies and negatively impacted Jwell’s overall service quality.

Lack of Security Support for E-commerce Commodity Transactions

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Although Jwell implemented a smart warehouse system, it lacked adequate security measures, making it
susceptible to fraudulent activities and theft during e-commerce commodity transactions. This vulnerability
stemmed from a lack of ownership safety protocols, insufficient surveillance systems, and weak access
controls. Furthermore, with the increasing reliance on digital platforms for e-commerce transactions, the
smart warehouse needed robust cybersecurity measures to safeguard sensitive information and prevent data
breaches. For instance, although cargo owners could place orders through Jwell’s platform and the platform
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would successfully process them, these orders were not equivalent to sales contracts. Jwell’s platform could
not guarantee the security and immutability of the transaction data.

Crisis of Confidence in Remote Delivery

Although cargo owners using Jwell’s smart management system and VR devices could remotely monitor their
cargo, there was a lack of trust between Jwell and the cargo owners. For example, when owners requested the
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delivery of goods, Jwell still relied on traditional approaches such as sending faxes or bills and using official
seal stamps to confirm security, resulting in lengthy operational processes. Moreover, the remote delivery
process was not sufficiently secure against cyber threats, leading to a crisis of confidence in it.

Furthermore, the digital and smart warehouse chain mentioned above was unable to transmit information
effectively among the steel mills, customers, and logistics managers, resulting in the formation of isolated
“information islands” due to the lack of real-time connectivity within the warehouse chains. Additionally,
Jwell’s online platforms primarily focused on value-added services to generate profit—for example, by
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providing financial solutions throughout the industry chains, including off-line warehousing, processing,
transportation, and logistics. However, its platform type, transaction mode, and product channels were
similar to those of other steel e-commerce businesses, limiting its ability to generate substantial profits. In
fact, its profits increased by only 1.8 per cent in 2016. As a result, there was an urgent need for Jwell to
transform and upgrade its warehouse management and online platforms.

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JWELL’S BLOCKCHAIN INITIATIVE

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Alternative 1: Integrating Blockchain Technology into Jwell’s Management System

With the advancement of blockchain technology, internet companies began developing blockchain-related
technologies and applying them in various industries, such as the internet of things (IoT), smart manufacturing,
supply chain management, and digital asset transactions. For example, Tencent established a blockchain research

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and development team at the end of 2015.11 In 2016, China UnionPay and IBM jointly launched an integrated
blockchain technology-sharing system,12 while Alibaba’s Ant Financial became the first to apply blockchain
technology track charity donations by integrating blockchain into its “Ant Love” platform, which is linked to
Alipay.13 In 2017, China Merchants Bank became the first to launch a blockchain-based cross-border clearance
system,14 and Alibaba announced its collaboration with Price Waterhouse Coopers Consulting to develop a
transparent and traceable cross-border food supply chain using blockchain technology.15

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Blockchains consisted of public blockchains, which were accessible to anyone, and private blockchains that only
selected users could access. Blockchain technology was widely used due to its four main characteristics:

• Decentralization: Decentralization eliminated the need for a central management system, allowing
information to be transmitted directly between parties.
• Transparency: With the support of blockchain technology, all transaction records were transparent and
traceable, effectively addressing issues arising from traditional information asymmetries and ensuring
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the interests of both parties involved in the transaction.
• Autonomy (or collective maintenance): Blockchain-based networks adopted unified specifications and
protocols, enabling all nodes in the network to exchange data freely and flexibly.
• Security: Blockchain incorporated asymmetric cryptographic technology, and the presence of proof-
of-work mechanisms theoretically ensured that data could not be tampered with or forged, thus ensuring
data safety and reliability.
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After learning from the experiences of companies like Alibaba and Tencent with blockchain technology, Yuan
began to consider the feasibility of applying blockchain to Jwell’s warehouse management. In 2017, Jwell
initiated discussions with a local university and Mr. Ray Co. Ltd. about collaborating on the development of
blockchain applications for Jwell’s warehouse management. This involved the proposed integration of a new
blockchain-based “Jwell Chain Network Platform” into the warehouse management system.
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Integrating the Blockchain-Based “Jwell Chain Network Platform” into Jwell’s Warehouse
Management System

Jwell’s proposal to integrate the blockchain-based “Jwell Chain Network Platform” into its steel industry
warehouse management system aimed to ensure the security of information access via the blockchain bus
system (see Exhibit 4). Built on the FISCO BCOS (the Financial Services Blockchain Consortium,
Shenzhen’s Be Credible, Open & Secure blockchain platform) technology, the platform would host a
trading centre, regulatory centre, traders, delivery warehouses, settlement banks, and logistics companies
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(see Exhibit 5). The trading centre would connect Jwell’s online systems, providing services related to steel
storage information, industry information, and other services for steel e-commerce transactions. It would
supervise the entire transaction process, ensuring the reliability of transactions. The regulatory centre would
oversee and verify data on the trading platform, taking responsibility for every transaction that occurred on
the blockchain network. The traders would be bulk commodity enterprises engaged in trading on the trading
centre. The delivery warehouses were at Dahai Industrial Park, where the bulk commodities involved in

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transactions would be inspected and stored. Settlement banks would provide settlement services for

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electronic transactions, while logistics companies would handle the transportation of the goods. By
establishing a collaborative ecosystem among participants in the steel industry, Jwell could securely share
information and coordinate activities with stakeholders in real time, thus ensuring data integrity and
addressing the issue of insufficient information sharing between different parties in its existing systems.

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By introducing a new transaction process with five main steps, this platform would represent a fundamental
departure from steel e-commerce’s traditional transaction processes and mechanisms. In Step 1, the seller
would publish sales information on the trading platform, using blockchain technology to ensure accuracy
and tamper-proofing and with a visible time-stamp indicating the time the entry was created. Step 2 would
involve the platform confirming the listing details with the provider, triggering the creation of a smart
contract recorded on the blockchain. In Step 3, interested buyers would negotiate or proceed with a fixed-
price transaction, with the blockchain recording the entire process for integrity. In Step 4, a successful
purchase and sale contract would be signed, and the blockchain would generate a smart contract for reliable

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information circulation. In Step 5, the buyer and seller would determine contract handling, fully recording
it on the blockchain. The integration of distributed ledger and IoT technology would enhance transaction
tracking, help minimize disputes, and ensure reliability.

Through this new transaction process, the circulation records of all commodities would be recorded on the
blockchain, enabling the realization of digital assets. All credit records, digital assets, and participating
users would be endowed with on-chain digital identities. The proposed integration would also enhance the
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following aspects of management in Jwell’s warehouse.

Inventory Management

Users would have access to information on goods entering and leaving the warehouse, as well as real-time
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inventory updates. Jwell would employ IoT devices and sensors integrated with the blockchain to gather
real-time data on steel inventory stored in the warehouses, connecting to the blockchain network to instantly
update the inventory ledger. The system would also provide accurate and up-to-date information on
available stock, thus reducing delays, optimizing inventory management, and enhancing overall supply
chain coordination. This approach would help address concerns related to the mismatch between storage
capacity and production line capacity, as well as delays in documenting property information.
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Asset Digitization

By availing of blockchain technology’s decentralized, unforgeable, and collectively maintained nature; its ability
to enable unalterable, trust-free operations; and the reliability of its database, the Jwell Chain Network would
record the entire life cycle of the goods ordered by customers as they were processed and went into circulation.
This would include the transfer of warehousing and ownership of cargo, promoting the digitalization of steel coil
assets and realizing the uniqueness of digital assets and transactions. The blockchain would securely record the
circulation data of all commodities, preventing tampering or loss. This would enable all participants to access
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real-time data related to steel, assembly units, equipment, and materials, eliminating many traditional manual
procedures. Additionally, users including Jwell, cargo owners, and third parties would be able to track the
movements of steel products on the blockchain and verify their origin via reliable and unalterable records. This
would significantly reduce costs, improve efficiency, and enhance transaction credibility. Furthermore, the
application of blockchain technology would effectively prevent the risk of information leakage and malicious
manipulation of any single-node device in the industrial IoT platform.

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Smart Contracts

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The Jwell Chain Network would implement smart contracts to facilitate the automated and intelligent
transfer of ownership of cargo in steel e-commerce transactions. Access Control Organizations would be
established within the blockchain nodes, verifying the identity of new entities entering the network and
issuing transaction certificates to users for each transaction. Once completed, the certificates would be

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cancelled and a smart contract would be generated and executed with the user. Smart contracts would thus
act as authorization mechanisms, enabling participants to fulfill agreements without relying on third-party
authorities. Transactions would be triggered automatically once the conditions were met, and the transaction
code would remain unmodifiable, reducing the possibility of human intervention.

With smart contracts, users would verify online transaction authorization information, confirm the identities
of both parties, and achieve online delivery authorization authentication. The Jwell Chain Network would
then be linked with warehousing, logistics, and cargo property information through the blockchain,

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highlighting real-time ownership and following the predetermined processing steps outlined in the smart
contract. Jwell would also utilize blockchain encryption algorithms to secure data transmission and
maintain information confidentiality, thus guaranteeing the security of transactions between users.

Through the implementation of smart contracts, Jwell would achieve protection for ownership of cargo,
ensure data security, improve efficiency, and reduce security risks for the contracting parties involved in
payment and product delivery. This would resolve the issue of information blocking regarding cargo
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ownership and reduce the likelihood of disputes with customers, as contracts would be executed
automatically. Jwell would also eliminate the need to involve financial institutions in cases of delayed or
failed payments, as the transparent nature of the blockchain would allow the contracting parties to verify
the payment status independently. This would necessitate real-time tracking and transmission of
information on the blockchain through the Jwell Chain Network.
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Credit Guarantees

By leveraging blockchain’s traceability and tamper-proof nature, the Jwell Chain Network would record
information about suppliers, steel mills, steel traders, and customers on the blockchain, creating a new form
of credit guarantee. Specifically, the platform would issue blockchain warehouse receipts based on the
depositor’s inventory and combine them with delivery orders. The depositors would acknowledge these
receipts, which would serve as electronic rights certificates representing ownership. This would enable them
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to be traded autonomously, efficiently, and securely on the platform, ensuring liquidity and efficient
processing of financial asset attributes. The sellers and buyers could quote, inquire, and match transactions
on the platform at any time. Jwell would conduct credit evaluations on both parties after each transaction,
saving the credit score in the blockchain ledger and updating it periodically. Users with high credibility
would be rewarded to encourage their continued participation in transactions.

Moreover, banks could verify information about goods, access detailed contract and loan information, and
review credit records, contract documentation, token transactions, smart logistics, and other related
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information. Pledged warehouse receipt holders could then redeem an equivalent number of receipts by
making payments or deposit them as collateral to obtain pledge financing from commercial banks. The
business logic (see Exhibit 6) would reduce the need for companies to provide property collateral when
applying for loans from banks, mitigating the risks associated with duplicate mortgages, contract
falsification, and document forgery. In summary, this innovative form of credit guarantee would help
enhance confidence in e-commerce transactions.

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Intelligent Supervision

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The participating institutions in the Jwell Chain Network would be categorized into core institutions and
general institutions. The core institutions, including the trading centre and regulatory centre, would play a
pivotal role in overseeing all electronic transactions using blockchain technology for intelligent supervision.
The trading centre would establish transaction ledgers via smart contracts, ensuring reliability with integrated
functions such as delivery, processing, transfer of cargo ownership rights, warehousing statistics, processing

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statistics, and billing. Simultaneously, the regulatory centre would oversee platform data, verifying blockchain
transactions for accountability and credit endorsement. Intelligent supervision would enable dynamic
monitoring of inbound and outbound activities in the warehouses, facilitating real-time risk control and early
anomaly notification. The platform could then seamlessly connect warehouses nationwide, actively
monitoring commodity movements in and out of warehouses to provide real-time risk warnings.

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Data Analysis

The Jwell Chain Network could conduct real-time, off-line analysis of on-chain data. Real-time analysis would
focus primarily on examining and auditing transaction data. Initially cached in the Kafka16 platform, the data
could be processed in real time through the computing engine (such as Spark Streaming17 or Storm18), with
results written back to Kafka or stored in Structured Query Language (SQL) for Managing Relational Databases
(My Structured Query Language, MySQL)19 or Hadoop Database (HBase).20 Off-line analysis would involve
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building data warehouses for analysis. The transaction and asset data would be saved on Hadoop Distributed
File System (HDFS)21 and then processed using Spark,22 the MapReduce (MR)23 batch computing engine, or a
machine learning engine. Through data extraction, cleaning, filtering, mapping, merging, and summarizing, and
through aggregation modelling, the warehouse’s data would finally be formed. Data analysis would provide the
foundation for decision-making in online platform transactions, warehousing, and logistics.

By leveraging blockchain technology, the Jwell Chain Network would aim to connect warehousing,
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logistics, and e-commerce transactions. By integrating with the financial, logistics, and supply chains, it
would address the issues concerning information sharing in traditional steel business chains. This approach
could be applied throughout the entire steel asset life cycle, offering advantages such as eliminating
intermediaries, ensuring data safety and reliability, reducing costs, improving process transparency, and
enhancing operational convenience and maintenance.

Furthermore, with the Jwell Chain Network Platform, Jwell could better integrate blockchain technology
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with its existing OMO system (see Exhibit 7). By leveraging blockchain core technology, Jwell would
gradually establish an “online + off-line open ecosystem” that would be unique in the steel industry. Driven
by the provision of excellent services for customers, this ecosystem would include upstream suppliers and
production enterprises; midstream logistics, processing and trading entities; and downstream end-users,
forming a symbiotic relationship. To foster the development and continuous improvement of the ecosystem,
other industries, such as universities, research institutions, technology giants, and financial institutions,
could also be included. By integrating blockchain technology with the OMO system, Jwell would be better
able to meet customer demand for integrated services in the digital era.
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While recognizing the potential benefits of integrating the blockchain-based Jwell Chain Network Platform into
Jwell’s warehouse management, Yuan foresaw several challenges associated with this transformative initiative.

First, the adoption of a blockchain alternative would introduce technical complexities, especially in terms of
system integration, that would directly impact Jwell’s warehouse management. Challenges would arise in
attempting to seamlessly incorporate blockchain into the existing infrastructure, ensure compatibility with

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legacy systems, and overcome potential disruptions during the process of implementation within the

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warehouse environment.

Second, blockchain networks often encountered scalability issues when handling large transaction volumes,
a concern directly relevant to Jwell’s warehouse operations due to the increasing number of transactions
within the steel e-commerce platform.

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Third, although blockchain was known for its security features, the implementation of a blockchain
alternative at Jwell would require serious attention to data privacy, especially concerning sensitive
information within the warehouse due to the complete data backup for internal participants, thus directly
impacting warehouse data management.

Fourth, blockchain technology operated in a regulatory framework that was still under development,
implying that Jwell would encounter challenges in navigating and adapting to regulatory frameworks

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governing the use of blockchain in the steel industry, including warehouse management.

Fifth, the successful integration of a blockchain alternative would depend on user acceptance and
understanding, including among the stakeholders within Jwell’s warehouse ecosystem. Jwell would also
face challenges in educating its warehouse users, including suppliers, steel mills, traders, and customers,
about the benefits and functionalities of blockchain.
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Sixth, Jwell’s blockchain alternative would need to interact with external systems such as financial
institutions, logistics providers, and other industry partners, thus impacting warehouse collaboration.
Achieving seamless interoperability with these diverse systems would be challenging for warehouse
operations, requiring standardized protocols and collaboration with external entities.

Seventh, implementing a blockchain alternative would involve significant upfront costs, including for the
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technology infrastructure, security measures, and ongoing maintenance, with direct implications for Jwell’s
warehouse budgeting. Finally, resistance to change from stakeholders within the Jwell ecosystem would
also pose a challenge within the warehouse, as some warehouse participants might be accustomed to the
traditional processes and reluctant to adopt new ones.

In addition, Jwell would face other challenges specifically associated with implementing blockchain
technology in its warehouse management. The immutable nature of on-chain data would present risks of
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permanent loss due to human error in inputting entries, with potential consequences for warehouse
inventory accuracy. Performance issues stemming from the need to download extensive transaction
histories would affect warehouse operations. Delays in validation and competition for bookkeeping power
would add further complications to the warehouse management processes.

Alternative 2: Upgrading the Existing Smart Warehouse System

Yuan also considered an alternative strategy: upgrading the existing smart warehouse system through the
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integration of IoT technology, which presented itself as a simpler solution.

This alternative would empower Jwell to establish interconnection at the warehouse operation layer, the
IoT layer, and the platform layer. On the operation layer, Jwell would deploy automated systems and robots,
intelligently executing tasks such as cargo handling, sorting, and packaging. This comprehensive approach
could provide warehousing and logistics support, complemented by visual services for steel transactions.

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Simultaneously, at the IoT layer, sensors and IoT devices would be employed to achieve a comprehensive

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view of personnel, cargo, and operational status. This would facilitate data collection, equipment status
monitoring, and maintenance of cargo management. The utilization of various technologies, including high-
precision 3D positioning, real-time intelligent video analysis, and AI deep learning for location
management, would enable online self-service operations and intelligent monitoring within the warehouse.
Moreover, at the platform layer, data originating from the IoT layer would be shared with ecosystem

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partners such as traders, end-users, logistics providers, and financial institutions. Through the application
of IoT sensing technology, warehouse business processes would be streamlined, standardized, and made
traceable. This alternative approach could seamlessly integrate online and off-line information, offering
high-quality warehousing services to ecosystem partners. Although this alternative might lack some of the
rich functionalities inherent in blockchain technology, it would represent a practical avenue for enhancing
Jwell’s warehouse management. This alternative would also have provided the following benefits for Jwell.

First, the implementation of an enhanced smart warehouse system would improve operational efficiency.

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Through seamless automation and optimization of various processes, the warehouse’s day-to-day
operations would experience a marked increase in efficiency. The integration of cutting-edge technologies,
including IoT devices and AI-driven analytics, would play a pivotal role in this transformation. These
technologies would enable real-time monitoring of inventory, empowering proactive decision-making.
These real-time updates would minimize the risk of stock-out or overstock situations, contributing to
smoother warehouse operations and effective inventory management.
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Second, the upgraded smart warehouse system would offer a unique opportunity to revolutionize supply chain
visibility. Integrating advanced tracking systems into the existing infrastructure would provide unparalleled
precision in tracking and tracing goods across the entire supply chain. From the moment products entered the
warehouse to their final destination, this enhanced visibility would ensure a comprehensive understanding of the
entire supply chain life cycle. The benefits could extend to better inventory management, reduced lead times,
and an overall improvement in customer satisfaction through reliable and timely deliveries.
tC

Third, the upgrade could address the challenges associated with human error and manual data entry. By
automating routine tasks such as order processing and inventory reconciliation, the reliance on manual input
would be reduced significantly. This would not only reduce the likelihood of inaccuracies but also enhance
overall data integrity within the system. The move toward automation would ensure that critical data would
be recorded accurately, contributing to a more reliable and efficient warehouse management system.
No

Fourth, the upgraded system would pave the way for improved connectivity and collaboration with external
partners. The seamless integration with suppliers, logistics providers, and other stakeholders in the supply
chain could create a more interconnected and cooperative ecosystem. This integration would facilitate the
real-time sharing of data, fostering a collaborative environment that could enhance the overall efficiency
and effectiveness of the supply chain.

Yuan was aware that the decision to upgrade Jwell’s smart warehouse system would represent a strategic move
toward a technologically advanced warehouse management solution. The multifaceted benefits would include
operational efficiency, enhanced supply chain visibility, mitigation of human errors, and improved
Do

collaboration within the broader ecosystem. This upgrade could position Jwell to meet the industry’s evolving
challenges while providing a solid foundation for sustained growth and innovation. On the other hand, for this
alternative, Yuan also anticipated potential challenges that Jwell would face and need to address.

Implementing automated systems and robots at the operational layer would present a significant hurdle. While
these technologies would hold the promise of enhanced efficiency, challenges related to workforce adaptation

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and potential job displacement would need to be addressed. At the IoT layer, the reliance on sensors and IoT

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devices might lead to ongoing challenges in terms of maintenance and technological obsolescence. Sustaining
alignment with the rapid advancements in IoT technology would also necessitate continuous investment in
upgrades and updates, introducing a layer of complexity to ensure the long-term sustainability of the system.

Moreover, the deployment of various advanced technologies, including high-precision 3D positioning, real-time

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intelligent video analysis, and AI deep learning, might introduce complexities in terms of system integration and
compatibility. Moreover, sharing data from the IoT layer with ecosystem partners at the platform layer could
raise concerns about data security and privacy. In addition, the absence of certain functionalities inherent in
blockchain technology might limit the system’s capacity for robust and transparent transaction management.

This alternative might fall short of providing the level of trust and security that blockchain technology
typically offers. Addressing these challenges would require a comprehensive strategy encompassing
workforce management, technology maintenance, data security protocols, and strategic planning to ensure

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successful integration and sustained efficiency in Jwell’s smart warehouse system upgrade.

With the opportunities and challenges at hand, Yuan needed to undertake a comprehensive risk assessment
and engage in strategic planning to effectively navigate this alternative.

NEXT STEPS
op
How should the issues and challenges related to the lack of sharing of real-time information about cargo
and financial data and the lack of sufficient support for security in Jwell’s current warehouse management
system be addressed? Should the company have implemented the blockchain initiative, or would a strategic
update of the existing smart warehouse system using IoT technology have been more appropriate? Yuan
faced the imperative of making the decision.
tC
No
Do

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EXHIBIT 1: 3C (COMPLEX, CUSTOMER, AND CASH) ECOSYSTEM

os
Logistics
Park

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Machining
Storage

Vanadium
titanium
Distribution

Customer Cold chain

yo
op Internet

O2O

Source: Prepared by the case authors based on Jwell’s ecosystem chart in the report “Jwell’s Xie Hai: The Secret of Building
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an E-commerce Company with a ¥40 billion24 Annual Transaction Volume without ‘Burning Money’” (in Chinese), January 3,
2017, accessed January 10, 2023, [Link]

EXHIBIT 2: JWELL’S ANNUAL OPERATING INCOME 2014–17 (IN MILLIONS OF DOLLARS)

Year 2014 2015 2016 2017

Annual operating income 12.97 103.76 461.2 1,383.5
No

Note: $ = US dollars
Source: Annual income information provided by Jwell.
Do

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EXHIBIT 3: NATIONAL STEEL OUTPUT AND CAPACITY UTILIZATION RATE 2011–16

os
rP
yo
Note: Prepared by the case authors based on the data from “2017 China Steel Industry Operation Report” (in Chinese), April
op
28, 2018, accessed December 28, 2022. [Link]
tC
No
Do

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EXHIBIT 4: PROPOSED JWELL BLOCKCHAIN WAREHOUSING PLATFORM

os
rP
yo
op
tC
No

Source: Screenshots of Jwell’s proposed blockchain warehousing platform (the Jwell Chain Network), provided by Jwell.
Do

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EXHIBIT 5: LOGICAL MODEL OF PROPOSED JWELL BLOCKCHAIN WAREHOUSING PLATFORM

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Regulatory agency

Data viewing

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Seller Transaction declaration Order settlement Delivery warehouse

Blockchain

Transaction Platform Transport of goods

declaration

yo
Buyer Logistics enterprise
Settlement
information
op
Financial institution

Source: Prepared by the case authors based on information provided by Jwell.

tC
No
Do

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EXHIBIT 6: LOGICAL MODEL OF JWELL’S BLOCKCHAIN WAREHOUSE RECEIPT FINANCING

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AND TRADING PLATFORM

Pledge financing
Blockchain warehouse receipt financing and trading platform

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Redemption note
Pledge Financing Automatic Financing Automatic Financing
pledge pledge Redemption note

Depositor Split Holder of Split Holder of

warehouse warehouse
transfer receipt transfer receipt Transfer
Signing Verification transaction
warehouse and guarantee Register Register

Sign for

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Blockchain warehouse receipt

Issue warehouse receipt and register

Take delivery with documents
Storage enterprise

Sign and issue

op
Source: Prepared by the case authors based on information provided by Jwell.

EXHIBIT 7: JWELL INDUSTRIAL INTERNET ECOSYSTEM

tC
No
Do

Source: Prepared by the case authors based on “Logics behind Jwell’s digital ecology,” October 20, 2021, accessed January
10, 2023, [Link]

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ENDNOTES

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1
All dollar amounts are in US dollars.
2
Alan H. Price, Christopher B. Weld, Laura EI-Sabaawi, and Adam M. Teslik, “Unsustainable: Government Intervention and
Overcapacity in the Global Steel Industry,” Wiley Rein, April 2016, accessed March 8, 2023,
[Link]
[Link].
3
“China Iron and Steel Sector Report 2016 4th Quarter,” EMIS Insights Industry Report, February 2017, accessed April 20,

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2022. [Link]
Quarter_en_566193414.html.
4
“Reconstructing China’s Steel Industry,” East Asia Forum, August 18, 2016, accessed January 8, 2024,
[Link]
5
“Chinese Steelmaking Capacity Reduced in 2016, Not Increased,” CRU Insight, February 16, 2017, accessed January 8, 2024,
[Link]
6
Alan H. Price et al., “Unsustainable.”
7
“State of Play in the Chinese Steel Industry,” Peterson Institute for International Economics, July 5, 2016, accessed January
8, 2024, [Link]

yo
8
“The Future of China’s Steel Logistics Industry,” Saifei, accessed December 28, 2022,
[Link]
9
Crane positioning technology referred to the use of Radio Frequency Identification (RFID) and radio waves or microwaves
in the steelmaking production process. The crane, as the main transport equipment in logistics, employed non-contact one-
way or two-way communication to carry out automatic identification and positioning. This technology facilitated data acquisition
and exchange, serving the purpose of efficient data management.
10
Crane unmanned technology referred to the use of advanced industrial technologies in the steelmaking production process.
As the main logistics transport equipment, the crane utilized coded cable positioning, sensors, PLC operation control, wireless
network communication, and other technologies. Through the automatic control unit and advanced technology, the crane was
op
capable of operating unmanned operation sequences and crane paths, including independent planning. This technology
enabled efficient and automated crane operations in steel production.
11
“China’s Tencent to Embrace Blockchain Logistics and Help Smaller Enterprises Out of Financing Plight,” Blockchain, March
21, 2018, accessed December 28, 2022, [Link]
smaller-enterprises-out-of-financing-plight.
12
“FEITIAN, China UnionPay and IBM Jointly Launched Innovative Block Chain Application: Inter-Bank Shared Card Points,”
Feitian, September 23, 2016, [Link]
13
Avi Mizrahi, “Alibaba’s Ant Financial Chooses Blockchain to Monitor Charities,” Finance Magnates, April 8, 2016,
tC

[Link]
14
“China Merchants Bank launches US$50M DeFi, dApp Fund with Nervos,” Forkast, May 19, 2021,
[Link]
15
“Alibaba’s Jack Ma Says Bitcoin Was a Bubble, While Blockchain Was Not,” China Money Network, May 18, 2018,
[Link]
16
Apache Kafka was an open-source distributed event streaming platform used by thousands of companies for high-
performance data pipelines, streaming analytics, data integration, and mission-critical applications. “Apache Kafka,” Apache,
accessed February 28, 2023, [Link]
17
“Spark Overview,” Apache, accessed February 28, 2023, [Link]
18
Apache Storm was a distributed real-time computation system designed for processing large volumes of data with low
No

latency. It was an open-source framework developed by the Apache Software Foundation. “Apache Storm,” Apache, accessed
July, 15, 2023, [Link]
19
MySQL was an open-source relational database management system (RDBMS) widely used for managing structured data.
It provided a robust and scalable platform for storing, organizing, and retrieving data through structured query language (SQL)
queries. MySQL, accessed July, 15, 2023, [Link]
20
HBase was an open-source, distributed, column-oriented database built on top of the Hadoop Distributed File System
(HDFS). It was designed to handle large amounts of sparse data, providing random real-time read and write access to Big
Data. “Apache HBase,” Apache, accessed July 15, 2023, [Link]
21
Hadoop Distributed File System (HDFS) was a distributed file system designed to store and manage large datasets across
multiple machines in a Hadoop cluster. Apache Hadoop official documentation, accessed July 15, 2023,
[Link]
Do

22
Apache Spark was an open-source distributed data processing framework designed for big data analytics and machine
learning. It provided an interface for programming clusters with implicit data parallelism and fault tolerance. Apache Spark
official website, accessed July 15, 2023, [Link]
23
MapReduce (MR) was a simplified programming model for processing large amounts of datasets pioneered by Google for
data-intensive applications and now was a popular tool for the distributed and scalable processing of big data. Ibrahim Abaker
Targio Hashem, Nor Badrul Anuar, Abdullah Gani, Ibrar Yaqoob, Feng Xia, and Samee Ullah Khan, “MapReduce: Review
and Open Challenges,” Scientometrics 109 (2016): 389–422.
24
¥ = CNY = Chinese yuan renminbi. US$1 = ¥6.9608 on January 3, 2017.

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or 617.783.7860