According to a report published in the Valuates Reports under the Transportation & Logistics category, the global logistics market was valued at USD 7,641.20 billion in 2017 and expects to reach USD 12,975.64 billion by 2027.
Although the projection seems like a lucrative industry, many freight and logistics companies miss a significant portion of profits for various reasons, including inefficient practices, manual data entry, use of technology in silos, and cyber-attacks which account for about yearly losses of $50 billion. Besides, the logistics and freight business comprises highly complex processes, with diverse stakeholders, varying interests and many third-party intermediaries.
Blockchain can be a game changer for logistics companies. It can help eliminate operations barriers, inaccuracies and fraud, save time and cost, boosts transparency and efficiency and increase revenue by approximately 15 percent.
What’s clear at this point is that blockchain applications may have one of the most profound impacts on the logistics industry, to drive efficiency and enable new business models.
What is blockchain, and how does it work?
Blockchain is a peer-to-peer network technology that builds, stores, and maintains digital data in the form of distributed ledger that makes them tamper resistant. Stakeholders involved in a blockchain (banks, carriers, logistics, forwarders, individuals, companies etc.) can interact with each other and create various kinds of records (shipment details, transaction records, financial statements, certificates, etc.).
In a blockchain, only verified records are stored and combined to form a block of data and then linked with previous blocks to create a chain of blocks called ‘Blockchain’. Data in a blockchain is stored chronologically, and every block in the chain contains data from previous blocks. The whole database is then auto-replicated and stored on different nodes of the system. Thus, it is almost impossible to tamper with the stored data as it would require making changes in every node across the entire network simultaneously. Above all, blockchain technology allows access to the data basis the private or public permission given to the concerned.
Blockchain-backed supply chain platform provides access to the same information to all stakeholders involved, thus reducing the time for communications and data transfer errors. The secured platform facilitates data exchange through a distributed ledger of all relevant information in real-time, which used to take days earlier.
In a broad sense, blockchain can harness the following benefits in the logistics industry.
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Improve Efficiency
Blockchain can greatly improve the way logistics and freight business are carried out currently by automating each business transaction and enabling a more direct relationship between each participant. The use of blockchain can effectively enhance the delivery process with tracking and improve the productivity of freight & logistics companies.
Blockchain can improve the efficiency of the supply chain by automating the paperwork, storing data in a tamper-evident digital format, eliminating silos, and effectively tracking in a multi-stakeholders ecosystem. It would automate and facilitate each business transaction by storing information in a tamper-evident digital format. Blockchain technology also ensures tracking a shipment’s lifecycle and ownership transfer from origin to last-mile delivery, even if it changes the hands of various stakeholders involved.
Data transparency
Due to the low transparency and fragmented structure involved in the freight and logistics industry, the work process becomes complex as it involves multiple parties. Blockchain technology provides mechanisms to ensure the data stored are verified, accurate, and tamper-proof. Thus, in a blockchain, every stakeholder receives controlled access to a shared database creating a single source of truth. So using blockchain technology in the supply chain ensures data transparency and access from a single database that consists of the most recent, accurate, and reliable data.
Enhance Collaboration
The supply chain process involves multiple stakeholders working together in collaboration with each other and exchanging the flow of information and financial transactions. But today, the industry is largely fragmented and working in silos, making it highly complex to operate with low transparency and diverse technology adoption. Blockchain can potentially help to unlock the value in the supply chain efficiency and overcome these challenges. This technology also enables data transparency by streamlining information-sharing processes, supporting decision-making, and strengthening communicative relationships with supply chain partners.
Improves response time and saves costs
Blockchain technology in the supply chain has a huge potential to optimize the cost as well as time associated with trade documentation and administrative processing by powering leaner, more automated, and error-free processes. Also, by boosting supply chain transparency and automating administrative operations, the technology can help in the visibility and predictability of logistics operations. Thus, blockchain not just increases efficiency and decreases cost but also improves relationships among all the stakeholders.
In the future, we can anticipate blockchain technology will bring an era that will transform the highly fragmented supply chain industry and effectively sync the information and financial flows when combined with the IoT, artificial intelligence, robotics and more.
But despite all the hype surrounding blockchain today, the success depends on how the industry perceives leveraging new technologies and embracing ways of rethinking old processes in the digital era. While there are still many challenges and potential to explore in the supply chain using blockchain technology, the industry is supposed to see a significant transformation in the years to come.