The importance of the logistics industry can’t be overemphasized. Every firm has a department that caters to the movement of products, employees, and much more. Some companies revolve around this field. Though this industry is lucrative globally, the issues that it faces drastically reduce the profits that accrue to operators. Some issues that are linked to it are unnecessary middlemen, fraud, stealing, and human errors. There is a need for a technology that nips these issues in the bud. Blockchain is a distributed network with nodes that store data in a transparent, immutable, secured, and decentralized manner. Once incorporated in logistics, it will add transparency, and prevent data from being falsified.
Ways In Which Blockchain Can Aid Logistics
Logistics will be helped in the following aspects with the integration of blockchain into its operations:
• Efficiency and Effectiveness
We are still in the days where some logistics companies have to use paper-based systems or an online system that could be altered at a whim to track the shipping and freight of goods. One of the worst things that can happen to a delivery firm is to lose the packages of its customers. Such an incident could lead to a boycott of its services, especially since the world is a fast-paced one. To ensure that the entire process, from the beginning to the end, is efficient, blockchain technology adds transparency. Different participants can track the delivery progress of products. It can also be structured in a way to allow clients to track the delivery of their products from the comfort of their homes, thereby increasing customer satisfaction and experience.
At the moment, the logistics industry is plagued with some issues like alienated data storage systems that are not shared amongst the different participants, fragmentation, lack of transparency, and much more, which blockchain can solve with its efficient network.
• Reduce Intermediaries with Smart Contracts
Annually, billions of dollars are spent in settling disputes in the logistics industry. It could be a client suing the company for losing their package or a delivery firm instigating a claim against its competitor for a breach of contract.
The industry is also plagued with a lot of middlemen, which participants and users have to deal with regularly. This situation comes with some drawbacks like higher cost, longer time, and waste of resources.
A smart contract is an automated function that works on the blockchain and allows different parties to draft an agreement that will bind on them. With this feature, there is no need for a middleman to be present before it is binding. The different parties are allowed to add their terms and clauses to it, and once agreed upon by every participant, it can’t be altered. It is far cheaper than using the traditional legal system.
• Adding Efficiency into Load Boards
Logistics’ load boards are not efficient because they may be duplicated, or manipulated, thereby offering a wrong representation of activities. This may be done out of human error or in a bid to fraudulently benefit from the error.
Blockchain technology will verify the timestamped loads that are added by shippers, and stop them from manipulating the records in the future. This means that a load can’t be duplicated, and everything in the network has been verified.
With this feature, there is no need for an intermediary to verify the state of the load data and stop the duplication of load boards.
• Tracking of Assets and Managing Inventory
Logistics companies are in charge of ensuring that the packages of their clients are delivered at the right place and time. This means that to do this effectively, they need a real-time asset tracking and inventory management system.
Instead of tracking done manually, companies can craft a mechanism that incorporates blockchain and the Internet of Things together to actively track the delivery process of packages, and reduce the chance of goods being lost in transit.
With this system, tracking is managed via digital sensors, thereby allowing participants to be abreast with the location of the package as it moves through the mechanics of the supply chain.
It is expected that this new system will reduce delivery time by a lot while incorporating transparency, which is something that clients will appreciate.
Examples of Companies That Use Blockchain for Logistics
Blockchain is no longer a theoretical concept in the real world, as its use cases are being actively incorporated into the activities of companies. Some firms have started seeing the importance of adding blockchain technology to improve their logistics operations.
-
FedEx
When the name, ‘FedEx’ is heard, it reminds one of the largest logistics and delivery companies on the planet. This multinational organization works in multiple countries and has a track record of delivering on time.
With the coming of blockchain technology, FedEx has been considering adding this feature into their regular operators to improve their activities to a greater height.
Fred Smith, CEO of FedEx stated in May 2018 that he felt the technology could be the “next frontier” for logistics. He believed that it would improve operations, and to buttress his thought, he partnered with a notable blockchain firm, Hyperledger. Through this collaboration, it is expected that logistics will improve greatly once it is combined with the distributed ledger.
-
CargoX
There are various segments of the logistics industry, and some companies focus on a niche. A typical bill of lading shows the goods that are being shipped, and it is given to the owners of the goods once they are delivered. Usually, the traditional bill of lading is processed in a week or more, which is not efficient. With the CargoX, this long process can be reduced drastically to only four minutes, cutting off the unnecessary wait time.
CargoX used the Ethereum network to organize a project that occurred between some participants in Asia, which included “the Chinese exporter, the carrier/logistics provider, the consignee in Slovenia, and a release agent.”
Stefan Kukman, the CEO of CargoX was ecstatic with the results:
“In our business, the standard is 2-10 days, so if we do it in four minutes, or even an hour, we’re doing great.”
-
Ideanomics
Import and exports make up a big part of the economies of numerous countries, and China is one of those countries. Ideanomics decided to strike a partnership agreement with Shanghai port and APMEN Trade Tech Co. to improve the clearance process. They wanted to create an online port clearance mechanism that would incorporate blockchain technology, thereby reducing the time and cost linked to shipment clearance.
According to the Co-CEO of Ideanomics,
“We will integrate business data from various partners, establishing a risk control model in cooperation with a single-window to provide risk control services for regulatory authorities and enterprises.”
-
UPS
Another notable company that offers logistics services all over the globe is the United Parcel Service (UPS). Companies like the aforementioned are always looking for ways to improve their services by making them more affordable, quicker, with an increased feeling of transparency.
UPS applied for a blockchain-based patent that could allow them to actively track their packages while looking for the best routes to deliver them to clients.
Challenges associated with infusing blockchain technology into the logistics industry
• Resistance from the status quo
Once a new technology is about to be incorporated into an existing system, it is faced with resistance from those that prefer the former system. When blockchain is added to logistics, some red tapes will be removed, and the need for some job positions may no longer exist. This means that some participants in the logistics industry may feel that the technology could make their roles obsolete.
• Difficult Implementation
Implementation is a big issue because the logistics industry is fragmented, with numerous participants that are scattered all over the industry. Some participants may have issues with understanding the concept and functionalities of the technology. Before blockchain can function effectively, there is the need for intense retaining of workers in that field.
• Lack of unions
The logistics industry may be vast, but there is an existing lack of cohesion between the different participants. It is rare to see collaborative forums in the industry, meaning that getting numerous firms to add this technology into the underlying architecture of the ecosystem may be difficult.
• Lack of transparency
Blockchain brings transparency elements to every industry that incorporates it. The logistics industry is not known for transparency, meaning that many participants may not fancy the technology because of that aspect.
In Conclusion…
- Blockchain functions effectively in industries that are ready to be disrupted. If only the logistic industry sees the benefits that accrue to embracing the technology, it will be easy for firms to incorporate it into their operations.
- Blockchain will make it easy for logistics firms and clients to track the progress of packages.
- It will introduce transparency and immutability into its operations.
- Blockchain in logistics has gone past the theoretical stage because there are companies that are currently using this to improve their operations.
- Though the technology is efficient, it will face some challenges before it will be accepted.
If you would like to read more articles like this, follow DeFi Planet on Twitter and LinkedIn.
