How Blockchain is transforming the supply chain and logistics industry

logistics trechnology

While Blockchain is mostly associated with its debut role in the creation of crypto currency, the technology is a major disruptor, impacting several industries. With wide spread applications in sectors involving agreements/contracts, tracking, and payment, the logistics industry has begun exploring Blockchain technology to access its innovative and secure system.

Managing supply chains, today, include complex co-ordination to transport and distribute goods. Modern logistics networks cater to the expanding global markets, resulting in supply chains that span over hundreds of stages over months, multiple geographical (international) locations, tons of shipping and customs paperwork, and multi-level payments involving numerous stakeholders and entities involved.

Blockchain can potentially help increase the efficiency and transparency of the supply chain process and positively impact everything from warehousing to delivery to payment. Furthermore, with an essentially built-in chain of command, Blockchain facilitates bringing in the necessary reliability and integrity in supply chain management.

What Is Blockchain?

According to the Economist, a Blockchain is a distributed database that maintains an ever-growing list of records called ‘blocks’. The information in a block is locked and cannot be altered as each block contains a timestamp and a link to a previous block. The nature of Blockchains makes it function like a public, digital, distributed ‘ledger’. This function facilitates recording of every transaction on a block and across multiple copies of the ledger, making it highly transparent. It’s also highly secure and extremely efficient and scalable. Since its debut in 2009, Blockchain has had a disruptive impact on several industries, beginning with the financial sector.

Samir Lambay
Samir Lambay, CEO and Co-Founder for Freightcrate Technologies
Apart from Finance, Blockchain has currently found successful application in the Jewellery sector, where it is being utilised to trace the origin of diamonds and eliminate fraud. The innovative use is termed ‘TrustChain’ and is a partnership among precious metals refiner Asahi Refining, jewellery manufacturer, precious metal supplier LeachGarner, retailer Helzberg Diamonds, and an independent precious metal verification service UL. The application facilitates the authentication of diamonds and precious metals and their tracking from the place of origin to the retail outlet.

Among logistics players, Maersk, the world’s largest container shipping operator, has partnered with IBM to explore Blockchain to streamline its global supply chain operations. Through this partnership, Maersk aims to develop a global digitised platform that offers efficient and secure methods for transportation of goods across global boarders and trading zones.

It is estimated that about $4 trillion worth of goods are shipped annually across the globe, 80% by ocean freight. This exponential increase in movement of goods has elevated the cost of documentation and administration of the process to one fifth of the physical transportation cost. The innovative application of Blockchain by Maersk will be based on open standards and is expected to create digital and secure system that can be used by the global shipping ecosystem.

How Blockchain works?

While efforts are already underway to organise supply chain management using Blockchain, here is a breakdown of exactly how and what will be the impact of Blockchain on the sector. Some key areas where the technology can add value include:
  • Keeping Records: This includes accurate recording of the quantity and transfer of assets - like pallets, trailers, containers, etc. - as they move between supply chain nodes
  • Real-time Tracking: Tracking of purchase orders, change orders, receipts, waybills, or other trade-related documents
  • Verification: Assigning or verifying certifications or certain properties of physical products, for e.g., determining if a food product is organic or fair trade
  • Labelling: Linking physical goods to serial numbers, bar codes, digital tags like RFID, etc. for efficient tracking
  • Transparent Process: Effectively sharing information about manufacturing process, assembly, delivery, and maintenance of products with suppliers and vendors.
Apart from the above mentioned tactical benefits, Blockchain technology is set transform the entire sector, with value additions like:
  • Enhanced Transparency: Accurate documentation of a product’s journey across the supply chain helps reveal its true origin and touchpoints on an open, easily accessible platform. This in turn helps build trust and eliminates the bias found in today’s opaque supply chains. Customers and Logistics Service Providers can, thus, share logs with OEMs and regulators, creating a transparent and trusted process
  • Greater Scalability: Virtually any number of participants, accessing from any number of touchpoints, can easily be added to the process, making it vastly scalable
  • Better Security: A shared, permanent and tamper-proof ledger with codified rules helps to potentially eliminate the multiple audits required by internal systems and processes
  • Increased Innovation: The decentralized architecture coupled with scalable, secure and transparent framework opens up vast opportunities to create new, specialized uses for the technology.
Container truck

Several companies, carriers and freight forwarders are already discovering ways to leverage these innovations to increase profits and strengthen relationships across the supply chain.

Samir Lambay, Co-Founder & CEO, FreightCrate Technologies, says, "Blockchain as a technology has a huge potential in cutting costs and creating transparent processes in the Logistics industry. Moreover, since Blockchain is highly secure and safe, it allows many intermediaries within the global supply chain, including transporters, customs authorities, shippers and carriers to communicate safely, cheaply and effectively with each other and the customer. Pilot projects are already being carried out by both carriers and large corporations and it is only a matter of time before the technology will be widely adapted in supply chain management."

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