Almost all major manufacturing companies have a global footprint and continuously move materials from one geographical region to another. Multiple service providers — Freight Forwarders, third party logistics service providers, and carriers — work together in moving materials and act as parts of one single shipping network. Effective collaboration among all these different types of organizations is critical to the success of any supply chain.
Blockchain architecture, which was evolved from distributed computing theory, helps creating a distributed digital ledger that can be shared among different parties and still keep the data clean and accurate. After creating the first impact in digital currencies, Blockchain is now a significant focus area in Logistics.
Blockchain features, such as distributed data architecture, the ability to broadcast the same information to the entire shipping network without any data inconsistency, and reliable data history, make Blockchain a reliable way to operate the shipping network efficiently.
Several blockchain projects for logistics are currently in progress. Two major consulting companies — Accenture and IBM — are currently trying to create public blockchain platforms for global logistics. IBM, in collaboration with Maersk, started the blockchain-based platform called Tradelens.
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IBM’s Tradelens brings together three significant collaborators — Customers, such as manufacturing companies, Service providers, such as logistics service providers, and application vendors — to create an end-to-end shipment tracking digital ledger. Accenture’s project tries to create a similar digital ledger (to hold all bill of lading information), which would act as the single source of truth for all supply chain members — Shipper, Receiver, and Carrier.
Apart from the above two projects, there are few other private blockchain projects currently in progress at various stages. The success of these public or private blockchain projects is dependent on the participants’ commitment to keeping the digital ledger updated always.
Blockchain Readiness Check
All these initiatives claim to help streamline the logistics process. Given blockchain’s complexity, cost, and ability to disrupt operations, Blockchain may not be suitable for all organizations. At the same time, staying in the sidelines can risk an organization’s ability to compete with its competitors. Below are the indicators an organization should look to decide whether blockchain can help optimizing its logistics operations.
Global Presence — If an organization works in multiple countries and works with a significant number of third-party logistics service providers, then the organization will be able to get the maximum benefit from the Blockchain-based logistics platform.
Value of Asset in transit — Millions of dollars’ worth of inventory in transit at any given point of time would make blockchain a worthy investment. However, if inventory movement is seasonal or occasional, then Blockchain adoption may not make a significant difference in improving supply chain efficiency.
Custom clearance — Ports and customs authorities follow complicated and time taking customs clearance processes. The blockchain-based digital ledger can help to overcome such bottlenecks in inventory movement.
Complicated EDI — EDI (Electronic Data Interchange) messages are continuously exchanged among supply chain partners to carry out the shipping efficiently. If the supply chain is operated by temporary participants (it happens when an organization relies on the marketplace to find carriers on demand), Public blockchain-based logistics platforms will help to reduce the dependency on EDI or replace EDI.
Unless an organization finds any of the above scenarios relevant to its supply chain, Blockchain implementation can prove to be costly and complicated.
Considerations for Successful Implementation
Below are the considerations to evaluate public blockchain-based logistics platforms.
Open APIs Accuracy — Understanding the platform’s current data quality is an essential step in evaluating a blockchain-based logistics platform. Open APIs — Weather, Road or Sea traffic Data APIs — provide significant amount of data that can make or break the digital ledger data quality.
Technology Platform Architecture — Digital ledger should have high availability across the world and a proven disaster recovery process.
Collaborators— Digital ledger maturity is solely decided by the number of participants present in the platform. If there are not enough supply chain partners readily available in the digital ledger platform, adoption of that platform may not prove to be successful. Choosing the blockchain-based system, which has a good number of participants, would not only provide better data but also reduces the implementation cost significantly.
Data Security — Data security is an integral feature of the blockchain. However, ensuring the platform level data security is necessary to select Blockchain platform for logistics.
These considerations are applicable mostly for public blockchains. Unless there is a strong ROI or legal requirement to use private blockchain, it is better to use a public blockchain. The public blockchain is more collaborative, which is necessary to track assets in transit efficiently across the world.