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.