Logistics and the BlockchainApr 10, 2018
Blockchain: An open, distributed ledger that utilizes cryptography to record and secure transactions between two parties efficiently and in a verifiable and permanent way.
It would be a great understatement to say that the impact of blockchain has yet to be fully understood when it comes to the intersection of business and technology. But while it’s fair to say that the impact on logistics is not yet matching the hype, it is also true that the time to consider the range of possibilities for exploring this disruptive, and potentially game-changing technology, is now clearly upon us.
How and Where to Begin?
In September 2017, Juniper Research conducted a study of 400 company founders, executives, managers, and IT specialists on the topic of blockchain. Their goal was to assess how commonly blockchain is deployed, its perceived benefits, and how much organizations are willing to invest. Below are some of the relevant findings:
- Awareness of blockchain technology is growing: Four out of five people reported having “a little” or “a good” understanding of blockchain overall.
- Blockchain deployments are on the rise: Thirty-nine percent of respondents, including 56 percent of companies with more than 20,000 employees, were either considering deployment of blockchain solutions or were in the process of deploying them. For the companies with 20,000+ employees, 54 percent had reached the proof of concept stage, and 66 percent of those anticipated blockchain would be an integral part of their systems by the end of 2018. Sixteen percent of these larger organizations were in trial deployments.
- Concern over the potential for disruption: Forty-five percent of larger companies anticipated difficulties with systems interoperability could be a challenge both internally and externally. This could include the inability of customer systems to integrate with blockchain or an unwillingness of customers or trading partners to work with the technology.
Blockchain and Logistics: A Very Brief History
While the historical roots and application of blockchain technology have focused largely on the financial sector, there’s also a highly compelling argument to be made regarding the potential benefits to the $8.6 trillion global logistics market. The inherent multi-party, network-based nature of logistics alone makes it a totally viable and highly attractive candidate. But there’s also considerable public information available documenting numerous examples of projects already underway in the logistics industry, by shipping ports, logistics providers, and global shippers alike:
- The Port of Rotterdam, Europe’s largest shipping port, is taking part in a Blockchain consortium focused on logistics. The project has the support of more than 15 public and private sector companies based in the Netherlands. Consortium members plan to spend roughly two years designing and developing applications for blockchain technology in the logistics sector. There have been similar efforts in the past, but according to the founders, this project is unique because of its scale in the logistics chain.
- Belgium-based Port of Antwerp, the second largest port in Europe by container capacity, is running a pilot blockchain project focused on logistics automation. They announced they are looking to use the technology to automate and streamline the terminal’s container logistics operations. The test is being conducted in conjunction with a blockchain startup called T-Mining. The goal is to speed up the interactions between port customers to prevent the malicious manipulation of data.
- Shipping and logistics giant Maersk, along with IBM, have announced they are working together “to use blockchain technology to help transform the global, cross-border supply chain.” The blockchain solution based on the Hyperledger Fabric and built by IBM and Maersk, the global leader in transport and logistics, will be made available to the shipping and logistics industry. The solution will help manage and track the paper trail of tens of millions of shipping containers across the world by digitizing the supply chain process from end to end to enhance transparency and the highly secure sharing of information among trading partners. When adopted at scale, the solution has the potential to save the industry billions of dollars.
- U.S. retail giant Walmart started a major test of blockchain technology for supply chain management. A pilot project, started in the first quarter of 2017 and scheduled to run for four months, planned to leverage distributed ledger technology to track and trace pork in China and produce in the U.S.—two high-volume product categories with large markets. The project—a collaboration between Walmart, IBM, and Tsinghua University in Beijing—was first unveiled in October 2016 when the project partners claimed they were creating a new model for food traceability, supply chain transparency, and auditability. “By harnessing the power of blockchain technology designed to generate transparency and efficiency in supply chain record keeping, this work aimed to help enhance the safety of food on the tables of Chinese consumers,” noted an IBM press release.
Beyond the examples above, there is also ample research available documenting the many expected benefits of blockchain technology, both generally and within the logistics/supply chain industry. The potential benefits documented within these studies are numerous and varied.
What Is the Potential Value of Blockchain to Logistics?
For practical purposes in speaking to the logistics community, the value delivered to the industry may be best categorized into one of the following five areas:
- Improved compliance, accuracy, and transparency: Immutable shared contracts, documents, and transactions
- Greater consumer security and trust: Improved product visibility, provenance, and fraud detection
- Real-time feedback and response: A shared and scalable data network built on trust
- Shared assets, infrastructure, and talent: Improved utilization via a sharing economy
- Improved financial liquidity and capital performance: Ease of exchange and collateralization
Each of these areas alone could have the potential to deliver clear business benefits that would likely be worthy of pursuing. Arguably, most companies would have little trouble developing a logical argument and use case in support of one or more of these business improvement opportunities. As Adam Robinson of Cerasis stated, “With a world that is becoming more connected on a daily basis, blockchain technology will inherently develop into a symbiotic relationship with the Internet of Things and today’s advanced logistics and supply chain management systems.”
The single biggest challenge today may be determining where to start. But as is true of all journeys, they can only begin by someone choosing to take the first step.