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THE IMPACT OF BLOCKCHAIN ON THE LOGISTICS INDUSTRY

Marketing Manager
Anastasia Shevchuk

INTRODUCTION

As digital technologies revolutionize industries through advances like IoT, VR, AR, AI, machine learning, robotics and more, the logistics industry remains largely outdated and inefficient, missing out on improvements to methodology and operations. IoT, VR, AR, AI, machine learning, robotics have already offered a bunch of genius solutions to the logistics industry.

However, next to all the above mentioned technologies, there is one more whose potential is underestimated. Yes, we mean blockchain. While the majority of people think that blockchain is limited to cryptocurrencies, its real-world application scenarios are innumerable.

Perhaps you are interested, how blockchain will affect the global logistics environment? So, blockchain technology is expected to increase efficiency, decrease costs and enhance end-user experience in the logistics industry.

But, first of all, let's have a look at one more great solution in the logistics industry: electronic CMR and then dive into the world of blockchain.

CMR VS E-CMR

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

Such documents must have the following information:
the date and place where the document had been completed;
the name and address of the transport company, as well as the consignee;
the description of the transported goods and the packaging method used;
the weight of the goods;
the charges related to the goods;
the information regarding dangerous goods.
Let's consider the e-CMR and its application in details.

The electronic CMR is a digital document that is issued by the shipping party to the logistics service provider that executes the international transport. The business party that receives the asset signs the CMR as evidence that the delivery has been completed.

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

The important difference between paper-based and electronic versions is in the signing process. Business parties sign the e-CMR with pin code or QR code while CMR is signed with pencil. Data security is improved, and accountability is fully transparent.

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

ADVANTAGES OF E-CMR

E-CMR

Real-time availability

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

Less disputes

Information provided through paper based CMR's is not always clear. Notes cannot be read, damage information is separately provided and incomplete. This leads to disputes between selling partners/buying partners and transport companies. E-CMR information provides digital, clear information, with GPS and date/time stamp, so no misunderstandings on responsibilities can occur.

Let's move to blockhain technology in logistics now!

WHAT IS BLOCKCHAIN IN LOGISTICS?

Blockchain in the logistics industry is a decentralized public ledger system that documents all changes to a record in real time. Armed with that 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 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 take a real use case of using blockchain technology in the logistics industry.
Walmart, a multinational retail corporation uses blockchain technology for improving supply chain transparency and tracking provenance. Since recently, Walmart requires lettuce and spinach suppliers to use a blockchain database. In the event of contamination by food-borne illnesses, Walmart can identify through the blockchain the precise point of contamination.

This allows Walmart to ensure food tracking, traceability, and safety. Walmart is now able to guarantee the quality of their products which also saves them money and keeps them accountable. If another Ecoli outbreak occurred they would be able to detect it before reaching stores and discard the affected foods, substantially reducing the likelihood that infected food will reach the consumer.

What is more, Walmart has also offered an opportunity for scanning products in-store and receiving instant information about them, including their sources and the logistics processes involved in their journeys 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 to improve their delivery processes. This effective method of tracking goods could significantly boost productivity levels. Blockchain improves 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 can be seen as unique mathematical data fingerprints. The data about supply chain transactions is stored along with information about authors and timestamps. Everybody 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 all communication records between everybody involved in the delivery process. In blockchain any action is trackable, and due to 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 demanded by the consumer. Payment and invoice management is faster and more precise.
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CHALLENGES OF BLOCKCHAIN IN THE LOGISTICS INDUSTRY

Privacy issues

Major issues are associated with both individual and organizational privacy. Depending on the information provided in the blockchain, specific individuals and employees may lose their private data. Wages, personal information, and their performance may be publicly available; care should be taken in these situations. Most of the listed are identity privacy issues.

Organizational privacy data may include information related to organizational intellectual property, performance, and costs without a broader picture. This confidential information should be managed carefully in an environment where transparency of information is a goal. Thus, there will be tensions involved in how much and the type of information to be shared. These are usually associated with transaction privacy issues.

Accessibility concerns

Smaller companies with limited knowledge and resources wanting to take advantage of blockchain technology may be at a greater disadvantage and be further disadvantaged. This inequity may occur to organizations, transporters and logistics companies, in less developed regions of the world. This situation may also be relevant for sole traders and micro-enterprises, where some blockchain activities may 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 takes a mix of software skills. It also helps to understand economies and businesses, especially your business. You may have to train staff or hire new people with these skills. You could also outsource your blockchain development to a third party. The best choice for your business will depend on your current situation and future aspirations.

WHAT IS THE FUTURE OF BLOCKCHAIN IN LOGISTICS?

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

You could do a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis at this point, focusing on the weaknesses of your project team and the threats your project faces. Weaknesses might include factors such as the lack of technical skills in your organization, while threats include competing products or other constraints from outside your team that could contribute toward the failure of the project.

SUMMARY

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