Blockchain for Logistics: Why It Matters
Logistics is an essential part of the supply chain and transportation management. The PR Newswire report by Cision states that the global logistics market will reach $15.5 trillion by 2023. Although it looks like a lucrative industry, many companies miss a significant percentage of the profits due to unnecessary expenses, inefficient practices as well as theft, and cyber-attacks. Stolen, misshipped, and mislabeled cargo alone make up about $50 billion in losses every year.
Blockchain is a game-changer for companies that want to improve processes and make operations more organized and more efficient. Here is how blockchain is revolutionizing logistics industry.
According to the World Economic Forum, blockchain integration can help eliminate supply chain barriers and increase revenue by approximately 15 percent. Blockchain lets companies save time and costs by using verified smart contracts that automate the whole buying process. By eliminating inaccuracies and fraud, blockchain can boost the transparency and efficiency of the supply chain as well as cut the paperwork. In addition to that, blockchain makes the supply chain more secure and improves transaction flow. Such giants as Unilever, Amazon, Walmart, Nestlé, Alibaba are already leveraging blockchain in logistics and supply chain.
6 Ways Blockchain Can Improve Logistics
Blockchain can greatly improve the way shipping and freight are done. To enhance the delivery process and improve productivity logistics firms can use blockchain for effective tracking of goods.
To establish an effective logistics system, it is important to work globally and transparently to ensure and optimize the delivery of goods between parties, and to secure information and financial transactions. However, due to the competitive nature of the logistics industry, along with unstandardized processes, data silos, and different levels of technological development, logistics has low transparency and a fragmented structure.
By eliminating the bureaucracy in administrative processes, blockchain can improve the efficiency of global trade. The need to involve multiple participants and the enormous amount of paperwork can be replaced by an automated process that enables a structured approach to monitor the product lifecycle from its origin to the store shelf and facilitates all ownership changes between manufacturers, retailers, and buyers.
Current systems are centralized, which means that a malicious attacker can have full control over them once they get access. Such an intruder can alter or erase any information stored within that system.
With blockchain networks, there is no central authority over the whole system. Compared to other competitive solutions, blockchain increases the degree of security since a third party can’t modify the information that is stored in the chain. What is more, blockchain networks can utilize cryptographic security techniques to make it nearly impossible for a hacker to change the chain of data.
Blockchain enhances transparency and security. It enables companies to track the changes efficiently and records them all – what is changed, why, who made the changes, and when. Since all entities on the chain have the same version of the ledger, there is no disagreement in the chain regarding transactions and the transaction process becomes more efficient.
Once the products are shipped and the digital smart contracts are signed, the data will be reflected in the public ledger. The data is stored along with the information about who made it and when, and this information is extremely difficult to tamper. Companies that have access to this ledger can track the goods and see who is currently having the goods.
4. Real-Time Asset Tracking and Inventory Management
Blockchain can be paired with the Internet of Things and mobile-based technologies to develop systems for real-time delivery monitoring. Tracking no longer has to be done manually – instead, it can be done through digital sensors that keep track of goods throughout the entire supply chain from start to finish. By using blockchain and IoT, logistics companies can shorten delivery times, bring transparency to the logistics process, and keep a closer eye on the goods supplied.
Organizations may maintain accurate and up-to-date inventories by using small sensors that are attached to products or objects. Such “smart” inventories can provide a wealth of useful data on the goods, their past locations, how long they’ve been stored at the facility, and more.
Meticulous inventory auditing can be streamlined using IoT sensors, reducing the likelihood of lost products, improper storage, or other issues that could affect overall revenue.
5. Smart Contracts
A whopping $140 billion is bottled up in transportation payment disputes every day. On average, it takes 42 days to settle in full on an invoice which is a waste of time and resources.
A smart contract is a blockchain-based solution which allows for automated legal binding of agreements along the supply chain. Smart contracts enable companies to monitor the steps within a logistical process and enforce compliance with the prearranged rules of a transaction, reducing the risk that the other party will fail to fulfill an agreement.
This is particularly effective in allowing smaller and less established companies without a pre-existing reputation or references, such as start-ups, to join the supply chain sector. Due to the transparency they ensure, smart contracts can slightly alleviate this issue.
6. Performance History Monitoring
Blockchain allows monitoring the carrier’s and suppliers’ performance history. Moreover, companies can check the performance of individual vehicles within the fleet and record the past performance of particular carriers, including on-time pickups, on-time deliveries, and so on.
This knowledge allows making more informed decisions and thus improving the supply chain. Backed with valuable data, businesses can develop quicker routes and remove unnecessary steps in the shipping process.
The logistics industry is huge and complex. It may be extremely difficult to control the distribution of goods at various levels as the supply chain may run through many stages and geographical locations. Worse yet, this sector involves a whole lot of paperwork and invoices and if a single piece of paper goes missing, the delivery of the product may be delayed.
Logistics companies are searching for new technologies that can help them organize the existing processes, cut costs, and improve the transparency of the supply chain. The blockchain technology has the power to revolutionize the logistics completely. When coupled with emerging technologies like IoT, big data, and artificial intelligence, blockchain can streamline the logistics processes and make the supply chains more efficient.
Not only established companies but many young startups are implementing blockchain to gain a competitive edge. If you want to leverage the blockchain technology but don’t know how to do it correctly contact us for help. Our specialists will analyze your case and provide the best possible solution. To learn more, you can check out this case study.