An Open Ledger: Six Ways Blockchain Will Change Supply Chains

Tags: Logistics I.T., Logistics, Technology , Supply Chain

With e-commerce giants fueling a spike in shipping volumes, logistics companies need to increase efficiency, while reducing costs. One of the biggest roadblocks to doing so, is improving communication and transparency between manufacturers, freight companies, and buyers.

With the global market expanding and consumer demands increasing, it is more challenging than ever to ensure quality control, and that the right products are being transported safely. However, the invention of blockchain – a distributed database that stores data in a way that makes it tamper-resistant – now offers a means of logging the permanent history of a product digitally from manufacture to sale.

Here are six ways that blockchain will change supply chains, for the better:

Increase transparency of the source of materials

From fair trade coffee to fine wines, both modern consumers and industrial buyers want to know that their products have been sourced responsibly. Thanks to information being stored on the blockchain, users can ‘track and trace’ products from production to sale, allowing end buyers to know exactly where their product was created and with what materials.

Better manage recalls

From recalled food products to bad batches of pharmaceuticals, traceability of products across the supply chain is extremely important when those products are discovered to be unsuitable for sale. While many countries like the United States and the UK already require products to be tagged with traceable batch codes, this still leaves room for tampering. However, if batch information is logged on the blockchain, it ensures the information is legitimate, and makes adhering to product recalls easier.

Provide transparency towards conditions monitoring

When transporting perishable goods, batches need to be stored in temperature-controlled environments. Using existing systems, it can be difficult to ensure these conditions have been maintained across land, sea, and air. Storing the correct temperature and packaging requirement information on the blockchain will ensure that transporters at each stage of the process have access to the right information, and will also offer buyers a means of verifying these conditions have been maintained.

Digitize records and eliminate paperwork

Along a supply chain, there is a huge amount of paperwork involved from start to finish – from batch records to shipping approvals, to delivery receipts. The cost of documentation of goods is estimated to reach one-fifth of total transportation costs. Maintaining this paper trail is time consuming, and leaves space for tampering and negligence along the way. However, blockchain documents can be stored digitally, proving their authenticity. Permits can be approved digitally, and shipments can be released by smart contracts, speeding up the process overall.

Improve load balance efficiency

According to recent studies, transporting empty containers costs the shipping industry as much as $15-$20 billion a year. Due to intense competition, and a lack of communication and cooperation between freight companies, the majority of loads are shipped without being filled to capacity. Adoption of the blockchain would allow freight companies to advertise and sell any available transport space to other companies, potentially saving millions each year.

Move towards more cooperative business model

As outlined above, adopting the blockchain would open the door to more cooperation between logistics companies and manufacturers. As load visibility is improved, it opens the door to small-scale manufacturers, as well as logistics companies sharing loads and resources. This could lead to more clustering, allowing smaller players to stay competitive in the age of Amazon and Alibaba.

In the highly competitive modern logistics landscape, companies need to stay on the cusp of technological advancement to cut costs, speed up processes, and stay relevant. Blockchain can help companies work together to maximize efficiency.