In this article, we aim to elucidate what blockchain logistics entails and why it holds significant relevance. In essence, blockchain logistics bears the potential to revolutionize the logistics industry, rendering virtually every logistics and shipping task more efficient and expedient.
Understanding blockchain logistics first requires comprehending the challenges the logistics industry confronts.
Key supply chain challenges
Manufacturers and retailers often view logistics as a commodity, a mere means to transport their goods from point A to B as inexpensively and rapidly as possible. Goods in transit represent dormant inventory and unpaid items, exerting pricing pressure on logistics companies.
Another prevalent challenge is the reliance on paper-driven processes. While not always physically paper, the journey of goods from A to B is influenced by countless parties exchanging digitised documents such as certificates, BLs, SDS, emails, or Excel reports. Each document functions like a piece of paper, demanding someone to review its content, verify its accuracy, and then share it with another party contingent on its correctness.
These methods have been in place since the ancient times of the Chinese Salt Trade or since the days of renowned traders like Marco Polo and Sinbad the Sailor. In these supply chains, each participant holds information vital to other parties, and sharing such information is usually bound to the fulfillment of contractual terms and conditions.
Take the Bill of Lading for instance. There was a time when we didn’t hand over a needed Bill of Lading because the payment hadn’t been made prior to goods loading. The result was goods sitting in demurrage in Singapore for nine months until a resolution was reached. This highlights the importance of timely and accurate document exchange in the supply chain and the risks involved when it goes awry.
Blockchain logistics demystified
So, how does blockchain come to the rescue?
Understanding blockchain logistics involves a grasp of how blockchain operates.
A shared database for the supply chain is one option. While it would mean everyone could see everything, it would also lead to information overload. The shared data could be manipulated against you or even falsified. As a result, shared databases often fall short, and processes remain paper-bound.
Blockchain, as a distributed ledger or a record of transactions, however, changes this. A key aspect of blockchain is that any changes to the record must be corroborated by other parties. Once this happens, the change becomes indelible – it can’t be deleted, edited, or refuted.
The benefits of immutability
This property of blockchain, known as immutability, is a game-changer. It allows us to have a database where every alteration is validated by other participants, creating a trustworthy database that enables us to digitalize the supply chain, eliminating the reliance on paper.
And what if someone still makes false claims or fails to meet contractual obligations? Such anomalies become immediately noticeable in real time. We can employ smart contracts that automatically execute payments if the correct entries are made in the database (or impose penalties for incorrect entries, such as late shipping).
In a conversation with multiple supply chain managers, we discovered that they receive an average of nearly 200 emails daily. These are 200 emails they must check for shipment status, inspect for potential issues, or verify if processes are running smoothly. With blockchain logistics, these countless emails can be replaced by a dashboard that displays green lights for successful projects and red lights for ones needing attention, with minimal effort.
If we consider 30 supply chain managers in an average supply chain, each dealing with 200 emails per day, that equates to a reduction of roughly 6,000 emails daily – a substantial improvement!