Blockchain technology is causing a big disruption for logistics companies and has the potential to make the supply chain more efficient, transparent and secure. But what exactly is blockchain and how will it impact the supply chain?

Recently, U.S. blockchain company Skuchain partnered with NTT Data to build a blockchain platform for supply chain and logistics management. The platform combines blockchain technology with IoT and innovations, such as RFID. The solution has been trialed in Japan’s manufacturing sector and has successfully been used to improve supply chain efficiency. Blockchain offers the ability to track and trace goods throughout each point of the supply chain, from manufacturing to sales. The technology reduces stock wastage, increases efficiencies and provides companies greater control over their supply chains.

Chains of Freedom

As businesses become more dependent on global supply chains for goods and services, the freight and logistics industry will play a much more critical role. Currently, the industry is controlled by freight brokers who help facilitate transactions of loads from shippers to carriers by adding a markup. This not only increases the costs for the carriers, but also of the downstream prices to the consumers. The sheer number of these intermediaries magnifies the problem multifold. Another problem is cargo theft. Cargo theft causes losses of approximately $30 billion per year. Since the nature of ownership is distributed, this means there is no one party that is accountable.

Traditional supply chains have relied on physical movement of lot of large volumes of paper documents. For example, a shipment of flowers from the Kenyan port of Mombasa to Rotterdam generated dozens of documents and hundreds of communications involving farmers, freight-forwarders, land-based transporters, customs brokers, governments, ports and carriers. This can result in huge challenges in efficiency, tracking and theft.

Blockchain can help to solve these challenges of efficiency, transparency, tracking and security. For example, by using smart contracts (that are automatically triggered when pre-defined conditions are met), it can eliminate or drastically reducing the role of intermediaries. Danish giant Maersk has partnered with IBM to use Blockchain based approach to put all documents into a single template based workflow, which is triggered when farmer submits the packing list. As each step in the supply chain is completed, the documents are captured and shared so that all the participants can see what has been submitted, when they were submitted and by whom. No party can modify a record without consensus from others on the network.

Some companies have already started using blockchain to solve business challenges and are commercially available.

What Does This Mean for Supply Chain Solution Providers?

According to a new report from Tractica, annual revenue for enterprise applications of Blockchain will increase from $2.5 billion worldwide in 2016 to $19.9 billion by 2025.

A cloud platform enabled blockchain service will present opportunities to integrate next generation technologies with Blockchain and help customers redefine their business by meeting their Blockchain-related requirements. Solution providers need to enhance their offerings to enable their customers in improving the efficiency, security and transparency of their multi-party processes and collaborative supply chains. It’s not too early to start thinking about developing Blockchain extensions to their existing applications, especially in the following areas:

  1. Logistics and transportation
  2. Collaborative workflows
  3. Multi-echelon, omni-channel fulfilment
  4. IoT: Blockchain stores manage, protect and transfers the smart information from smart appliances and smart chain sensors

Read JDA’s recent white paper, “Blockchain: Will it Change the World?” for more information on blockchain technology and the impacts it’s having on the supply chain already.