How Will Blockchain Impact Logistics, Supply Chain And Transportation?
65% of senior transportation executives believe the logistics, supply chain and transportation sector is experiencing a seismic shift. These are the findings of a recent Forbes survey of 400 executives whose perception is driven largely by the proliferation of artificial intelligence (AI), machine learning (ML) and blockchain.
Most of my views come from Globaltranz’s membership in The Blockchain in Transport Alliance (BiTA) – they joined in 2017. BiTA is an industry association focusing on the use of blockchain to drive efficiency in transportation, logistics, and supply chain.
What’s blockchain’s transportation role?
Blockchain is a technology that’s perfect for the transportation industry and I believe will provide revolutionary impact. Blockchain allows people/companies who don’t know or trust each other to engage in commerce.
Examine a typical shipment: From origin to destination, you have multiple parties touching the freight and needing visibility into specific details. Keep in mind there are thousands of shippers and carriers – land, sea, rail, and air – as well as freight brokers/forwarders, 3PLs, insurance providers, customs agents and customers of all kinds. That means there several parties who don’t know anything about each another, but they have business to do, ranging from small, low-value shipments to larger, or very large and very high-value shipments. Unfortunately, there’s no standardization. There is no way of exchanging data in a trusted manner across this group of participants.
Ultimately blockchain provides is trust. Blockchain makes certain this network has everything they need to know about their shipments and transactions in one place, and they know the information is accurate because of the security of the distributed ledgers. Blockchain can become a transformative tool.
Blockchain in practice…
When creating a use case it’s hard to know where to start. Providing seamless visibility across the value chain is a massive advantage. There are several technologies, like RFID or IoT/telematics, that can capture location or condition information. Currently, much of that data is isolated in silos. Blockchain is a platform giving all members greater insight – instant shipment tracking at the SKU level.
Blockchain enables unbroken provenance. You will be able to see a physical trail and all handoffs along the way, even the condition of the goods, and where they were warehoused or transported during any period. If you know everyone who touched the shipment, you have a trail of whether it’s been tampered with or some part of it has been swapped. You also know about quality control.
Blockchain and payment are also transformative. Blockchain contracts are workflows that automate payments based on shipment events. The parties agree to contract terms and embed them within the blockchain and when the terms are met – for example, a carrier delivers a shipment at a warehouse – both parties have proof [of specific performance] and the smart contract initiates an automated payment.
Transportation is a massive segment of the global economy – up o 12% of cash flows – and there are so many parties involved: shippers, carriers, 3PLs, customs and the companies that provide fuel for trucks, planes, trains, etc. There are a ton of transactions associated with any single shipment. Now think about having to wait 60 to 90 days for payment across each and every segment from each and every participant involved. What if, instead, we use blockchain and smart contracts to speed up payments? That introduces trust and automation, speeding verification and eliminating an enormous drag; there’s an enormous amount of payment float in the global economy.
How close are these blockchain realities?
Keep in mind that this is a HUGE undertaking. This work has to take place across a varied and vast landscape where very few standards exist. To implement blockchain in any meaningful way requires a very high degree of standardization across all parties. So long story short, progress will be slow.
One of BiTA’s missions is education, and in that sense, they’ve come a long way. Two years ago, I might have gone to a conference and been in a room of 100 people where maybe only one or two were knowledgeable about blockchain. Today, in that same room, there might be 10 who are full-on enthusiasts plus another third who can articulate use cases. And the figures are growing exponentially.
I am an enthusiast who believes we’re on the verge of some major breakthroughs that will prove transformative.
What else is on the horizon?
Being a supply chain engineer I prefer to focus on specific challenges and applications. For example, there’s discussion around insurance and the desire to expedite loss verification. Also note, when insurers don’t know much about the carrier or when they can’t accurately verify provenance, that increases the cost of insurance – blockchain can help to address this.
Teams are also exploring applications that could enable pay-as-you-go instead of outright purchase. So telematics would link to blockchain ledgers, enabling users to pay on a per-mile basis. And if that’s not enough, imagine a futures market in transportation – a means of creating greater certainty in shipping costs. The world of blockchain has a lot going on, and there is a lot of potential. Stay tuned.