Blockchain technology in logistics: The future of the supply chain
Much has been said on blockchains in the last five years; some experts consider it a breakthrough innovation in business technology. Be it in banking, investments, or logistics, this advancement has been trending and is likely to be the future of large-scale transactions.
According to a consulting firm ABI Research report, despite a 35% contraction in blockchain industry revenues due to the COVID-19 crisis, companies specializing in this technology had numbers up to 131% higher than those in 2018. By 2025, revenues are expected to increase from $374 million reported in 2020 to over $2 billion.
What is blockchain technology?
Considering its status as an emerging technology, how it works is still not entirely clear to many. There will be those who know the word Blockchain, but not its definition.
In simple terms, Blockchain is a new type of database. The difference over traditional technologies and methods lies in how the information is handled: instead of a centralized server, a series of computers, also called nodes, are used. The data is stored in blocks. As one fills up, it is linked to the next, each node with a copy of each transaction. In the context of a transaction, it is in this same network that a deal’s validity and security are certified. The information is communicated and verified not by one but by all the nodes in the network.
This decentralization secures the operation: the data is permanently recorded in the Blockchain, and to modify it, virtually the entire chain must be changed. Should cybersecurity vulnerabilities arise with a particular user, it is difficult to affect the operation and information in general; failures and alterations in one node are automatically corrected with the others’ data.
Uses in logistics and the supply chain.
Traditionally, there is a long and complex chain of stakeholders exchanging documentation in disconnected systems between a manufacturer and a buyer in a supply chain. Advances in technology such as Blockchain seek the interconnectivity of participants and information systems through digital alternatives and solutions to traditional operation processes.
When it comes to blockchains, the most common use is as a digital ledger where transactions of an entire chain are recorded and validated. However, it is not the only use: Blockchain has been a key to increasing the security and productivity of operations in the logistics industry. This happens by digitizing processes and streamlining data exchange; for example, the Blockchain enables smart contracts that, from delivery orders, verify that every statute is met at every step of a supply chain.
The Blockchain ensures the transparency and traceability of an exchange. This technology, coupled with innovations in big data and artificial intelligence, possibilities go further than this with applications such as:
- Temperature control and monitoring.
- Connection with the internet of things devices.
- Accurate projection of delivery times, among others.
- Automation of monotonous tasks.
- Prediction and management of bottlenecks.
- Tracking of money flow between all actors in the supply chain.
Incorporating new technologies in the logistics industry minimizes disruptions such as theft, cyber-attacks, unnecessary intermediaries, and shipping errors. This comes with the transparency and traceability of blockchains: if there is a problem, a company can know where, when and under whose responsibility it happened. According to the World Economic Forum, this type of solution can increase global GDP by 5% and international trade by up to 15%.
That being the case, it goes without saying that Blockchain, or any other emerging technology, is not a cheap or easy solution to implement: it requires the active participation of every participant within a supply chain. First and foremost, there must be a strategy with specific goals. Once a plan is developed, it must be tested at a smaller scale in a pilot program and adapted by observing control variables. The platform can only be gradually expanded when its functionality and value to a company or industry is proven. Starting early in pilot testing, emerging technologies is a long-term competitive advantage against competitors who have not yet invested time and money in them.
For more information on Blockchain and other topics related to logistics, international trade, and customs, stay tuned to our social networks and website. At Woodward, we have more than 80 years working in national and global logistics. We are your best ally when it comes to moving your merchandise.