The logistics and supply chain industry is a tricky business to manage. Operating a business in this sector requires no less than the utmost accuracy in all processes involved.
A single mistake might lead to a domino effect that could topple the credibility of supply chain stakeholders. For example, an erroneous input of date could mean a delayed transfer of raw materials from vendors to manufacturers. The resulting error could then compromise the timely delivery of orders to retailers, as the supply falls short of customer demand.
Yes, one mishap could turn the entire supply chain topsy-turvy. And that’s inexcusable.
That’s why logistics and supply chain industry managers are constantly looking for viable means to optimize their operations. The goal is to achieve the highest level of accuracy and efficiency possible to keep the delivery of goods dependable at all times.
This is where blockchain technology comes in. Logistics and supply chain innovators have seen an opportunity worth grabbing in blockchain.
The concept of blockchain might prove a bit too intimidating to some, especially those who are self-avowed tech noobies. However, there’s no reason to get dissuaded from exploring the subject just because of its seemingly complex nature. Here, we’ll try to discuss blockchain in the most relatable manner.
Essentially, blockchain serves as digital storage for information. Its original function is to serve as a platform for cryptocurrency transactions, such as Bitcoin. With the technology’s distributed and decentralized nature, the tool has disrupted the status quo in financial transactions by eschewing intermediaries like central banks and global financial institutions.
Think of blockchain as a shared database. But it differs from a typical database in how it stores and processes information. In a nutshell, a blockchain comprises blocks linked together via cryptography, hence the name.
Here’s how information storage works in a blockchain. New data goes into a fresh block. This block waits until it reaches its maximum capacity for information. When that happens, the block links to the previous block. The stored data are then presented in chronological order.
Presently, with its prevalent application in cryptocurrency, most blockchains contain ledgers of transactions. However, it’s worth noting that blockchains can host all sorts of information. That is why businesses outside the crypto field have tapped the technology for process optimization.
Blockchain touts three selling points to businesses. They are as follows:
- Immutability – Recorded data are fixed unless those in command of the blockchain decide to make alterations due to errors.
- Transparency – All stakeholders have access to the database. It even allows review of live transactions. That means no one is left out when it comes to pertinent information.
- Security – Again, it’s virtually impossible to alter the details of previous blocks in a chain. Unauthorized modifications will be difficult to pull off.
Blockchain and the Logistic and Supply Chain Industry
The integration of blockchain in the logistics and supply chain industry boasts critical advantages. Here are some of the top ones.
Employees who perform critical functions such as payment execution, documentation, ownership transfers, and tariff settlement, among others, are not immune to clerical errors. On top of that, some get tempted to pursue fraudulent activities for personal gain.
Business owners can avoid those scenarios via smart contracts, which can consolidate multiple functions. As a result, workflow gets optimized and business processes are improved.
Transparency and Traceability
Businesses often pay excessive amounts for stock delivery due to the unavailability of standardized pricing information. If there’s access to the said information, often the sources don’t have credibility.
With blockchain integration, the supply chain becomes transparent, especially in terms of how processes are priced by vendors. All details of past and present transactions are duly recorded and ready to be accessed by industry stakeholders. These stakeholders can then approximate what the standard protocols are in terms of both delivery duration and corresponding prices of logistic services.
Blockchain makes it easier to spot where culpability lies in terms of compromised goods. In moving supplies from one place to another, it’s quite common for mishaps to happen, resulting in product damage.
Because blockchain contains details on the movement of shipped products, it’s easier for suppliers and their recipients to trace where problems took place. Therefore, the responsible party is held liable.
Inventory and Cargo Tracking
Multiple players participate in the supply chain. They often employ their systems for cargo tracking and inventory and communicate with stakeholders outside those systems – whether via emails, Zoom meetings, or other messaging channels. Those become unnecessary with a shared database that can be accessed by all participants in the supply chain.
Other Potential Benefits
On top of the advantages cited above, blockchain integration in the logistics and supply chain industry affords businesses secondary benefits, too.
Improved Corporate Reputation
Corporate reputation is crucial to all businesses. In the supply chain industry, whether you provide logistic services or you are the client in need of a shipping contract, you must work on your brand.
That entails the proper delivery of services or products you’ve been paid to accomplish.
The supply chain’s adoption of blockchain can make it easier for businesses to keep their names untarnished. With an accessible and shared database detailing the ins and outs of the delivery process, all stakeholders in the system can carry out their duties as expertly as they can, given that the stakes are high and culpability is easily traceable.
Improved Public Trust
A shared database inspires trust among the public. Considering its accessibility and transparency, there’s little room to question any information’s credibility. That means blockchain adoption in the supply chain can put the entire industry in a good light. As a result, there’ll be more business transactions at hand.
Reduced PR Risks
Suppose you are in the business of selling high-value goods. You partner with a shipping company to process orders. One order gets compromised along its journey from your storage to the recipient’s address. The recipient, as expected, is outraged. They call you out online.
That right there is a PR disaster. And if there’s no sufficient transparency in the logistics process of the transfer of the goods, chances are you’ll find it difficult to prove your inculpability. Blockchain eliminates this risk because of detailed and real-time recordkeeping.
Stakeholders no longer have to wait passively for processes to complete. Through blockchain, they can actively monitor functions related to the inventory and movement of stocks.
In need of more inspiration? Here are some success stories of blockchain adoption in the supply chain industry.
• Tomcar – This Australian company manufactures cars. As a workaround for excessive fees charged for international financial transactions, the brand resorted to cryptocurrency. The company now pays some suppliers with Bitcoin while receiving crypto payments from clients based in Taiwan and Israel.
• BHP – This mining giant has also adopted blockchain to digitize operations. The technology’s application centers around supplier verification. Plus, through blockchain, the company can ensure consistent social and environmental compliance.
In fact, in 2021, the BHP Group successfully completed a blockchain deal with a Chinese company involving iron ore, which amounted to $14 million.
• De Beers – Blood diamonds can tarnish a jewelry business’s reputation. That’s why De Beers uses blockchain to closely track where their diamonds come from and where they are sold. As a result, the brand’s loyal patrons get to peacefully sleep at night knowing they do not own illegally sourced diamonds.
• PepsiCo – A couple of years back, this beverage giant implemented Project Proton. Using blockchain, the system automated the brand’s ad supply chain. PepsiCo and its partner company maximized smart contracts to increase marketing efficiency by up to 28%.
• GreenTrack – This project resulted from the partnership between Birla Cellulose, an Indian fabric producer, and Sappi, a South African paper company. GreenTrack used blockchain to closely monitor raw materials from sustainable forests all the way to production.
• Food Trust – This is IBM’s blockchain platform for tracking foodstuff. The goal is to use blockchain to enable participants across the food supply to record and share data relevant to the supply chain. Brands that have signed up with Food Trust include Walmart, Tyson Foods, Raw Seafoods, Carrefour, and Nestle.
Across all industries, innovation is imperative. Businesses don’t grow by sticking solely to what they already know. They grow by exploring ways and means by which to level up their operations.
The same rule applies to the logistics and supply chain industry. Perhaps, even more so than in other fields. That’s because top-notch collaboration and communication between stakeholders are integral to the maintenance of the industry’s efficacy. Without the accurate relay of information, the processes involved are compromised, with the worst-case scenario of disrupted services.
Thankfully, there’s blockchain technology. From its original function as a platform for cryptocurrency transactions, the technology has come a long way. Many blockchain trends crop up, and one of them is the technology’s introduction to operational paradigms that various businesses put into place. One industry that has a lot to gain from blockchain is the logistics and supply chain. We look forward to how this integration will advance in the coming years.