Blockchain in Logistics and Supply Chain Management

Blockchain-Logistics-Supply-Chain

Blockchain has achieved a lot in a very little time, not only has it effectively given rise to a currency but a complete virtual financial market as well. Whether Bitcoin or any other cryptocurrency will ever be accepted as a real deal will be debated for long but blockchain technology is something that the tech community feels pretty positive about. Although the technology attracts financial applications at its core, it offers scope in a number of industries – Logistics and Supply Chain Management (SCM) being one of them.

How is Blockchain applicable to Logistics and Supply-chain Management?

There are plenty of opportunities blockchain technology provides in every industry. In Logistics and SCM, however, the biggest promise blockchain offers is that of creating transparency – which means that every member of the network can access the same data, providing a single point of truth.

There are a number of ways this technology will prove to be useful. For one, smart contracts will be used by companies to automate the buying process, therefore, decreasing expenditure and saving time. Organizations will also be enabled to improve the transaction flow and secure the supply chain. It is done by attributing a tag to each product which allows securing the supply chain quickly.

Thus, you can store data regarding origin, legitimacy, storage location, property certificated & records – all the necessary information on a single ledger. Even if all the data is in a single place, it is still easily accessible – creating a more transparent supply chain but also a system that will be useful in decreasing cargo theft from occurring.

In both these situations, ultimately the savings are passed on to the end customer.

Automotive supplier payments

Blockchain enables transfer of funds anywhere around the globe. The transfer is direct in between the payer and the payee; there is no need for traditional banking approaches. It is also secure and rapid. For e.g., It will only take minutes, rather than days to carry out automated clearing house payments.

Specifically, Bitcoin transfers offer low fees. Tomcar, the Australian car manufacturer uses bitcoin to pay suppliers- right now three partners in Taiwan and Israel accept this kind of payment. While the advantage is of cost savings, conversely, the company is careful enough to avoid being too much dependent on bitcoin.

Simplifying Paperwork Processing in Ocean Freight

Moving international consignments includes a lot of paperwork. Imagine you have to ship refrigerated goods from East Africa to Europe- you’ll need stamps, approvals of more than 30 officials and companies that communicate with each other on more than 200 occasions.

Plus, important documents like Bill of Lading can be forged. Counting altogether, the cost of trade-related paperwork processing is estimated to be about 15% -50% of the expenditure of the physical transport.

IBM and Maersk have come together to tackle such inefficiencies and digitize the paper records. As a solution, they created a permissioned Blockchain solution to connect the network of shippers, ports, carriers and customs all around the world.

“Our aim is to create a blockchain platform that will benefit participants throughout shipping supply chains, including manufacturers, shipping lines, freight forwarders, port and terminal operators, shippers, and customs authorities” writes Bridget van Kralingen, Senior Vice President, Industry Platforms, IBM.

IBM writes that the platform is built on open technology stack and is underpinned by blockchain. The two main capabilities it offers will tackle current documentation and visibility challenges.

Cold chain monitoring

Pharmaceuticals and food need distinct storage conditions. Warehouses and distribution centers are equipped with sensors which record specifics of sensitive products such as humidity, temperature, vibration and other items that need strict monitoring. These readings are then put on the blockchain- where they will be permanently stored and be contamination-proof. If the storage conditions change from what was agreed upon, then each member on the blockchain can witness it. A smart contract will activate an action to rectify the situation. The blockchain’s operability may also extend to announcing products unfit, changing “use-by” dates or applying penalties.

Origin Tracking

Product status at each stage of production is possible with blockchain technology. The records are inalterable and cannot be deleted. This can be used to trace each product back to its origin. For e.g., if there is a foodborne disease outbreak, retailers can immediately find the source of contamination and gain back consumer’s trust in food safety.

IBM in partnership with Walmart is using Blockchain to augment the supply chain partner’s current IT systems through superordinate, transparent ledger – that traces the food item’s movement.

Identifying Counterfeit Products

The verification of the source of high-valued items mostly relies on paper certificates (which can be forged and manipulated). Therefore, it is not easy to determine whether the item is genuine or fake and in some cases stolen. This is applicable to other items such as expensive watches, wines, leather products etc.

Diamonds, for example, are difficult to verify if they are genuine and not fake, stolen or are “blood diamonds” (mined in a war zone). Currently, their authentication is confirmed utilizing a paper-based certification system.

Everledger takes a different approach and records each stone, which is given a distinct one-of-kind identifier using blockchain. This is based on the calculation of 40 data points in addition to the traditional “four Cs” of classification of a diamond, which consists of – color, cut, clarity and carat.

Stones over .16 carats also have a specific serial number scribed on their girdles during the grading procedure. The platform is partly public and partly private. All the certificates can be cross-referenced on the blockchain, meanwhile, all the sensitive information like police reports or policy data is on the company’s Eris-based platform.

Blockchain and the Internet of things

The current internet architecture with server infrastructure cannot handle the huge amount of data and devices that come with IoT. Single servers characterize a single point of failure; raise concerns over data security. Thus, as a solution, a public Blockchain ledger can connect and manage IoT devices. Given the large amount of IoT objects, for e.g., shipments, vehicles etc., logistics may be one of the most promising applications for Blockchain and IoT.

Walmart has a patent whose goal is to enhance last mile logistics via connecting delivery drones to the Blockchain. IoT devices like these could be provided with digital currency – empowering them to interact autonomously through smart contracts, in order to pay fees and duties by themselves.

Conclusion: Our View

Even if blockchain alone is not “end-all” solution to all the challenges in supply chain management and logistics – it will contribute significantly in fighting fraud, securing transactions and limiting errors (which will solve substantial amount of logistics predicaments). The value of blockchain, however, depends upon the number of people using it – therefore the rate of adoption is certainly important at this stage.

Consequently, there must be an ecosystem of companies willing to use blockchain and have the ability to share data on the blockchain platform. However, seeing the numerous benefits, successful use cases and large companies interest in the technology, the supply chain and logistics industry’s adoption of blockchain continues to gain steam.

Related Articles:

What does Blockchain have to offer in DevOps?

How Blockchain Is Changing Healthcare Industry

How Indian Banks are using Blockchain to expedite trade loan approvals

Blockchain in Financial Services

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