We have been hearing about blockchain and the benefits it brings to businesses. Known for its disruptive impact on the financial services sector as “bitcoin”, blockchain impact can be felt across countless other domains. This article will discuss very possible applications of blockchain in Logistics and Supply chain.
DreamOrbit is a technology service company that focuses on providing solutions to Logistics, Transportation and Freight companies around the globe and have taken interest in blockchain technology too. Here is an inside story from our CoSI – Centre of Solution Innovation team working towards applying cutting edge technologies on Logistics and Supply chain business cases.
Today’s supply chain are inherently complex and is broken in many ways. In the 1900’s the supply chains were relatively simple and small because commerce was local. It is just the opposite in 2018. The manufacturing has been globalized, distribution networks run across the nations and customer base is anywhere with an internet connection. It is incredibly difficult to operate through the current system and very susceptible to illegal practices, inefficiency and monetary loss.
What is blockchain? How can supply chain be using this technology?
Blockchain is a distributed ledger that holds records and verifies the events (transactions) in a series of blocks that makes it tamper-proof and secured. How? It exists in multiple copies spread over multiple computers (nodes) – secure because each new block of transactions is linked back to previous blocks – making tampering practically impossible. Any user in the system may access, increment or inspect the block but can never change or delete it. Thus, creating a permanent trail of public records.
Think of it like this: the entire supply chain is about a product’s journey right from manufacturer to the consumer and therefore we can assume the product to be the “cryptocurrency” of supply chain. Every time the product changes hands, collects attributes, gets accessed for information, changes price, receives damage etc.; all these events can be documented, creating a permanent history of the product right from manufacturer to the consumer and maybe even beyond. It can even collect information through multiple repairs and finally to the recycling center, where the product can be reduced to its basic elements and can be consumed as raw materials, injecting it back to the supply chain. Imagine if we could record and track back all that information.
Here are some improved events or process in an end-to-end supply chain –
Recording – Purchase Orders, Bill of landings, receipts, shipment updates and other notifications and documents related to logistics
Linking – physical goods to cargo type, serial numbers, barcodes, RFID tags, temperature controller and other sensors
Assigning – categories like type of cargo, type of transportation equipment required, carrier, NMFC, Freight class, Hazmat codes etc.
Tracking– the quantity of assets like – pallets, trailer, containers transferring from location of shipper to consignee and various location nodes in between.
Accessing – information using open source or controlled with different parties about manufacturing processes, assembly, delivery, storage or maintenance of the specific product.
Payment – using blockchain which is already an established cryptocurrency for transfer of funds anywhere in the world without the use of a traditional bank, it will be very convenient for a global supply chain.
Applications of Blockchain in Supply Chain
Here are some use case that can be benefited using blockchain technology –
Smart Contracts and Payments
One of the prevalent problems in logistics are the disputes over the final payment after the order is completed. It is estimated that 10 out of 100 freight invoices have inaccurate data that leads to a dispute between carrier (payee) and shipper (payer). The direct implication of such disputes are delayed payment, overpayments and sometimes even no payments at all. Blockchain has potential to increase efficiency to the settlement process too. As the documents are digitized and real-time shipment data recorded in blockchain – based systems, the product or cargo is traceable from the moment it leaves the shipper to final delivery. The system can be extended to other freight management software using API to collect all relevant logistics information to record in the blockchain – based database. On meeting the conditions, for example, receiving proof of delivery from last-mile delivery partner, the contract settled automatically. In case of a dispute, the same blockchain traces back for relevant information or/and corrective actions to resolve. The smart contract and payment system can be scaled and automated further using IoT. For example, for pharmaceutical companies, one of condition to meet is whether the goods delivered are as per the agreed conditions (e.g., temperature, humidity, tilt measurements). A connected pallet can automatically transmit confirmation and the time of delivery as well as the condition of the goods to the blockchain-based system. The system then automatically verifies the delivery and releases correct payments to the appropriate parties greatly increasing efficiency as well as integrity.
Supply Chain Transparency & Safety
Blockchain can help the companies to monitor the condition of the cargo during shipping, especially for pharmaceuticals, chemicals and perishable food items. For the supply chain to be successful, these cargos should be uncompromised. For a brand in the business, a compromised product should be never reach the consumer if damage or spoilage occurs through transportation. The quality of the product can be recorded automatically using sensors for temperature, humidity, vibration etc. or manually verified by handlers. These inputs recorded on a blockchain-based database. If it detects a deviation, it triggers the subsequent corrective action plan to subdue it.
For example, while transporting medicine, if the system detects cargo’s temperature to drop below prescribed value. The system runs a corrective action depending upon the size of deviation. The system could adjust the “use-by” date or in worse condition, label it unfit to use and halt it from reaching consumer. Since the blockchain database is recording the product status starting from manufacturing to consumer, the records can trace back the fault to the concerned party and apply penalties accordingly.
Faster and Global Freight & Logistics
Global Logistics & Freight is complex and chaotic. It involves many parties with conflicting priorities shipping the cargo across the globe. These parties can be insurance, legal, brokerage, settlement services, outsourced transportation management, compliance, route planning, delivery scheduling, fleet management, freight forwarding, last-mile delivery and even consumer. With hundreds of interactions, communications and status updates between these parties and many disparate and unconnected systems recording them. The possibilities of costly delays are innumerable. Therefore, it is imperative that we apply new methods of efficiency to achieve a significant impact on global logistics. Blockchain has huge potential to alleviate enterprises from many limitations of traditional paperwork and bureaucracy in global logistics. A blockchain-based global system would digitize documents; automate workflows for procurement, multimode transportation, track and trace, managing customs, insurance, finance etc. and record end-to-end information too. This enables a more direct relationship between each participant hence making global freight and logistics much faster and simpler than it is now.
Protecting reputations and fighting counterfeits
With many fraud and counterfeiting cases taking away a big slice from the profits, the businesses are looking for a quick solution. Blockchain has the potential to improve anti-counterfeit measures in different industries – pharmaceuticals, luxury items, precious stones, electronics etc. because blockchain weaves the security into the data itself—providing a full audit trail that everyone can see. The product label or RFID tag embedded in the product that can directly feed information to blockchain system. At various exchange points in supply line, for example, at retail locations when receiving inventory or by the consumer to check for genuine product while purchasing. All these anti-counterfeit features are available on a mobile application. The solution is quite straightforward. By using, a mobile device camera to scan the label and check the information against the database of the company will help in identifying counterfeit, diverted goods and stolen goods too.
How to get started with Blockchain
Even though blockchain is a hot topic with the experts calling it the next frontier in global commerce, it still is new and a developing technology. There are many concerns regarding its implementation in the real life scenarios. One, it is a complex programming language and the internal IT team is not well equipped to gain in-house expertise for the technology. The companies might have to depend solely on a technology partner. Second, it relies on network effect. That means for blockchain to succeed truly, more people in the supply chain need to participate on the platform consistently. Its return on investment is directly dependent on the number of people use it. Third, the technology has become an international political issue due to divided stance of global leaders on the aspects related to data privacy and control. Where some countries have shown a positive stance, the others have declared it in direct conflict with their respective national interest. At present, logistics companies might be hesitant to apply blockchain to the whole supply chain at global level. However, blockchain is definitely a solution to many costly operational processes, especially freight contract and fulfillment. It is true that to derive the most value, blockchain is to be implemented end-to-end, procurement to customer delivery. However, to start with, we advise our customer to start on individual processes. We work with our customers by identifying a use-case that can reap huge monetary benefits or greatly improve customer satisfaction. The DreamOrbit team helps to scope out the technology plan and develop a proof of concept. Once the POC is refined, our team deploys the MVP of the product and stepped up continuously to include more functionalities and customer data until it is ready for full-volume production.
As you can see in the figure below. The tasks along the supply chain of receiving quotes, awarding tender, scheduling pickup, and tracking until delivery are building blockchain that offers smart contract solution automating final payments. Each layer is foundation to the next one. Solutions for processes and sub-processes within can build up to a holistic solution eventually. The dream of one operating system for logistics can turn to reality.