Blockchain in the supply chain – What does the future look like?
A modern supply chain typically consists of hundreds of stages managed by dozens of specialists working on tons of documents worldwide. Logistics processes can last for weeks or months. As the shipping industry becomes more complex, there is less and less transparency in communication between participants. The large number of logistics companies that empty the space makes it problematic to detect breaches. According to a joint study by Accenture and logistics giant DHL, more than 500,000 shipping companies in the US are causing data silos and transparency issues. According to the report, blockchain can solve many of the problems plaguing logistics and supply chain management.
The research claims that because blockchain enables data transparency by indicating a single source of verifiability, it can build greater trust in the industry. The technology can also make the logistics process leaner and more automated, potentially saving the sector billions of dollars a year.
The delivery process generally involves around thirty parties: shippers and receivers, third-party logistics, carriers, freight, banks, insurance companies, etc. In addition, the parties exchange more than 200 paper messages during the delivery of just one shipment of goods and documents such as delivery confirmation, invoices and bills of lading. The cost of the paperwork associated with that comes to hundreds of dollars or 15%-20% of the shipping cost. The blockchain solution has the potential to reduce complexity and save the industry billions of dollars.
As an example, shipping giant Maersk, located in Denmark with branches across the US, has teamed up with technology leader IBM to integrate blockchain into international trade. The two companies developed an open and neutral industry platform, TradeLens, underpinned by blockchain technology. The platform allows the digitization of the document process and removes the risk associated with the use of paper originals as documents were immediately available to all parties concerned and all changes could be tracked and traced. In this way, the sender saves courier costs, and the recipient can minimize delays and the risk of demurrage or detention. On the other hand, the carrier receives systematic transfers of the bills from the TradeLens system, all underpinned by blockchain, which helps to reduce the turnaround time for communication in one seamless digital process. The platform provides a secure place to share important documentation with approved partners anywhere in the world.
International logistics, which accounts for 90% of world trade, often involves all types of transport. Each participant in the supply chain uses its own local accounting system such as CRM, BPM, EDM, ERP, etc. Communication between these systems is usually carried out in an analog (traditional) method related to paper documents. The given approach creates many problems. A significant proportion of cargo, containers and vehicles are lost or not used as they are simply “out of sight” in the system. Correcting inaccuracies takes a lot of time and money. Blockchain technology can be used to create a unified digital document management system in the cloud, allowing supply chain participants to track the location of vehicles, cargo and their products in real time, even at the micro level.
Within Walmart, it began in 2016, when the company’s vice president of food safety asked his team to track a package of sliced mangoes to the source. It took his team 6 days, 18 hours and 26 minutes. While all the data was there in the system, it took a long time to get to the information. After adopting blockchain technology in a food tracking system, Walmart was able to track the mangoes stored in its US stores within 2.2 seconds, literally the speed of thought!
Blockchain applications have the bonus of making the supply chain sector not only secure but a cost-effective solution. However, blockchain adoption needs appropriate legislation. As blockchain regulation and technology matures, we will see it impact and disrupt many different industries.
Today’s regulation around the IT industry is not suitable for crypto and blockchain as it can undermine the basic principles of decentralized technology. The best strategy is for regulators and policymakers to adapt their policies to successful existing blockchain programs around the world. Sensible regulations that reduce potential fraud and hold providers to the same standards as traditional payment companies and marketplaces will accelerate adoption as businesses as well as customers do not like using unregulated providers. Recognizing the need for greater regulatory clarity will benefit everyone: governments, the supply chain industry and its users.
Image by Gerd Altmann from Pixabay
