Exploring the applications for a blockchain logistics supply chain management.
Bitcoin, a solution for a decentralized financial system, gave recognition to blockchain technology. In the past few years, this technology has found its way to build applications in all the sectors unimaginable. One such sector where blockchain is being explored in a massive way is the supply chain and logistics.
The Logistics Industry
The supply chain and logistics industry is expected to reach billions of dollars by 2022. The sector is the backbone of multiple businesses across the world. However, this rising industry has grown increasingly complex with time.
The logistics industry has numerous stages for each process that are not properly interlinked to each other. Moreover, there are multiple actors and stakeholders at each operation who do have no coordination with each other. Over the years, this simple process of managing and distribution of goods has grown time-consuming, expensive, and extremely opaque.
Proper implementation of supply chain management processes can lead to a decrease in overhead costs, eliminate frauds, and increase quality. The new technological solutions can be vital in achieving a smooth flow of each process in the logistics sector. Among them, blockchain is one of the technologies that is experimented to improve the overall system across the supply chain.
Let’s find out the advantages of implementing blockchain in logistics and supply chain management.
The Blockchain Logistics Solution
Blockchain’s core protocol facilitates a number of applications for the supply chain and logistics sector. Moreover, it induces transparency across the entire chain. It further facilitates and links all the individual processes to improve efficiency in the industry.
Tracking the Shipment to its Origins
Blockchain facilitates a digital ledger that records and stores information. At any point in time, the data can be traced back to its point of origin.
Now, the logistics sector supports everything from medical supplies to agricultural products. However, our traditional methods do not support the tracking and tracing of each individual product. This has further led to the creation of counterfeit drugs and supplies. Moreover, consumers have now become aware of knowing the origins of the products they use.
Blockchain provides an effective way to record each information pertaining to the product on a ledger. This includes data like raw materials, temperature conditions, shipment origins, etc. The data can be further made accessible to consumers through sensors and RFID tags. This reduces the scope of counterfeit products from entering the supply chain.
VeChain, a blockchain-based management program has developed VeChain NFC chips that are used for verifying the authenticity of any product. Retailers can basically attach these chips to their products. Consumers can scan these chips using their smartphones. This further prompts the blockchain to return a message that verifies the authenticity of the product. VeChain has also introduced a drug and traceability solution that enables IoT devices to capture and record all the information pertaining to vaccine manufacturing. This data gets recorded on the VeChain Thor blockchain thus ensuring that the data remains immutable.
Blockchain’s digital ledger further helps bring transparency into the individual supply chain processes. Each piece of information is recorded on a decentralized ledger such that it can be verified by anyone.
By recording data pertaining to products can help build trust among the companies. Moreover, the improved visibility over factors like raw material origins, product ingredients, mode of shipment, etc can further reduce the auditing costs. The data can also help build trust among companies and consumers. This also helps a company to retain its reputation and not spend money over false lawsuits. Additionally, transparency can also help in the prevention of exploitation of workers at the ground levels.
Provenance, a London-based company, uses blockchain to provide transparency for the food and agriculture supply chain. It offers transparency by facilitating customers to find the origins of their products and also confirm its environmental sustainability. Further, it also developed a system that ensures that a farmer is fairly compensated for their individual efforts.
Currently, the supply chain and logistics industry comprise of multiple stakeholders at each point. This includes manufacturers, consumers, retailers, suppliers, auditors, etc. However, the actors lack coordination among each other and thereby it is difficult for the chain to smoothly function.
Blockchain enables a ledger of data such that each stakeholder has the same piece of information. Moreover, the ledger is automatically updated without the need to coordinate the data among each individual. This reduces the number of intermediaries and further lowers down the cost of the industry. The data stored on the ledger is immutable and hence cannot be deleted or modified by any particular member. This further eliminates the possibility of fraud or any illegal activities carried out by any actor on the chain.
Tradelens, an IBM initiative, is launched with the aim to modernize today’s supply chains. It enables participants to digitally connect and share information on a peer to peer blockchain platform. By bringing the multiple participants on a permissioned blockchain platform, tradelens allows fruitful collaboration across the logistics ecosystem.
Improve Efficiency and Reduce Costs
Blockchain is essentially a bundle of data stored and managed in a transparent manner. Analyzing and deducing the data is where its true value lies.
The conventional logistics sector still works on paper-based systems. They are not only ineffective but also consume unnecessary time and workforce. Bringing the data from paper to a distributed platform can solve the many redundancies faced in the industry today. By deducing and conveying additional information like delivery time of any product can bring efficiency into the chain. Moreover, blockchain-based smart contracts can help automate various tasks that further reduces the need for the unnecessary workforce.
Other advantages also include reduced paperwork, improve inventory management, eliminate human originated errors, and minimize courier costs.
Invoices and Payments
Invoices and payments remain a touchy topic for a number of industries and logistics are certainly one of them. Although suppliers demand payments in 30 days, the process is largely dragged to months. Blockchain and smart contracts can provide relief with invoices and payments by automating conditions.
Using smart contracts, automated invoices and payments can be generated using pre-defined conditions like payable terms, payable receipts, delivery proof from logistics carriers, etc. As soon as the conditions are met, smart contracts automate payment into the supplier’s digital wallet without any additional reminders. This ensures smooth operation along with no analog gap between supplier and consumer. Smart contracts can further simplify the finances for logistics and help generate better liquidity in the sector.
Dexfrieght is one such platform that uses tokenized invoices and smart contracts to reduce friction for the logistics payments. Using payment terms pre-defined on a blockchain smart contract, it automates the procedure and aims to enhance liquidity.
Blockchain is indeed a fruitful promise for the supply chain and logistics management. Moreover, at this point, it has become crucial for the industry to adopt such innovative solutions for better management and operations. It aims to bring fruitful value in the growing fast-paced sector.