The logistics industry keeps the world running. Without goods, products, and components, countless other industries would find themselves inconvenienced. But consumers rarely consider what goes on behind the scenes. Those working in logistics, however, know that the struggle is real.
Problems such as inventory control, manpower management, delays, customs issues, lost items, and stagnant business processes cost the business millions, if not billions of dollars every single year.
But in the last few years, blockchain technology has been touted as a way to solve many of the issues that plague the sector. But does it live up to the hype? As a small logistics business owner, or someone considering starting a logistics company, blockchain could well be worth your consideration.
What is blockchain?
Blockchain was only a concept in the 1980s, and it got implemented in 2008. Satoshi Nakamoto, the person or group behind Bitcoin, used blockchain to power its cryptocurrency and to record all transactions.
In simple terms, blockchain is an interlinked and perpetually expanding list of records. Each record or ‘block’, is linked to the one before it, and each subsequent one is based on the previous. Cryptography creates the link, and each individual block contains a hash that includes information on the block before it, a timestamp, and data related to the specifics of the transaction.
A blockchain is typically spread over multiple nodes or computers and it is replicated in real-time and in an identical manner across each of them. This further contributes to the security aspect of blockchain as it makes it impossible to hack or tamper with. If information is spread over a potentially infinite number of nodes, a hacker or fraudster can’t tamper with every single one.
But isn’t blockchain just for cryptocurrency?
No! There are two main kinds of blockchain; public and private. A public blockchain such as the one that bitcoin runs on is open to everyone. It can be seen and contributed to by anyone who wishes to participate. A private blockchain is one whereby participants are approved, usually by the person that set it up, or via a set of predefined rules. Typically, private blockchains are used in business solutions.
Private blockchains are designed for a variety of different businesses and sectors. This started with the financial sector, moved into fintech, education, healthcare, governance, and, of course, supply chain and logistics. There is quite literally an unlimited number of potential use cases for blockchain technology.
How is blockchain used in the logistics sector?
Overall, the logistics sector is becoming more digitized, but it is still plagued by a variety of problems. Transparency, accountability, losses, and tracking products as they move through the chain, typically prove challenging. Blockchain, however, has been incorporated into a growing number of companies and is revolutionizing the way things are done.
Here are some examples…
Food distributors are just one example. Consumers are becoming more conscious, and they want to know where their food has come from. They also want to know it’s been produced and transported in an environmentally friendly manner. Previously, consumers relied on trust, but with blockchain, every step of the process is recorded and verified.
You can track a coffee bean from field to cup, a grain of corn from crop to loaf, and a burgundy grape from vine to a wine glass. This provides customers with greater confidence in the products they are buying.
The US Department of Agriculture is currently working with a blockchain company to trace and verify the journey beef takes from farm to table. This exemplifies how it can enhance the supervisory and regulatory process as well.
Some 1.7 million parcels and letters are lost every day in the US mail and delivery sectors. This is a huge issue for couriers, postage companies, and, of course, consumers. While blockchain may not completely solve the problem, it can provide greater accountability. The item’s process can be tracked step-by-step, automatically, and everyone involved can follow it. Big names in the market such as FedEx have already spoken out in favour of blockchain, and the power it has to transform existing systems.
In the shipping industry, blockchain platforms have brought together competitors, governments, port authorities, and other stakeholders, to create new ways of doing things. Their solutions reduced shipping times, cut back on paperwork and bureaucracy, and lowered operational costs. Blockchain-powered technologies, such as smart contracts, cut down on manpower, resulting in a lower incidence of human error.
What’s a smart contract?
A smart contract is a digital, self-executing contract that exists on a blockchain network such as Ethereum. It’s coded to follow a set of predefined steps, each of which depends on the completion and cryptographic verification of the previous one.
For example, a smart contract for the transport of a package from a factory in China, to a doorstep in the US, would include steps such as ordering, payment, processing, packing, dropping off at the courier, processing by the courier, and each subsequent step of the journey. If one of the steps is not completed successfully, the process will not continue until the transaction is registered on the blockchain.
This process has huge advantages for the logistics industry as a shipment’s progress is not dependent on the manual action of a person. A product or item can be moved through the chain automatically, without waiting for someone to check the paperwork or execute certain actions. This saves considerable time, money, resources, and lessens the risk of mistakes. It also encourages greater transparency and accountability, making it harder for things to disappear along the way.
Great, but it sounds like it’s only for big businesses?
At first, perhaps blockchain was just for big companies with the budget to develop and implement blockchain projects. But now, much of the work has been done for you. Over the last decade, many blockchain solutions have been rolled out for businesses operating in almost every sphere.
The annual global business spending on blockchain technology is around $7 billion, but at the current growth rate, this is projected to reach $40 million by 2025. Almost all forecasts from different sources predict massive growth in the coming years. This is mainly due to the financial sector’s investment in blockchain, but logistics comes in second place.
The US is leading the way in blockchain spending, but Europe and Asia are not far behind. Those that haven’t yet invested in blockchain, are generally planning to do so soon. Statistics from Deloitte show that 39% of business owners plan to invest in blockchain technology within the next year. Furthermore, cash venture capitalists are willing to invest in blockchain startups- as much as 79% in 2019.
More than half of businesses said blockchain will be a critical part of their strategy. Almost 90% believe it will become widely adopted soon, and 83% said they believe failure to implement it will result in a loss of competitiveness.
The compound annual growth rate of the logistics blockchain market is a staggering 54% between 2020-2024, equating to over $811 million. Experts say this will be driven by more logistics companies integrating the technology, particularly in trucking to prevent theft and loss. The figures speak for themselves- blockchain technology is here to stay, and businesses of all sizes are either implementing it or planning on implementing it in the next few years.
A few years ago, cynicism around blockchain was rife, and rightly so. At that time, proven use cases were rare, and the implementation was in its infancy. But times have moved quickly, and your business can now enjoy Blockchain’s benefits just like Maersk, FedEx, UPS, Vinturas, British Airways, Kuehne + Nagel, and some of the world’s largest logistic companies.
How can I incorporate it into my logistics company?
You don’t have to create a blockchain solution from scratch. There is no need to code your own distributed ledger, troubleshoot it and move all of your operations onto it. Thankfully, most of the groundwork has been done for you. There are many service providers out there that offer out-of-the-box blockchain solutions or can bring you onto their private blockchain.
As a logistics business or startup, finding a blockchain-savvy corporate service provider is key to success. Fast Offshore can assist with Blockchain company formation, bank account setup, negotiating with payment providers, compliance and even ongoing maintenance. Contact us today!
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