Blockchain and Supply Chain: Improving Logistics Industry

Blockchain and Supply Chain: Improving Logistics Industry

At first sight, logistics seems to be simple: what can be easier than taking something from point A to point B? In fact, there can be dozens of other points between A and B, each involving a new company, people, and documents. The complexity of modern supply chains results in delays, losses, damages and opens impressive opportunities for fraud.
No wonder this industry requires the power of technological transformation as any other industry. In this blog post, we will disclose what blockchain technologies can offer to the industry.

Blockchain for Logistics: benefits

The blockchain technology is mainly associated with cryptocurrencies, however its principles can be useful for a variety of industries involving transactions and other exchanges. Blockchain is a decentralized network (chain) of blocks that keeps some information. Each new block is linked to the previous one, so it is impossible to change one block without changing the whole chain.
Let’s now see what improvements blockchain brings to the transportation and logistics industry.

Security and Transparency

Since the information in each node of a blockchain cannot be lost and changed or erased if someone simply wants it, it becomes a trustworthy way of storing data. Unlike storing the data at servers, the blockchain-enabled database is also hacking resistant as all the information is open and stored at multiple machines.

All shippers and carriers, as well as other participants of a supply chain, see the details of each cargo: its route, speed, documents along with all the changes made (when, why, and by whom). This increases the trust between different companies that have to work together within one chain of custody. Teaming up with IoT technologies blockchain also eliminates or at least decreases the possibility of illegal transportation of forbidden or dangerous stuff. Here is how it works: the smart sensors of a truck or a ship can weigh and analyze the load it carries and send the information to the network.

Security benefits of blockchain in logistics and supply chain management

Information Credibility

The transparency blockchain brings to the global trade industry goes beyond documentation and administrative procedures. It also shows the information about goods and their origin to ensure dealers and customers that the products are not changed for some fakes along their way to shelves or not produced using illegal child labor. The blockchain-based system can be used to confirm the exclusivity and real origin of luxury goods which are most likely to be faked.

The confirmation of proper production becomes even more important when it comes to drugs or food. With the help of blockchain it is easy to detect who is responsible for spoiled food or disease outbreak. Imagine a huge retailer importing eggs and chicken from several households. Suddenly consumers report getting salmonellosis after eating the eggs they bought from this retailer. Instead of destroying the whole stock, it is possible to find out the exact providers of contaminated products and get rid of their latest supplement.

One more way the logistics industry benefits from easy-to-access reliable information ensured by blockchain technology is the opportunity to see a vehicle’s history and performance efficiency. For example, when a company needs to buy used trucks, it can get the history of all breakdowns, repairs, and accidents of a particular vehicle.

Processes Automatization

One of the most revolutionizing effects blockchain has on the supply chain industry lies in smart contracts. These are sets of actions that are done after certain requirements are met. For example, this can be a program that sends money to the carrier right after the cargo reaches its final destination. Such a solution helps to eliminate the need for third-party companies like banks, to accelerate and automatize the processes that usually require more time and can cause a human error.

The long and tedious attempts to iron out conflict situations are a serious problem for the majority of players of the logistics industry. Many companies spend millions of dollars to resolve the payment conflicts instead of investing into business development. In most disputes, companies require external help to come to an agreement. Empowered by blockchain, supply chain management can save much time and resources by simplifying settling disputes.

Implementing blockchain in the supply chain also allows simple searching for matching routes and free spaces at vehicles. According to American Transportation Research Institute, 20% of all the distance trucks drive empty. It means losses in the industry’s income, which can be avoided by better communication and automatization of getting information about truck loads.

Logistics and SCM processes automatization using blockchain

Blockchain for Logistics: risks

Of course, there are some negative moments about blockchain technology in the supply chain, too.

Increase in Unemployment

Just like any other technology aimed at automatization of business processes, blockchain in logistics takes away people’s jobs. This has a negative effect on both society and the business itself. The more people have no jobs, the more goods remain not bought on the shelves.

Losing the Key

Yes, it is difficult to hack the blockchain-based system but if the key to all the data is stolen or somehow lost, one could hardly restore access to the information. Should we explain what does it mean for a business?

Risks of using blockchain in logistics and supply chain

Conclusion

Let’s now sum up all the details we’ve discussed. Yet implementation of new technologies like blockchain, IoT, machine learning, and others still have some weak points, in our opinion, they are still worth implementing. Blockchain-empowered solutions for logistics improve all the processes within the industry making it more transparent, secure and automatized.

The Bottom Line

The use and value of any technological innovation in any industry will grow in accordance with the growth of the number of companies utilizing it. At SCAND, we believe that the more logistics market game players adopt blockchain technology, the closer the industry gets to becoming a transparent and reliable ecosystem. And we are ready to help your business get full advantage of the tech revolution that has already started in the supply chain industry. Contact us to share your ideas and start making them a reality!