Denis Oakley

If your supply chain strategy consists of mollifying angry customers, you’ll always be behind.

Life becomes a fire drill and work becomes an endless chore.

The alternative is to invest in cycles that lead to better systems.

Because better systems put out the fire when it’s really small.

And to invest in design, because better design leads to clearer promises, which are easier to keep.

And to invest in quality as the focus of production, because keeping your promises creates delight and lowers costs so much it pays for itself.

Credit goes to Seth Godin for capturing the above on his blog. I only changed a couple of words. It captures so much of how the logistics and supply chain industry works – and what we want to change. LogChain is a way to create far happier customers, robust supply chains that are more profitable. Best of all it’s easy to do. Grab a demo and see how it works

In this article, I’m going to explain what blockchain logistics is and why it is important. TLDR, Blockchain logistics holds out the promise of changing the logistics industry by making almost every logistics and shipping task easier and faster.

To explain blockchain logistics clearly you first need to understand the problems that the logistic industry faces.

Key Supply Chain Problems

First off manufacturers and retailers see logistics as a commodity. It’s simply a way to get their goods from A to B as cheaply and quickly as possible. Goods in transit aren’t being paid for and consume precious inventory. This puts a lot of pricing pressure on logistics companies.

Secondly, everything is paper-driven. Not always literally, but the process of getting goods from A to B is driven by dozens of parties exchanging digitised pieces of paper. These may be called certificates, BLs, SDS, emails, excel reports or whatever. However they are described each acts as a piece of paper; someone has to read it, check that the information is correct, then share it with someone else depending if it is correct or not.

This is the same way that things have been done since salt traders (fascinating article on the Chinese Salt Trade) built huge mansions on the Yangtze, or since Marco Polo and Sinbad the Sailor tried their luck at international trade.

The problem with these supply chains is that everyone in them has information that other parties need. Sharing that information is often tied to whether the terms and conditions of contracts have been met.

Bill of Lading Example

For example, I once didn’t give someone the Bill of Lading he needed because he hadn’t paid me before the goods were loaded. As a result, the goods sat in demurrage in Singapore for 9 months before we reached an agreement.

In this case, my forwarder didn’t know that I hadn’t been paid so instructed the warehouse to release the steel to the trucker who took it to the port, who loaded it on board. Lots of people needed to exchange paper with other people in order to keep things running smoothly. If the paper isn’t exchanged on time and correctly then you get problems.

Equally, if deceit is involved, perhaps my customer said he’d paid but he hadn’t, life for a supply chain manager often comes down to an argument of who said what when. This ‘he said, she said’ is expensive and resolving it and claims, further saps the profits of the sector.

Blockchain Logistics Explained

How does blockchain help here?

To understand blockchain logistics we need to understand how blockchain works.

We could have a common database for the supply chain. If we did that then everyone could see everything.

The problem with this approach is that too much would be shared. The information you shared could be used against you. The information you post or receive could even be false. The shared database falls down very quickly under these conditions. That’s why everything still remains as a paper transaction.

Blockchain is a distributed ledger – or record of transactions. What is key for our purposes is that if you make a change to the record you have to get other people to agree that you have made a change. Once you do that then your change becomes permanent. It can’t be deleted, edited or denied.

The Benefits of Immutability

This is what blockchain calls immutability.

This changes everything. You now have a database where every change is verified by other parties. It’s also clear that you either said something or you didn’t. This means that the database can be trusted, and that enables us to use the database to digitalise the supply chain rather than relying on paper.

What happens if someone still lies? If they lie or simply don’t meet contractual obligations – deliberately or not – then this is obvious in real-time. We can use smart contracts that automatically pay if people make the right entries in the database (or charge them if they make the wrong ones – such as shipping a day late).

I spoke to a number of supply chain managers earlier this year. I asked them how many emails they got each day. The average was almost 200. That’s 200 emails they had to check for shipment status. Check each email to see if something was going wrong, or sometimes, wasn’t reported to be going right. Blockchain logistics means that we can get rid of those emails – and replace them with a dashboard that gives green lights for the projects going well, and red lights for the ones you need to pay attention to – with little or no effort.

If you think about 30 supply chain managers in the average supply chain, each dealing with 200 emails each day – that is close to a reduction of 6,000 emails a day. Not a bad thing to do!

If you’d like to read more about transparency in trade lanes, you can download our whitepaper here. Alternatively, give us a ping and book a LogChain demo.

Going head to head with Google is foolhardy. Is the same true with IBM in blockchain logistics? Everyone says that you shouldn’t talk about your biggest competitor, but given that if you tap blockchain logistics into Google and IBM’s name comes up top it’s fair to say that most people know that IBM has something to do with blockchain logistics. Specifically Tradelens.

In some ways, LogChain is built off IBM blockchain logistics. We use Hyperledger Fabric which has had substantial contributions from IBM amongst others. The real difference is less one of technology and more one of domain knowledge.

IBM, bless its soul is staffed with technologists. At the heart of LogChain are logisticians. (That’s why the LOG at the beginning of LogChain). That makes a huge difference.

Our job is to deliver the 7 R’s of logistics it isn’t to build technology. Building a software solution that helps companies nail every single one of those 7 R’s (Product, Quantity, Condition, Place, Time, Customer & Price) is what is going to make us grow. Technology however clever, that doesn’t solve those problems does not.

What’s Wrong with IBM’s Blockchain Logistics

IBM blockchain logistics has had a lot of bad press.

• Why IBM and the Maersk Group venture was doomed to fail. Our takeaways and the state of B2B blockchain adoption.
• How Maersk’s Bad Business Model Is Breaking Its Blockchain
• IBM Blockchain Is a Shell of Its Former Self After Revenue Misses, Job Cuts: Sources

Reading these articles it seems that the way the IBM logistics blockchain was implemented in its Maersk joint venture didn’t focus on the two key aspects of blockchain technology. Creating Trust and increasing Interoperability. Failure was this driven by a business model that misaligned incentives and few of the benefits of blockchain logistics could be realised.

We’ve taken a different approach.

Neutral and Independent Logistics

The LogChain goal is to be a neutral independent player that enables supply chain networks to become more efficient. LogChain unlocks supply chain efficiency in the same way that a new motorway unlocks traffic on a constricted highway.

So when you use LogChain the immediate benefit is that you are able to shift your product far more easily than before. Because your competitors don’t and will never own the platform you are able to expand with confidence.

As more stakeholders in your supply network join ALL of you get more benefits; these don’t just accrue to the most powerful players in the chain. Instead they are available to everyone equally with the desire to improve the effectiveness and efficiency of what they do.

This is the core premise of LogChain blockchain logistics. It’s fair, it’s neutral, it’s open. For sure there is a lot of technological wizardry behind what you see, but it’s all aimed at delivering fairness into the supply chain, not distorting it.

So when people ask us, what about Tradelens? We remind them of what it’s like to sell on Amazon. If you find a niche and do well, Amazon has all your data and is soon selling what you do. Better. Not a nice place to be.

If you’d like to read more about transparency in trade lanes, you can download our whitepaper here. Alternatively, give us a ping and book a LogChain demo.

Why did we decide to solve the problems of logistics with blockchain? I’ll be totally open. It wasn’t because blockchain was a trendy fad. Indeed for a long time, we didn’t mention blockchain at all when we talked about LogChain. It was just a bit of technology buried in the product design.

Years ago I used to be involved in the exporting of steel (OakleySteel). We were a middleman between the steel mill and a huge selection of manufacturers making specialist engineering equipment for the oil and gas industry.

We always had big problems being efficient at this. This was because we didn’t trust our customers not to cut us out and go to the mil direct, or the mil in cutting us out. Equally whilst we had to trust our freight forwarder, they also shipped a lot of our competitor’s steel and so we were constantly wary of handing too much information over to them.

The paranoia wasn’t totally unreasonable either. Based on a rumour we once decided to buy all the 200mm thick steel on the market and cornered it for a particular project.

Digitalisation works by increasing the flow of information. The more information or data that flows, the easier it is to do interesting things with it, whether that is cutting costs or increasing automation or anything else.

The Problem is the Lack of Trust

The lack of trust between parties who regularly work with each other is one of the reasons why the logistics sector remains backwards. Most inter-company communication is by email, paper (pdf) documents, excel spreadsheets or even pen marks on a clipboard.

Loads of unstructured horrible data that can’t easily be organised – and which people won’t let be organised even it could be. That’s been the death knell for many tech-focused startups.

This is where blockchain comes in. Satoshi Nakamoto, the ‘founder’ of blockchain designed blockchain to solve the problem of two people, who don’t trust each other, having to make a transaction.

The answer, in simple terms, is to have a publicly available ledger that anyone can verify. Fraud, if the blockchain, is designed correctly, then becomes far harder, because it is absolutely clear what each party has said or done (it’s recorded forever in the blockchain.)

Using Blockchain in Logistics

How do we use blockchain in logistics? Well imagine a trade lane – we are shipping steel from Antwerp to Singapore for example. We have the exporter, the mill, the customer, and the freight forwarder. As the exporter, those are all the parties I know.

My forwarder also deals with the trucking company, the warehouse, the port, national customs organisations, the shipping company and the customer’s freight forwarder. Possibly the manufacturer’s freight forwarder as well.

It gets tangled quite quickly, doesn’t it?

Each of them adds information onto the blockchain. The weight of the goods. The truck unloaded weight. The time of entrance to the port. The time of loading. Charpy V-notch test even, as we are talking about steel.

That information is true. It’s guaranteed by the person who uploaded it and verified by the blockchain. It can’t be changed (unless it is updated and the old value remains in the record to avoid fraud). Then that can be shared instantly.

Trade Lane Transparency

It can be shared instantly across the trade lane. So for example my customer (who has no idea who my freight forwarder is. He doesn’t know who the trucking company is. He can see the unladen weight of the lorry, the laden weight of the lorry and see the weight of the steel being loaded. This is all visible within seconds of it happening.

If the weight doesn’t match what he was quoted this can be flagged automagically. Problems can be resolved before they become expensive.

He doesn’t have to wait for the truck to tell the forwarder. Nor for the forwarder to tell me and for me to tell my customer…

Simply from my own experience that would have saved our shipping team about 20% of their time each week. The company would have saved tens of thousands of pounds each year as we smoked out issues. This could have been done far earlier than otherwise.

Combining Blockchain with Logistics

This is the vision of combining blockchain with logistics. It allows us to see what is happening in other parts of the trade lane. Everything is totally trustworthy. It is fully transparent, without giving away critical commercial information.

If you’d like to read more about transparency in trade lanes, you can download our whitepaper here. Alternatively, give us a ping and book a LogChain demo.