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  • Writer's pictureConnie Chan

Blockchain in the supply chain – What does the future look like?

A modern supply chain typically consists of hundreds of stages managed by dozens of specialists who work with tons of documents all over the world. Logistics processes may drag on for weeks or even months. As the shipping industry is becoming more complex, there is less and less transparency in communication between its participants. The large number of logistics companies crowding the space makes it problematic to detect violations. According to a joint study by Accenture and logistics giant DHL, more than 500,000 shipping companies in the US are causing data siloing and transparency issues.

According to the report, blockchain can solve many of the problems plaguing logistics and supply chain management.

The research claims that because blockchain enables data transparency by indicating a single source of verifiability, it can build greater trust within the industry. The technology can also make the logistics process leaner and more automated, potentially saving the sector billions of dollars a year.

The delivery process generally includes around thirty parties: shippers and consignees, third-party logistics, carriers, freight, banks, insurers, etc. What is more, during the delivery of only one consignment of goods, parties exchange more than 200 paper messages and documents such as delivery confirmation, invoices, and bills of lading. The cost of the paperwork associated with it comes to hundreds of dollars or 15%-20% of the shipping cost. The blockchain solution has the potential to reduce complexity and save the industry billions of dollars.

As an example, shipping giant Maersk, located in Denmark with branches all over the US, has teamed up with tech leader IBM to integrate blockchain into international trade. The two companies developed an open and neutral industry platform, TradeLens, underpinned by blockchain technology. The platform allows the digitization of the document process and removes the risks related to the use of paper originals as documents were immediately available to all concerned parties and all changes could be tracked and traced. In such a way, the shipper saves courier costs, and the consignee may minimize delays and risks of demurrage or detention. On the other hand, the carrier receives systematic transfers of the bills from the TradeLens system, all underpinned by blockchain, which helps reduce communication turnaround time in one seamless digital process. The platform provides a secure space to share important documentation with approved partners anywhere in the world.

International logistics, which accounts for 90% of world trade, often engage all kinds of transport. Each participant in the supply chain uses its own local accounting system such as CRM, BPM, EDM, ERP, etc. Communication between these systems is usually carried out on an analog (traditional) method associated with paper documents. The given approach creates many issues. A significant part of cargo, containers and vehicles are lost or not used since they are simply “out of sight” in the system. Correcting inaccuracies takes plenty of time and money. Blockchain technology can be used to create a unified digital document management system in the cloud, which will let supply chain participants to track the location of vehicles, cargo, and their products in real-time, even at micro levels.

Within Walmart it began in 2016, when the Vice President of Food Safety in the company asked his team to trace a package of sliced mangoes to the source. It took his team 6 days, 18 hours, and 26 minutes. While all the data was there in the system, arriving at the information took a long time. After adopting blockchain technology in a food traceability system, Walmart could trace the mangoes stored in its US stores within 2.2 seconds, literally, the speed of thought!

Blockchain applications have the bonus of making the supply chain sector not only safe, but a cost-effective solution. However, blockchain adoption needs appropriate legislation. As blockchain regulation and technology matures, we’ll see it impacting and disrupting many different industries.

Current regulation around the IT industry is not suited for crypto and blockchain since it can undermine the fundamental tenets of decentralized technology. The best strategy is for regulators and policymakers to adapt their policies to successful existing blockchain programs around the globe. Sensible regulations that cut down on potential fraud and hold vendors to the same standards as traditional payment companies and marketplaces will accelerate adoption since enterprises as well as customers don’t like using unregulated vendors. Recognizing the need for greater regulatory clarity would be beneficial for all: government, supply chain industry and its users.

Disclaimer: This is a paid release that was not written by Crypto Online News. The statements, views and opinions expressed in this column are solely those of the content provider and do not necessarily represent those of Crypto Online News. Crypto Online News does not guarantee the accuracy or timeliness of information available in such content. Do your research and invest at your own risk.

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