How Blockchain Is Disrupting the Logistics Industry
While not everyone is familiar with blockchain right now, most people have heard of its most famous application - Bitcoin and other cryptocurrencies.
After a few years of rampant speculation - making a handful of early investors quite wealthy, and causing traditional financial institutions to break into mild sweats as the "end of banks" was theorized - it finally seems the Bitcoin bubble is ready to burst.
In the end, none of the apocalyptic predictions made for the financial industry have come to fruition. But, even so, it's the underlying technology behind cryptocurrency which is of the greatest interest. Players in almost every industry are keenly eyeing this technology as the potential applications for blockchain extend far beyond the financial sector.
Blockchain
For the uninitiated, blockchain involves a digital public ledger through which the entire history of a series of transactions (any exchange of data, not just financial interactions) can be traced.
Each block of data in the chain represents a single step in the transaction and is marked by a complex alphanumeric key known as a hash. The hash contains information about the current block and all the preceding ones. Should anyone attempt to manipulate the data, it will cause a significant and immediately-apparent change to the hash.
It's this transparency which gives blockchain its security, and what makes the technology appealing to so many organizations across a range of industries - including those in supply chain logistics.
"According to a recent Forbes Insights survey of more than 400 senior transportation-focused executives, 65% believe the logistics, supply chain and transportation sector is experiencing nothing short of a tectonic shift," writes the Forbes Insights Team. "Though there are several drivers behind this shift, one of the most powerful is the advancement of behind-the-scenes technologies like artificial intelligence, machine learning, and, increasingly, blockchain."
End to End Visibility
The clearest and most obvious application for blockchain in the logistics industry is in tracking freight shipments from origin to destination.
Blockchain can enable containers to be scanned at each point on their journey, with each scan used to create a new block of data in the ledger. The block doesn't just need to contain simple time and date stamps, either. It could also incorporate information about container sensor data, including temperature and other atmospheric information.
With many shipments needing to be maintained under very specific atmospheric conditions - especially those within the pharmaceutical and food and drink industries - the requirement for transparency and accountability is high. Should something go wrong with a shipment and a load be spoiled, it's important to be able to trace the point of failure. Once this point has been established, companies can work to ensure the same issue is not repeated in the future. If the same point in the chain continues to fail, then alternative providers can be sourced.
"What blockchain introduces, fundamentally, is greater trust across the ecosystem," writes Forbes Insights. "With blockchain, participants have everything they need to know about their shipments and transactions in one place, and they know the information is reliable because of the security of the distributed ledgers. In terms of the challenges and the needs of the transportation industry, blockchain can become a transformative tool."
Blockchain means that unreliable logistics providers have nowhere to hide, and any issues can be quickly identified and addressed to improve the supply chain for the entire industry.
Cryptocurrency Deposits
Another way blockchain could be used to improve the reliability of supply chains is in reducing no-shows and cargo rollovers.
Each company involved in the supply chain can agree to submit a deposit in cryptocurrency tokens which can be logged in the blockchain ledger and forfeited by any company that fails to meet its obligations. Deposits are of course nothing new, but a blockchain-based system would allow them to be taken with new levels of security and transparency, outside of international currency discrepancies.
Final Thoughts
Blockchain holds much promise for the logistics industry but presently exists in a pre-paradigm state. As yet, there are few, if any, tangible success stories out there, which means that significant proof of concept is required before industry-wide implementation can be considered.
As with all major shifts in operational standards, change will be slow, will incur significant costs, and will require industry-wide coordination and agreement to set out best practices and the establishment of a platform.
"We're working across an incredibly fragmented landscape where very few standards apply," writes Forbes Insights. "To implement blockchain in any meaningful manner requires a very high degree of standardization across all parties in these transportation processes. So, when you're developing commercial standards for whatever application we'd like to see, progress will be slow."
Blockchain is set to be a hot topic at Retail Delivery Connect 2019 , taking place in August at The Westin Fort Lauderdale Beach Resort, FL.
Download the agenda today for more information and insights.