7 Ways Blockchain Will Transform the Logistics Industry
7 Ways Blockchain Will Transform the Logistics IndustryContributed Content
Problems with documentation transparency and traceability of goods in supply chains can be either mitigated or completely resolved by modern systems based on tech innovations. This article summarizes the main benefits of blockchain for the logistics industry.
Logistics and supply make up one of the biggest industries worldwide, interconnecting countries around the globe. Developments in the supply chain have made logistics a crucial part of every sector in business and commerce, and we rely on sophisticated supply chains to service the needs of all consumers.
Supply chains have become more complex as they’ve become larger and more interconnected. Modern supply chains can often be bafflingly dense.
Currently, a hodgepodge of more modern digital systems and legacy paper-based systems, the logistics industry is crying out for more transparency.
Transparency Issues Are Hindering the Logistics and Supply Chain Industry
Most companies within the logistics and supply chain tend to be hesitant about sharing data on their processes. As a result, it's difficult to create visibility along a supply chain.
The majority of current standard supply chain and logistics practices make it difficult to impossible to track and view components while progressing through the supply chain. That type of data would allow businesses to apply big data approaches to optimize and save money.
Too much in the world of logistics remains stuck in the era of paper and pen documents. The digital systems that do exist are outdated or need a complete overhaul. Paper and pen and obsolete legacy systems are slow, prone to error, and more expensive in support than modern, digital systems.
All the above-mentioned problems contribute to a status quo in which decision-makers simply don't have information at their disposal to make accurate decisions. This leads to a fragmented approach to supply chain and logistics management that bleeds excess money and leads to compounding errors along the supply chain.
However, these problems can be addressed and mitigated by implementing modern tech systems designed to offer transparency and accountability, as well as promoting cost savings and accurate record and storage of data.
Blockchain can solve most problems with transparency in the documentation of the supply chain process.
What Is Blockchain?
Blockchain is a technology in which transactions are processed and recorded within a digital distributed ledger.
Currently, most people know blockchain for its implementation in cryptocurrencies like bitcoin. However, the underlying blockchain technology can be applied elsewhere.
The heart of the blockchain concept is the idea of recording data in a decentralized and distributed manner.
Information for each transaction is stored and verified by every entity within the network. No entity has the ability to unilaterally add or alter data, ensuring accuracy within the chain.
Public blockchain networks are likely to hold up to 10% of the worldwide GDP by 2025.
Blockchain technology has the potential to transform the way information is exchanged between partners within the supply chain.
Already, major logistics companies such as Maersk are partnering with tech giants and blockchain companies to create blockchain solutions, while nearly 500 companies from 25 countries have formed the Blockchain in Transport Alliance (BiTA) to explore how blockchain can impact logistics.
For example, using blockchain, businesses can track deliveries, verifying status history and geolocation.
The image shows an example of a delivery tracking system using blockchain. Customers and couriers can monitor deliveries on the map, scan QR codes, change statuses, and see delivery statistics updated in real-time.
Blockchain technology can revolutionize the supply and logistics industry, helping companies make their processes more transparent, secure, and efficient. Here are 7 ways blockchain can transform the logistics industry.
#1: Data Transparency
A major problem in the world of logistics is not being able to trust the accuracy of information. Companies along supply chains frequently keep their data secret, leading to a lack of transparency.
Blockchain can have a significant impact in this scenario, offering a decentralized, transparent way to store and access supply chain data.
No longer will individual companies or entities hoard their own data – Instead, the digital ledger will record all data as verified by each member of the network, producing a history of transport transactions which has perfect transparency and a guarantee of accuracy.
#2: Smart Contracts as an Entirely New Way to Create, Sign, and Fulfill Agreements
A staggering $140 billion is locked up in transportation payment disputes every day. On average, settling in full on an invoice takes around 42 days. This all represents an incredible waste of time and resources.
A smart contract is a blockchain-based solution which facilitates automated legally binding agreements along the supply chain. Smart contracts allow businesses to evaluate and monitor the steps within a logistical process, tracking the pre-programmed rules set into them.
Smart contracts enforce compliance with the pre-agreed rules of a transaction, taking away much of the risk and uncertainty that the other party in a transaction will fail to fulfill an agreement.
This is especially powerful in enabling smaller firms, such as start-ups, to enter the realm of the supply chain.
Frequently, these less established entities have trouble without a pre-existing reputation or references.
With that in mind, smart contracts may slightly alleviate this problem with their inherent transparency.
#3: Secure Data With Decentralization
Current systems are always centralized, meaning that a malicious intruder can have complete control over them once gaining access. Such an attacker can theoretically change or remove any data stored within that system.
Blockchain is decentralized, meaning there is no single access point that gives any user the ability to unilaterally make changes.
Further, blockchain networks can employ cryptographic security measures to make it nearly impossible for a bad actor to alter the chain of data.
Information security becomes more and more of a concern in today's business climate, and blockchain can offer superior data security.
#4: Reliable Permission-Based Access
Blockchain networks are capable of creating a robust system of permissions governing who is able to access various tiers and subsets of the total information within the network.
This means that more generic information can be accessed by any members, while more sensitive data can only be accessed by select members.
This system offers increased data security while allowing all parties free access to the information they need to do their jobs.
#5: Clarity in Asset Management
One of the strengths of a blockchain network is the ability to track assets and resolve ownership issues at all times. The blockchain ledger can handle complex, ongoing asset transfers while always keeping an infallible record of who owns what at any given time.
For example, there is a media network for purchasing music assets where buyers have wallets with tokens to purchase music tracks from artists.
Both parties can view information about available tracks and corresponding transactions, which are conducted via smart contracts. When the transaction is completed, the buyer can view its status with details.
A transaction is completed only when it complies with all requirements put forth by all involved parties.
Transactions cannot be modified once they are completed. Each party has access to all corresponding updates, which take place in real-time.
#6: Scalable Solution for Order Management
Blockchain is scalable with virtually no limits. This means there is no risk of bottlenecks clogging up a blockchain-based logistical network.
In order to ensure high performance (e.g., speed of synchronization) within large blockchains, it is vital to select a correct consensus mechanism, which is an individual matter for every project.
#7: Real-Time Asset Tracking
Blockchain has the potential to pair with the Internet of Things (IoT) and mobile-based technology to create a system for real-time delivery monitoring.
Such a solution would integrate existing technologies like RFID, Wi-Fi, GPS, ultrawideband and Bluetooth to create a more responsive system in which tracking assets would be possible at any point in time as it travels.
Blockchain Technology Can Help the Logistics Industry Increase Supply Chain Transparency and Efficiency
We've already seen the creation of projects aimed at using blockchain to increase supply chain transparency and help automate clerical and administrative actions. These types of projects are likely to integrate with other technological innovation to produce powerful tools for logistics and supply chain management.
The combination of blockchain and other vanguard technologies like AI, IoT, and robotics can transform the way goods are moved, tracked and analyzed. These systems are far from perfect, and challenges remain, but blockchain offers tremendous potential in this industry.