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Home Articles

Impact of Blockchain Technology on Supply Chain and Logistics

28 June 2022
Reading Time: 8 mins read
110 1
Impact of Blockchain Technology on Supply Chain and Logistics

The first blockchain implementation, Bitcoin, spurred considerable experimentation with blockchain technology, particularly in the financial services industry. 

As blockchain technology grows increasingly popular, large organizations and startups are looking for ways to apply it outside the financial services sector. 

Several companies are already testing blockchain solutions for a variety of purposes. For example, Provenance (a startup that focuses on supply chain transparency) once conducted a six-month test using blockchain technology to track ethical tuna sourcing in Indonesia.

Blockchain-driven supply chain and logistics innovations can create massive commercial value by increasing supply chain transparency, reducing risk, improving efficiency, and improving supply chain management.

This article explores how blockchain technology impacts the supply and logistics industries.  

What is Blockchain?

The term “blockchain” refers to a method of recording transactions in a system. Imagine the chain as though every transaction were written on a sheet of paper. Once a transaction has been recorded on the blockchain, it is impossible to edit or delete it. Ideally, this eliminates any possibility of fraud or error in the system.

The blockchain eliminates the possibility of fraud by making the entire chain of transactions transparent from start to finish. Because no central authority decides whether a transaction is genuine, the possibility of fraud associated with a system takeover is also eliminated.

Transaction validity becomes a fully democratic process because verification is executed concurrently with recordkeeping. There is no authority in charge; thus, there is no one to bribe or buy off to take over.

This enables the blockchain to record any transaction with value, not just financial ones.

Flaws in the Existing Supply Chain System

The existing supply chain system has several flaws. A century ago, due to the dominance of local businesses, supply chains were relatively simple, but they have since become highly complicated. 

Throughout the history of the industry, innovations in supply chain management have occurred, such as the decision to use trucks rather than trains for freight transportation or the introduction of personal computers in the 1980s. Because of the globalization of manufacturing, primarily done in China, our supply chains are incredibly complex.

It is difficult for buyers to know the actual value of items due to the lack of transparency in the existing supply chain system. The key players in the supply chain industry will also be ineffective when any unlawful or unethical act is detected. 

Benefits of Blockchain in Supply Chain and Logistics

Provenance Validation

As high-value commodities and assets move through the supply chain, they must be extensively monitored. Blockchain ensures that data has not been altered or disrupted when dealing with high-value items. This category also includes pharmaceuticals and perishable items. 

It is crucial in logistics to be able to explain where something originated from and how it was handled, especially as the industry evolves toward a more consumer-focused model. 

Increased transparency

Transparency is a major advantage of using blockchain in supply chains and logistics. The complexity of managing and coordinating across multiple partners is particularly noticeable in supply chain transportation logistics. Another significant benefit of blockchain in supply chain and logistics is that it facilitates information sharing.

It is challenging to develop a consistent and meaningful perspective on data. Blockchain technology is being deployed to address this challenge. 

Quality assurance

Blockchain technology allows all parties participating in a transaction to have access to data that can be used to determine the milestone’s transactions.

For instance, let’s assume you run a repair depot where you sell spare parts and repair vehicles. Blockchain technology makes it easy for you to verify that the repairs have undergone the necessary testing and validation. You can also record the facility’s results on a supplier or public blockchain. 

Financial savings

Incorporating blockchain technology into business operations has proven to cut operational costs. The technology also eliminates most manual processes in the logistics industry. This helps in boosting efficiency and reducing errors.

Blockchain technology will also increase responsiveness and efficiency along the route; these reduce the number of items in stock and shipping costs, respectively.

Improved track-and-trace

Thanks to blockchain technology, all transactions, and data that go through the system are preserved in an “immutable record.” When utilizing cold chain tracking, sensors can be used to track the temperature of medications or food that must be maintained at specific levels while in transit.

Businesses can use blockchain to track a product from its point of manufacture, determine whether it is made of the right components, and verify that the manufacturer who sent it actually produced it. This prevents the shipment of counterfeit goods.

Blockchain technology also makes it possible for businesses to determine whether the chain of custody was broken during any stage of transport, which is helpful in the case of commodity theft. 

Examples of Businesses Utilizing Blockchain Technology in Logistics And Supply Chain

Tomcar

Blockchains are extremely useful for a global supply chain because they allow money to be transferred anywhere in the world without using a traditional bank. Tomcar, an Australian automaker, uses Bitcoin to pay its suppliers. 

Walmart

In the food industry, having reliable records is essential for tracking each product back to its origin. As a result, Walmart employs blockchain technology to track the pork imported from China. The blockchain records where each piece of meat came from, how it was processed, how long it was stored, and when it got spoiled.

Billiton BHP

BHP Billiton, the world’s largest mining company, announced it would use blockchain technology to better manage and record data with its vendors throughout the mining process. This increases productivity and makes it easier for the company to communicate with its partners. 

Provenance

Blockchain’s transparency plays a crucial role in helping customers to know they are supporting businesses that uphold their shared principles of environmental responsibility and sustainable production. Provenance focuses on achieving this through its transparent blockchain record. 

De Beers

Diamond industry major, De Beers, uses blockchain technology to track diamonds from the time they are mined until they are sold to customers. The company employs this method to guarantee customers that they purchase genuine diamonds.

Cloud Logistics

Many supply chain startups, such as Cloud Logistics recognize a market opportunity to provide blockchain-enabled supply chain solutions to increase productivity and lower operational costs in the massive supply chain industry.

Through the use of blockchain technology, Cloud Logistics helps businesses to:

  • Enjoy hassle-free access to real time inventory and real time pricing.
  • Get rid of multiple TMS and WMS systems.
  • Produce the right merge-in-transit models
  • Enhance the patterns of using equipment. 

Obstacles to the Use of Blockchain Technology in Supply Chain and Logistics

Several businesses operate without using blockchain technology. Even with technologies as convenient as RFID chips and scanners, some warehouses still use paper for certain operations. In other words, not all businesses must use a particular type of technology simply because it exists. 

One of the more serious issues is that many current leaders are unfamiliar with the fundamentals of blockchain technology. Others dismiss it as a fad and are content to wait it out, while others profit from the hype. 

Even those interested are wary of devoting time and resources to a technology that is still largely unsupported by industry standards and practices. Investing in blockchain is risky without industry backing. This demonstrates the importance of companies like the Blockchain in Transportation Alliance (BiTA) working together to support a common set of standards. 

The obstacles that blockchain technology encounters as it evolves on a practical and legal level should also be noted. Companies may need to hire more programmers and train their legal departments on new business practices.

Most people are playing a waiting game as they anticipate the release of new software, standards, and procedures. Fortunately, some businesses are eager for change and recognize the opportunities that blockchain technology presents in the logistics sector.

In Conclusion

  • Supply chains and logistics have a lot of room for improvement in terms of end-to-end traceability, product delivery speed, coordination, and finance. As demonstrated by the businesses we examined, blockchain technology can be an effective solution for addressing these deficiencies.
  • One of the most serious issues for businesses is a lack of understanding of the principles of blockchain technology and its potential to improve supply chains. 
  • Stakeholder involvement, more empirical research based on supply chain data, and simulations of the effects of blockchain on supply chains can all help to encourage and accelerate the use of blockchain in supply chain and logistics operations.
  • The time has come for supply chain managers who have been watching from the sidelines to evaluate blockchain technology’s potential for their businesses. They must contribute to developing new regulations, testing new technology, conducting trials with multiple blockchain platforms, and creating an ecosystem with other supply chain managers. Even though substantial resources will be required for the implementation, the investment will undoubtedly be worthwhile.

 

If you would like to read more articles like this, visit DeFi Planet and follow us on Twitter, LinkedIn, Facebook, and Instagram.

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Damola Ojedokun

Damola Ojedokun

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