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THE IMPACT OF BLOCKCHAIN ON THE LOGISTICS INDUSTRY

Marketing Manager
Anastasia Shevchuk

INTRODUCTION

While digital technologies have been revolutionizing the world through advances like The Internet of Things, Virtual Reality, Augmented Reality, Artificial Intelligence, Machine Learning, and Robotics, the logistics industry has remained largely outdated and inefficient, seeing little to no improvements to their traditional methodology and operations, even with all of this incredible technology available to them.

However, in addition to these technologies, there is one more whose potential is underestimated. There is actually another brand new technology whose impact on the world of logistics could be unprecedented. We are, of course, speaking about blockchain. While many people still believe blockchain is limited to cryptocurrencies, the real-world applications of blockchain in logistics and transportation could be staggering.

You may be interested in exactly how we might see blockchain technology in the logistics industry. As a result of logistics companies using blockchain technology, we expect to see increased efficiency, decreased costs, and enhanced end-user experience in the logistics industry.

But, first of all, let's take a look at another incredible solution to many of the problems currently faced by the logistics industry, electronic CMR, before diving into the world of blockchain.

CMR VS E-CMR

Logistics is still thought of as a paper-and-pen industry. Documentation for the regulation of road freight transport, known as CMR (Contract for the International Carriage of Goods by Road), has recently adopted a new form: electronic CMR.

These documents are required to contain the following information:


  • The date and place where the document was completed.
  • The name and address of the transport company and the consignee.
  • A description of the transported goods and the packaging method used.
  • The weight of the goods.
  • Charges related to the goods.
  • Information regarding dangerous goods.
Let's take a look at the e-CMR and its application in detail.

An electronic CMR is a digital document issued by a shipping party to the logistics service provider in charge of executing an international transport. The business party receiving the asset signs the CMR as evidence the delivery has been completed.

The driver of the transport company can easily carry the document on his onboard computer system, a separate tablet, or smartphone.

The most important difference between the paper-based and electronic versions is the signing process. Business parties sign the e-CMR with a PIN or QR code, while CMR is signed by hand. Data security is improved, and accountability is fully transparent with the e-CMR, which is a great example of how blockchain can help logistics companies.

Once the e-CMR document is signed, the responsibility for the vehicle is unambiguously transferred from the transport company to the buying business party.

ADVANTAGES OF E-CMR

E-CMR

Real-time availability

E-CMR's are available the moment a transaction has been completed. Currently, paper based CMR's need to be sent to shipping parties by the transport companies. This takes a lot of time and (FTE) effort for the shipping parties that need to make sure all CMR's are received.

Less disputes

Information provided by paper based CMR's is not always clear. Whether notes are illegible or damage information is separately provided and incomplete, the result is disputes between selling/buying partners and transport companies. E-CMR information provides clear, digital information with GPS and a date/time stamp, so no misunderstandings with regard to responsibilities can occur.

Now, let's move on to how blockchain will affect the global logistics environment.



WHAT IS BLOCKCHAIN IN LOGISTICS?

Blockchain in the logistics industry comes in the form of a decentralized public ledger system which documents all the changes to a record in real time. Armed with this data, companies can implement faster routes and eliminate unnecessary steps in the delivery process.

Distributed and decentralized ledgers reduce mistakes and save time. Smart contracts enable retailers and logistics companies to conclude agreements that will immediately dissolve if all the agreed-upon terms aren't met. These ledger-based contracts increase transparency and profits, while decreasing delivery time and costly errors.

APPLICATIONS OF BLOCKCHAIN IN THE LOGISTICS INDUSTRY

Let's look at a real use case of blockchain technology in logistics.
Walmart is a multinational retail corporation that uses blockchain technology to improve supply chain transparency and track provenance. Walmart recently began requiring lettuce and spinach suppliers to use a blockchain database. This means that in the event of contamination by food-borne illnesses, Walmart can identify the precise point of contamination through the blockchain.

This allows Walmart to ensure food tracking, traceability, and safety are at an optimum level. Walmart is now able to guarantee the quality of their products, which also saves them money and keeps them accountable. For example, if another Ecoli outbreak were to occur, they would be able to detect it before it reached stores and discard the affected foods, substantially reducing the likelihood of infected food reaching the consumer.

What's more, Walmart also offers customers the opportunity to scan products in-store and receive information about them instantly, including their source and the logistics processes involved in their journey from origin to retail outlet.


transportation

BENEFITS OF BLOCKCHAIN IN THE LOGISTICS INDUSTRY

Blockchain improves efficiency

Blockchain technology is set to revolutionize many industries. Freight and shipping companies can benefit from blockchain by improving their delivery processes. This effective method of tracking goods could significantly boost productivity levels and improve supply chains by enabling faster and more cost-efficient delivery. It also enhances the traceability of goods, enables better communication between partners, and, most importantly, simplifies access to monetary resources. Due to its decentralized nature, blockchain removes the need for intermediaries in payment processes.

Blockchain is immutable and secure

Blockchain helps companies track the exchange of products along the supply chain. After the successful exchange of goods and settlement of smart contracts, the data enters the public or private blockchain together with algorithmic signatures that are impossible to forge. To finish this process, blockchain uses hash functions that are displayed as unique mathematical data fingerprints. The supply chain transaction data is stored alongside information about both authors and timestamps. Anybody with access to the blockchain can track this information. Moreover, this information can be shared with customers to increase end-user transparency.

Blockchain speeds up payment processes

Blockchain keeps a detailed record of all communication records between everybody involved in the delivery process and makes any action trackable. As a result of its security features, payments are more secure and forged information can be easily identified. Due to the decentralized nature of blockchain, money transfers have a low risk of fraud or error. With smart contracts, payments are issued automatically as soon as the buyer has met all the criteria required by the consumer, making payment and invoice management faster and more precise.
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CHALLENGES OF BLOCKCHAIN IN THE LOGISTICS INDUSTRY

Privacy issues

Major issues associated with both individual and organizational privacy are just one of the challenges facing blockchain in logistics. Depending on the information contained within the blockchain, specific individuals and employees could lose their private data. Wages, personal information, and performance records may end up being made publicly available, so great care should be taken in these situations.

Organizational privacy data can include information related to intellectual property, performance, and costs without broader context. This confidential information should always be managed very carefully in an environment where transparency of information is the goal. This means there will likely be tensions surrounding how much, and what type of information, is to be shared. These are usually associated with transaction privacy issues.


Accessibility concerns

Smaller companies with limited knowledge and resources who want to take advantage of blockchain technology may find themselves at a disadvantage, particularly when it comes to organizations, transporters, and logistics companies in less developed parts of the world. This situation may also be relevant to sole traders and micro-enterprises, in which some blockchain activities can be used to replace lower-skilled jobs. These may be aspects of a 'digital divide' that may become larger as greater automation and information technology are used to make processes more efficient.

Staff training

Blockchain programming requires a mix of different software skills. It also helps to have an understanding of economies and businesses, especially your own business. You may have to train existing staff, hire new people who have these skills, or even outsource your blockchain development to a third party. The best choice for your business will depend on what your current situation and future aspirations are.

WHAT ARE THE FUTURE USES OF BLOCKCHAIN IN LOGISTICS?

Risk management is the process of identifying the factors which pose the greatest risk to your project's success, and the steps you can take to reduce and eliminate them. In some instances, you might decide to accept the risk if it won't have much impact on your project, team, and stakeholders.

You could do a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis at this point, focusing on the weaknesses of your project team and the potential threats to your project. Weaknesses might include something like the lack of technical skills in your organization, while a threat could be a competing product or constraint from outside your team that contributes toward the possible failure of the project.

SUMMARY

When implemented correctly, blockchain helps companies involved in logistics and supply chain management increase efficiency, reduce costs, and raise revenue by creating new products and services. However, many enterprises are struggling to implement the technology correctly simply because they don't fully understand it.
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