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Why Blockchain is Transforming the Supply Chain and Logistics Industry

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Aug 19, 2020

Supply chain management is filled with complexities because there is a lack of transparency over the entire supply chain.

Blockchain supply chain logistics

These days, there's a new buzz word in the industry: blockchain. It's making everyone hopeful that soon there will be a massive transformation in the supply chain and logistics industry.

What is Blockchain?

The most popular use of blockchain technology is a cryptocurrency like Bitcoin. However, blockchain has other applications aside from being used as a payment or exchange currency. Blockchain works by recording every single transaction on a block and across many copies of the ledger or a cloud-based database. These are then distributed over various nodes for decentralization and security.

The whole process is transparent and secure because each block is linked to the one before and after it. Plus, no one has a monopoly over blockchain as changes or entries can only be made if all participating members authorize the alterations. The design is scalable, secure, and very efficient.

What is the Role of Blockchain in the Supply Chain and Logistics?

The technology provides an opportunity to enhance the cargo's visibility in every area of the supply chain from ordering, processing, and packaging.

Blockchain is advantageous for shippers as they can see more information than the other technologies like Electronic Data Interchange (EDI). Traditional technologies only carry a limited amount of data, such as who is the shipper and receiver or load location and status.

On the flip side, blockchain allows for more information to be shared among the supplier, shipper, carrier, and receiver. This data could include the time the order was packed, who prepared it, and the exact pallet it was loaded on. Blockchain tech also provides information on the condition of the load at any given time.

What Will Make Blockchain Successful in Transforming the Industry?

Technological advancements can improve any industry, but only if they are adapted and integrated well. This point holds true for the supply chain and trucking industries.

Trust the Data

For blockchain to succeed in transforming the industry, every player must trust the technology as the lone source of information. This is crucial because the information entered into blockchain can't be altered or corrupted once it's there; thus, users should trust the data recorded in blockchain.

For example, manufacturers requiring carriers to have $200,000 of cargo insurance before they load goods for transport must trust the carriers who confirm that they have the coverage registered in blockchain. Likewise, shippers that use the technology to track their goods being transported must believe that the data is accurate.

Technology Adoption Should be Industry-Wide

Standardization has its benefits in any industry. Hence, blockchain for the supply chain and logistics industry must cover all trucking companies, including the small carrier. Around 90 percent of trucking firms in the United States, after all, are small businesses with only six or fewer trucks in their fleet. Small carriers will have difficulties in both procuring and rolling out new technology. Maintenance of blockchain system can be quite costly to shoulder as it requires some consulting because it is such a new technology.

The industry must find a way for small carriers to adopt the use of blockchain gradually.

Data Standardization

On the standardization issue, all industry players must identify and agree on the characteristics of data, such as what information should be included in invoices, purchases, or manifests.

Data standardization is always challenging—for example, the use of EDI has been leveraged by the industry for three decades. Until now, there is no single EDI standard being implemented, and companies have various versions of EDI, making the collaboration among companies a time-consuming and burdensome task.

Industry players must keep in mind that blockchain for trucking is private and that all users like brokers, carriers, and shippers will be vetted. Thus, blockchain users could be relied on to uphold the integrity of the data being shared.

A Promising Technology But Cooperation is a Must

Blockchain technology for supply chain management and logistics is very promising. But all stakeholders must find ways to address the challenges that hinder the technology from taking off with wider adoption. Everyone should work together to embrace blockchain and standardize its implementation. This is the only way this technology can have an opportunity to transform the industry.

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