Blockchain Opportunities, Challenges, and Application in Logistics
Sep, 27 2018 | blockchain

The all-encompassing blockchain technology is a master coordinator of businesses and investments in many specialized ways and functions. Its closest of use to supply chain management in businesses is logistics application. This by and large means that like in the financial sector which has enjoyed the invention a great deal, businesses are also having good stories to tell about the latest technology invention that no doubt rule the world without contests at the moment.

 

Blockchain explores more and more industries of the world business day after day, presenting countless opportunities which makes it appealing to vast numbers of entrepreneur and business oriented corporate institutions of the world in the process. Of the many things that have made the blockchain technology so unique among similar inventions are its transparency level, decentralized operation system and perhaps the ability to optimize ecosystems of digital information. Overall it is a technology with windows of impressive opportunities.

Image: Blockchain’s realistic ecosystem of information in a glance

Blockchain use case in shipping and logistics is a well-documented influence. However, because the logistic industry is such an elaborate one encompassing new as well as experienced players, questions continues to surface about how to implement blockchain in technology, shipping and other forms of logistic as peculiar to each and every firm in the industry. One sure thing is that even though the logistic industry have real players and parties which cut across manufacturers, suppliers, customers, auditors and partly the supply chain system among others, the technology has benefits for all without any exclusion. Basically, tracking of product channels which include manufacturing, auditing, transportation and other chains associated with every production line is made attainable as well as unalterable with blockchain technology. This makes the invention more secured in nature than any other previous solutions introduced.

 

Below is a table analyzing the differences between previously used logistics solution in comparison with blockchain solution;

 

Previous Logistics Solutions Blockchain logistics solutions
Alterable operation pattern Unalterable operation pattern
More time on processes and logistic chain prone to fraud and cargo thefts Optimized time management and decreased cargo theft
Prone to third party interference Third party interference practically and temporarily difficult
Manual task monitoring and computerized data storage which expose process to human error Utmost task monitoring and improved data security
Manual or electronic signing of contracts Smart contracts, compliances and agreements
Manual and perhaps electronic terms of work vulnerable to alterations and fraud Electronic terms of work making alterations difficult
Manual verification processes Smart and electronic verification processes that boost firm’s efficiency an reputation
Secure supply chain More secured supply chain
Manual or semi-automated production cycle and processes Completely automated production cycle and buying processes
Supply chain not completely transparent Transparent information storage process, supply chain and access with a single electronic ledger

Significance of Blockchain on Logistic/Transportation Industry

Let’s begin by clearing the air that logistics are not limited to transportation or shipping of products, but a lot of people have made it appear so ignorantly. Well of course, transportation is perhaps one of the most significant division of logistic alongside the far reaching supply chain but that doesn’t spell a total depletion of the other subdivisions when logistics are being discussed in its entirety.

Image source: https://fleetnewsdaily.com/eroad-joins-blockchain-transport-alliance/

Logistics play important role in global economy and makes room for employment of people more than any other industry in the business, and perhaps corporate world combined. This is so since human lives are heavily dependent on the transfer of products, services and values, and logistics plays the most prominent roles in making these attainable. The need to secure and implement innovative solutions to cope with the constant growth as well as need to catch up with modern business realities makes blockchain technology fits perfectly well in shopping and logistic use cases.

 

Blockchain use case in shipping and logistics becomes the real deal via the Internet of Everything (IoE) which creates new challenges associated with connected devices. Shipping and logistics require a high level of security thus making blockchain a proper solution provider. Protection is ensured via advanced encryption methods, smart contract and distributed ledger which offer transparent dealings among business collaborators. To this end, blockchain in transportation has been able to tackle premium fees tracking, theft, ransomeware and corruption to the barest minimum.

Consequently, major reports has it that blockchain introduction into processes of shipping and logistic has saved companies up to 50 billon USD at first year use and over 500 billion USD just a year after the wave touched mass market by cutting on numerous intermediaries and significantly improving transparency. One can then imagine how much world business entrepreneurs have saved with the use of blockchain in logistic processes this time. How to implement blockchain in transportation and shipping is not supposed to be a question anymore. Everyone should be more concerned about what more benefit to expect from its application.

Challenges of Blockchain on Logistic/Transportation Industry

The touted massive importance of blockchain in shipping and logistics has not made it an infallible technology despite the recent influx of transportation startups in blockchain. Not at all! There are still voids to fill and improvements to be made.

Image source: https://www.ennomotive.com/blockchain-applications-in-logistics/

One of the implementation challenges investigated on the technology is that organizations may have to clearly define particular operations that will be based on blockchain before they are put to use. For instance, if a huge telecommunication firm wants to implement the technology, its CRM system would have to collect customers’ orders and forward them to provisioning system where shipping would be activated. Company might also require a billing system that generate bills once orders are successfully completed. The highlighted processes are however few of the necessary systems, all using different formats and methods of data storage, and working in isolation that are focused on specific objectives. These isolation and independence system of operation often gives the IT department huge challenges to connect data and implement new technologies. This ends up that data must be rearranged for particular purposes before a blockchain can be used. To solve this challenge, the new technology must be integrated and fit perfectly into existing IT systems to address actual problems of adoption and implementation. Existing data can be moved into the new technology as an integration approach, thus making use of existing information on their databases and taking advantage of the blockchain technology.

 

Similarly, bugs are usually associated with entering of blocks, creating a challenge. Also duplication mistakes can be made. However, these can be eliminated with the data mapping technology. The technology helps to minimize disruption on the integration level, creating one access that enables team to update systems and add or remove subjects using a single interface without affecting others. Blockchain technology can only be synchronized with existing technologies using a single layer access.

Use Cases of Blockchain in Shipping and logistics

Logistics is synonymous with all the processes that must be fulfilled to achieve a specific purpose. For years, multiple administrative and logistical processes led to paperwork, duplication errors and manual work. These processes were mutating as digitalization progressed, becoming more effective work. However, the major objective was not effectiveness, but efficiency. A feature that industries have observed with the use of the blockchain.

Since the creation of Bitcoin, the benefits of the Blockchain have attracted the attention of diverse participants of the productive sectors. Banks, governments, insurance companies, food companies and even online games have discovered how to implement the blockchain to make processes more efficient.

 

By integrating intelligent contracts in the supply chain of a company, the entire process is modified, acquiring a new modus operandi that allows you to enjoy the benefits of the Blockchain: immutability, decentralization, security and information in real time.

 

Therefore, companies that have decided to experiment with supply chains and logistics processes based on blockchain have adapted the technology to benefit various aspects of their production, shipment and follow-up.

 

 

  • Use Cases of Blockchain in Shipping and logistics: Car Dealership/Shipping Scenario

 

 

Car dealerships are usually local and international businesses. Shipping usually occur over a wide range of distances and cross borders, yet goods have to be monitored to the wholesalers and consumers in the production chain. Blockchain technology have been verified to be useful in a lot of ways in this regard. This spans through verified smart contract and agreement to automated buying and selling pattern which undoubtedly saves time and costs. Each parties involved in the chain also have quality protection and security because each car has a specific tag which on a single click provides users with information including origin and histories of the product.

A single ledger prepare for each car stores really important information on certificates, place of storage, authenticity, guarantee, origin and other important records. These data are easily accessed to aid decision making and provide a completely transparent supply chain process. Given these approaches, cargo thefts are put in check to protect manufacturers and dealers. Consumers would as well have the best information about products life and history including whether accident free or not so as not to buy the very substandard products with their hard earned money.

Benefits of Blockchain Technology To supply and Logistics

 

  • Immutable records

 

 

The encryption and decentralization of intelligent contracts makes it impossible for the information loaded in a block of the chain to be overwritten, modified or deleted , since the data is not stored in a computer or in a single server (centralized data), but is written with cryptography in hundreds of computers in the network.

This means that companies that use data backed by a chain of blocks will have high levels of security against malicious attacks that attempt to steal your information, thus producing safe inventories. At the same time, problems of duplication in files are eliminated and the transparency of the information increases to all those involved, since customers and suppliers can verify that the records have not been falsified or modified.  

 

 

  • Reduction in Administrative Costs

 

 

Also, adopting Blockchain technology allows reducing or eliminating administrative costs completely, thanks to the digitalization of processes. As we noted earlier, logistics has been evolving with digitalization as an alternative to perform more effective work. However, a large part of the companies’ data is still in paper or operating systems that require physical confirmations, due to various vulnerabilities.

The blockchain technology allows to “change the game” and to bet on a digital and encrypted handling of all types of files through intelligent contracts. This implies that companies or governments stop schematizing physical work for any type of process, drastically reducing the levels of paper and ink consumption; to make way for a blockchain platform that allows them to easily access contracts, accounting files, applications, communications and related matters; all valid and verified documents without needing to be in physical.

 

A scenario that would also allow the relocation of personnel dedicated to maintaining files and processing requests to areas where their contribution can be better utilized.

 

 

  • Real-Time Information Merit

 

 

It should be noted that to talk about digitizing all kinds of logistics functions – or at least most – of a company with blockchain it is essential to highlight the information in real time. With distributed accounting technology, contract participants have real-time access to the information provided in the chain. This means that suppliers and customers have access and visibility to the information of the status of the good, product or request throughout the process.

 

In addition, taking into account that smart contracts  are fulfilled automatically, the parties eliminate the multiple versions of the same document and streamline the negotiation process, since it is not necessary to wait to observe the proposed changes in it. A possibility that drastically reduces the time in which commercial agreements are established with other companies, for example. Access to information also allows final consumers to know the origin of the product in question, along with details such as date of manufacture, weight, date of shipment and delivery date. Details that help fight counterfeiting and fraud.

 

 

  • Payments and Returns Facilitation

The blockchain technology allows the use of cryptocurrencies, sometimes also called tokens, as a means to exchange values ​​or data. This use is what has attracted worldwide attention thanks to examples such as bitcoin.

 

Most of the attention is focused on consumer payment applications. Thanks to the blockchain, the retail companies could not only accept payments in cryptocurrency, but the created digital registers will also help simplify the process of refunds and refunds. Larger purchases, such as cars, real estate, etc. can also be tracked and verified to reduce the resale of stolen goods.

 

Also, smart contracts can help alleviate the pains associated with the collection and compliance that exist with traditional transaction protocols. Thanks to the blockchain, it could automate many operations such as collection and payment, reimbursements, insurance settlement and payment, among others.

 

 

  • Authenticity and Quality

 

 

Blockchain is designed as a distributed accounting book. This makes the falsification of any product very difficult. That is why it is so attractive to create currencies using their technology.

 

Likewise, blockchain makes it possible for every legitimate contact in a supply chain, from a supplier to a manufacturer or a sender, to be added as a verifiable record of the quality and authenticity of a product.

 

For example, the authenticity of luxury brands has always been a problem for fashion houses since in recent years imitations have become very convincing. This causes the exclusivity of the products to go down. With blockchain, the data tracked from the origin of the materials to the purchase of the customer could help to guarantee customers that what they are buying is true when confirming its authenticity.

 

 

  • General logistics

 

 

As the complexity of logistics and supply chains increases, there is an opportunity to boost efficiency through greater collaboration and transparency among multiple groups, including manufacturers, distributors, carriers, insurers, importers, wholesalers and retailers.

With blockchain, tracking in the supply chain to and from distribution centers can be much easier. This means that each logistics stage can have information on who handled it, where and when in real time, which benefits in less lost and damaged items.

 

In addition, once the data is recorded, it cannot be manipulated in any way, which eliminates the possibility of fraud. It also helps that stores know exactly when the shipment of the product will finally reach your store.

 

Conclusion

 

Finally, we can talk about the Arab Emirate of Dubai. The city wants to reduce its administrative expenses by taking all their manual processes of visa paperwork, licenses and billing of the state to data and files to the blockchain. The implementation of distributed accounting is part of the Smart Dubai strategy, with which they intend to convert Dubai into the Blockchain City in 2020.  The plan to eliminate all types of manual process is to redistribute 25.1 million productive hours per year and reduce paper expenses. At the same time, they are betting on becoming a more efficient State. Considering this, it is a fact that the implementation of the chain of blocks transforms the way in which logistics operate. It allows reducing, distributing and eliminating operational costs, through the information gives more power to the client and eliminates the risks of fraud among merchants, customers and suppliers. This then suggest that the question of how to implement blockchain in transportation and logistics should be stale by now. More should be discussed about more benefits we could derive from implementation.

 

References

 

https://cerasis.com/2018/07/23/blockchain/

 

https://www.ennomotive.com/blockchain-applications-in-logistics/

 

https://fleetnewsdaily.com/eroad-joins-blockchain-transport-alliance/

 

https://medium.com/@credits/how-blockchain-could-help-logistics-c3b2ab60be55