Consultants in Logistics

Blockchain in Logistics - All You Need To Know

Blockchain in Logistics - All You Need To Know

Despite frequent mentions in our newsfeeds, Blockchain remains a hazy topic for many. While the media focuses on the drama of Bitcoin speculation or coming revolutions in financial services, there are many who see possible uses for the underlying technology in the Logistics Sector and recently there have been a number of interesting trials.

BLOCKCHAIN DEFINED

In simple terms, blockchain technology is used to automatically update and reconcile a distributed and unalterable ledger in real time. The ledger is maintained with records or transactions in the form of “blocks” . These blocks of information are added to the ledger in sequence to form an evergrowing “chain”, in which each new transaction contains a record of every previous transaction. These ledgers can be programmed to record virtually anything of value so long as it is possible to express it in code. This could be births, deaths and marriages, titles of ownership, financial information, insurance claims, electoral votes, or freight movements.

For those without the time to get to grips with Cryptographic Hashes or how validation methods like “Proof of Work” help to keep blockchains honest, the key concepts to take away are about decentralisation, transparency, traceability and, ultimately, trust.

Transparency & Greater Security

Distributed ledgers are highly secure because copies are circulated to all members of the network. This decentralisation means the network does not rely on a single server or point of record, greatly reducing its vulnerability to catastrophic loss or corruption. Because each node in the network holds a complete copy of the ledger, falsified or altered data is rejected by consensus and the origin of any attempted breach is exposed automatically for all to see.

The underlying cryptography means that it is not possible to alter blocks without altering all previous blocks. This seemingly-simple innovation gets to the heart of what blockchain does and explains why some describe it as the “Trust Protocol” . It provides an infallible way to trust other parties in transactions, thereby eliminating the need for trusted intermediaries. In the case of cryptocurrency, this negates the need for clearing houses to process financial transactions, for banks to hold and secure accounts, and even for nation states to act as guarantors of value.

BENEFITS OF BLOCKCHAIN WITHIN THE LOGISTICS INDUSTRY

  1. Eliminate Recording Errors & Minimise Costs

    One reason the Logistics Industry is particularly suited to benefit from blockchain is that it produces vast quantities of data that tends to remain in silos. The database technology behind blockchain increases efficiency and reduces costs where parties can avoid using multiple, separate systems that have to be reconciled. Current ERP systems are expensive, inefficient and vulnerable by comparison. Records can be made in error, altered, or lost. Looking up information can be cumbersome, and disputes are common. Blockchain could eliminate recording errors while facilitating better tracking, fraud detection and data sharing in a vastly more efficient way.

  2. Reduce Delays from Paperwork

    At present, international trade entails a mountain of paperwork that starts with the consignment and snowballs as it progresses toward its destination. An average of approximately thirty parties are involved in a single international container movement, each responsible for maintaining records and updating other stakeholders. Around 40% of the transit time for international freight is spent waiting around, often for documentation, at touchpoints like harbours where 80% of transactions are still paper-based.

  3. Increased Consumer & Partner Trust

    This presents a significant opportunity for improvement in efficiency and helps to explain why companies like Maersk are pioneering trials of blockchain. They are using the technology to provide reliable, end-to-end visibility by digitising documentation and sharing it with all members of the supply chain in real time. Throughout a consignment’s journey, the blockchain is automatically updated with timestamped transactions containing information ranging from consignment weight to geographic location so that those with permission to view the blockchain can view its status at their convenience. In addition to improvements to transit times, huge amounts of back-office time spent processing paperwork and communicating with various parties could be saved.

BLOCKCHAIN TECHNOLOGY TRIALS

The trial run in 2017 by Maersk and IBM to build a blockchain for global sea freight included US port authorities and border security departments to ensure they were on board with the technology. That trial has now become a joint venture and the plan is to make the technology available to others with an impressive list of major global corporates expressing interest.

Businesses like IBM have been investing heavily in research for a number of years. An earlier pilot project with Walmart in the US illustrated the potential benefits of reducing the cost of secure traceability, expanding its use beyond sectors with high value and risk, such as pharma, into lower-margin sectors like food. Walmart uses the example of the 2006 spinach E. coli scare that killed three people and pulled all spinach from shelves across the US. It took investigators two weeks to trace the outbreak to a single lot on a single farm on a single day, by which time a whole industry had been devastated.

While blockchain could provide a quick and dependable solution to such an incident, Walmart and others aim to go beyond simple traceability to a point where they have an entire, interconnected view that could provide valuable data to the company and its customers.

DO YOU ENGAGE OR WAIT TO REACT?

Whether you are a warehouse operator looking to use guaranteed and up-to-date inventory information as a basis for financing, or an owner driver with a digital Smart Contract to release payment instantly on uploading a PoD, applications that could benefit you or put you out of a job are being thought up every day. As the technology gains traction, it will be interesting to observe the winners and losers. Progress may be constrained by the development of devices and systems to gather the underlying data but, as always with the adoption of new technologies, those who stand watching from the sidelines risk losing out. There may be few real-world examples of blockchain in the supply chain today, but advances in the necessary infrastructure are underway and could bring profound changes to the industry.

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