How blockchain can solve logistics-related challenges for MSMEs

Technology for MSMEs: The origins of blockchain technology date back to the 1990s, but it only became mainstream in 2008 when Satoshi Nakamoto brought crypto to the table with bitcoin. Blockchain was intended to be a feasible computational method for time-stamping digital documents to avoid manipulation. Today, it’s as mainstream as it gets. In today’s time, blockchain is slowly being discovered by MSMEs engaged in logistics as a solution to a number of challenges that make them vulnerable to inefficiencies and delays in processes.

Advantages of blockchain in logistics

Transparency and traceability

Blockchain is necessary as it enables traceability and transparency throughout the supply chain. MSMEs can leverage technology to track the shipment journey from pickup to delivery. It can help companies track fault lines and deviations that cause delays in the supply chain and ultimately repair it quickly for improved customer experience.

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Improved efficiency

The supply chain is a comprehensive process that requires attention at every milestone. Increased manual work usually compromises efficiency, so blockchain technology can streamline the process by automating all manual tasks. For example, automating payment processing and reducing intermediaries can help keep operating costs under control and strengthen the bottom line.

Increased security

Data tampering or the vulnerability of sensitive information are unfortunate, but common events that make the investment in online security imperative. Blockchain offers a distributed ledger system that stores data across multiple nodes as opposed to in a central database. This makes it difficult for hackers to change data or information and it is especially beneficial for MSMEs due to the lack of assets.

Better collaboration

The logistics industry follows a comprehensive and structured supply chain with a variety of stakeholders, including suppliers, customers and partners, but blockchain provides access to the agreements and shipments of all of them. They can share data securely, reducing misunderstandings and disputes over numbers and statistics, and helping to improve overall collaboration.

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Challenges in implementing blockchain technology in logistics for MSMEs:

High initial costs

The initial investment is heavy and MSMEs usually lack the financial resources and technological expertise to implement blockchain effectively. However, the benefits of blockchain may outweigh these initial costs.

Integration with existing systems

One of the biggest reasons for the inequalities in the industry is the inconsistency of resources such as technology and labour. Blockchain requires both, a certain level of technological expertise as well as intricate software and hardware to complement it. MSMEs looking to implement blockchain technology must integrate it with their existing systems and processes. This can be challenging, especially if their systems are outdated or not compatible with blockchain technology.

Regulatory and legal issues

Blockchain technology is a complex system for a beginner with elaborate regulations and laws, especially when it comes to privacy and cyber security. MSMEs must be pragmatic to gain knowledge about the same, otherwise the consequences can be heavy fines and reputational damage.

To survive and thrive by adapting to change, technology is essential. It cannot be denied that every coin has two sides and similarly, blockchain technology has advantages and some disadvantages, but looking at the bigger picture and the possibilities for the logistics industry, it may be an area worth exploring.

Meheriar Patel is executive director of Jeena & Company. Views expressed are the author’s own.

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