Blockchain to Make a Revolution in
At the time when Elon Musk is testing Falcon Heavy, the management of international freight is in the same state as 10 years ago – delayed cargo, a million of waybills and thieving suppliers. Blockchain cannot send trucks full of mandarins to Mars just yet, but it has potential to get rid of the major problems of logistics.
What Went Wrong?
Logistics has something in common with Jesus. The latter taught us to trust thy neighbor, while logistics teaches us to trust thy supplier. Anyway, let’s put all the disputable comparisons aside. When it comes to international freights, there is not much of choice. You either believe that the cargo will be delivered fresh and intact, or you don’t believe it, but still skeptically wait for it to arrive.
The issue of forced trust arises as it is extremely challenging to track down the cargo on each stage of the tangled supply chain. From the moment of purchase to when it is finally delivered to the end consumer, the product passes through the hands of dozens of intermediaries.
For example, you haven’t got the slightest idea which nooks of hell the pineapple you’ve just bought went through. It says “Brazil” on the price tag, but when it was picked, how long it was transported and how it was stored – all these remain a mystery. Not only to you, the end consumer, but also to the buyer.
Besides trust issues between the counterparties and the transparency of the supply chain, modern logistics has one more serious drawback, namely – a high cost of the paperwork. According to the UN’s data, the expenses on the paperwork during international freight transportation account for 3.5 – 7% of the product’s total cost.
So, here is the question: how do you cut the freight costs and restore the trust between the parties in the supply chain?
How to Optimize the Process?
These problems can be solved if we transfer the logistics onto blockchain. The blockchain is a unified and decentralized database, to which all the parties of the chain have access. All data about the product, its origin, status and shipping conditions are entered into this database. Moreover, this information cannot be forged or deleted. Due to this:
- Clients don’t have to blindly place their trust in what the suppliers tell them and hope for their decency. They know exactly where the cargo is and what conditions it is being stored in. This data is refreshed on every stage of the supply chain.
- There is no need for sanitary passports, certificates of origin, insurance policies and other papers. It means the elimination of paperwork costs.
- The risk of purchasing counterfeit goods is minimized. Every gadget, a pair of sneakers or a bottle of perfume has own code, recorded on the blockchain. If a product doesn’t have a code or a code doesn’t match the registry, it’s a fake.
- The risk of losing a product because of inadequate labeling is reduced.
It seems like blockchain solves all the problems posed before the logistics system in one go. In reality, it is precisely so. In the context of credibility crisis to ask you to believe our word would not be very smart. Thus, let’s have a look at a couple of successful blockchain projects.
The Experience of Pioneers
There are quite a few enthusiasts out there who are already using blockchain in their logistics systems.
The pioneer is Wallmart. It makes deliveries of mangoes to the US and pork to China with the help of blockchain. Such approach allowed the retailer to manage the stock more efficiently. What is more, the end consumers can make sure that there are no GMOs in the goods and that nature wasn’t harmed during the manufacturing process.
In Singapore, there is a startup named Yojee, which has united more than 30,000 transport vehicles from all over the world. It is a virtual dispatch manager of sorts, with blockchain technology and artificial intelligence at its core. The system controls the status of orders, issues invoices and manages delivery entirely by itself.
Logistics company Maersk enters information about the product onto blockchain and thus has got rid of supporting documentation. Besides, the data on the location of the container with goods and its status is continuously refreshed.
Ambrosus is a project whose participants can monitor the delivery of foodstuffs. All goods are equipped with special sensors which log the food’s status and location.
Soma project is continuing to grow. Soma is a decentralized marketplace for trading without intermediaries. Information about each product is stored in the form of a unique code. It allows to get data on the place of origin of the product, monitor price fluctuations, find out if the product is available from its seller. Also, the information about the deals done on Soma is registered on the blockchain.
More and more companies are implementing blockchain to optimize their supply chains. However, to really change the logistics system, it is necessary to develop a uniform standard and sync the work of the companies in this sphere.
This job is done today by Blockchain in Transport Alliance (BiTA). Among its members are such world logistics leaders as FedEx, US Xpress, and nearly 200 other companies. BiTA is striving to create a uniform standard for using blockchain by transport and logistics groups. At this stage, the alliance is doing educational work, organizing conferences and promoting collaboration between the companies.
If this standard can be developed, it will be possible to create an international freight transport infrastructure, which will be based on straightforward and open supply chains. Inside this infrastructure, the logistics process will be shorter and the data more accessible. That way, the issue of trust between the counterparties will resolve itself.