Stay up to day about the most exciting logistics tech and innovations: Follow us on Twitter and LinkedIn.
What is Blockchain?
Blockchain technology is essentially a database which stores data that is completely clean, incorruptible and fully auditable manner.
Going a level deeper, it is a distributed database technology (it allows multiple users). Information is stored securely and transparently, with or without a centralized governance/ control system.
The technology underpins Bitcoin and all cryptocurrencies. While a blockchain can exist without cryptocurrencies, a cryptocurrency cannot exist without a blockchain.
In the current industry context, blockchains are primarily used to code both business and governance processes, governing almost any transaction and then storing the record of that transaction on the associated blockchain. All the parties engaged in this transaction are also stored in an incorruptible way. Sounds like magic? Recording transactions on a blockchain produces a permanent, immutable record. Instead of relying on a single centralized authority/ company/ bank, the blockchain enables all participating entities to verify a transaction’s authenticity and examine its contents independently.
As mentioned before, Blockchain technology is used for cryptocurrency infrastructure, but this is a small part of the use cases. We’ve recently seen the integration of blockchain in sectors such as healthcare, media, and logistics
Let’s take a closer look at the USD ~10 trillion dollar logistics industry, where we believe the blockchain will have its first successful use cases.
Logistics is becoming more complex. It is already one of the most highly fragmented industries globally with a high level of entrepreneurs and providing an important source of employment. More and more stakeholders, including governments, are becoming involved with supply chains, making the rapid availability of information critical for success. The delivery of each shipment will almost always involve multiple parties and multiple sources of documentation.
Either directly or indirectly and there are many issues and challenges along the supply chain that increase this complexity.
1. Real time Location: The location of shipments in transit is often unknown. This makes it challenging to plan delivery timeframes for customers and impairs the ability for all stakeholders to use business resources efficiently.
2. Trusted Auditability: Establishing a reliable audit trail is becoming critical for customers, businesses and regulators as sustainability expectations rise.
3. Operation tracking: In many countries, logistic operations are tracked by hand, email or telephone. Pen, paper and old technologies like fax and email always result in delays as the underlying information cannot be transferred or accessed by all parties quickly. Even newer digital technologies do not allow simultaneous real time access
4. Conflict Resolution: Resolving conflict along the supply chain is time-consuming, complex and expensive. With so many moving parts and many stakeholders involved it is often very difficult to find the reason for a problem and a single version of the truth to resolve a transactional conflict leading to unnecessary negotiation time and legal fees.
5. Slow Payment: Slow payment plagues the industry and many small and medium-sized carriers don’t have the liquidity of the larger players. Slow payments can actually create an existential risk for SMEs.
These issues are making logistics operations more complex and less effective. As a result, the demand for end-to-end visibility, communication, transparency and dependability is rising in the sector, with the carriers responding to rapid time-saving solutions and rapid payments.
Blockchain is perfectly poised to solve these problems.
How can blockchain enhance the Logistics Industry?
Blockchain in logistics can easily be used to manage the supply chain more efficiently. Parties can keep track of multiple variables such as:- price, date, location, quality, certification, etc. using a blockchain. The real time availability of this information improves visibility and compliance.
It increases the traceability of the material supply chain for all businesses in the transaction. The potential to reduce losses to grey market and identify counterfeit products is enormous. Many companies are experimenting with the technology to strengthen an organization’s position as pioneers in ethical manufacturing.
In road freight the blockchain will provide the fragmented market place with a trust layer to operate on. This will ensure that stakeholders can come together in a marketplace fashion and trust that each party really is who they say they are. Verified documentation like transport licenses, insurance documents and more, can all be attached to a companies profile on a blockchain based system.
This can be take a step further by capturing data along the an orders workflow. From order to cash. All negotiations, their terms and contracts can be captured and uploaded to the blockchain along with information about who is involved in the transaction. All of this data can then enable the automation of the manual tasks like proof of delivery, and payment. This will decrease the time it takes from initiating and transport order to actually closing it. Lastly, this information will always be available should a company need to be audited for any reason.