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5 potential benefits of blockchain in supply chain logistics

Blockchain is poised to disrupt a number of industries -- including logistics. Here's how the technology might help get products into the hands of customers more efficiently.

The exponentially heightened expectations of modern customers makes supply chain logistics far more difficult. Thanks to the Amazon effect, customers want what they want, how they want it and as soon as they want it.

Enter one of today's most-hyped technologies: blockchain.

Blockchain for supply chain logistics can enable digital information sharing across a complex network in a trusted and secure way.

Here are five ways blockchain in logistics can help suppliers, manufacturers, distributors and retailers meet the demand for quicker, more convenient delivery of a wider variety of goods.

1. Validate provenance along the supply chain

Additional scrutiny of high-value assets and high-value goods is necessary as they move throughout the supply chain, said Greg Carter, CTO at GlobalTranz, a transportation and logistics provider based in Scottsdale, Ariz. Blockchain offers validation that there's been no disruption or corruption of the data when it comes to handling high-value goods.

The same applies to items such as perishable goods and pharmaceuticals.

"If we can prove the provenance at any of the touchpoints along the way using a blockchain, especially a standards-based blockchain, it gives us even more confidence," Carter said.

Being able to prove the provenance and proper handling is a key factor in logistics, especially as logistics moves to more of a consumer model.

"Businesses want goods to move fast, fast, fast, fast," Carter said. "They want Amazon Prime-type delivery on some pretty expensive, complex goods. And being able to have that verification [throughout the supply chain] is really critical."

2. Create transparency

The biggest benefit of using blockchain in supply chain logistics is transparency, said Andy Stinnes, a venture partner at Cloud Apps Capital Partners in San Francisco.

Transportation logistics is the one area of the supply chain where the complexity of having to deal with and coordinate across many partners is particularly evident. The value proposition for blockchain in supply chain logistics is the ease of information exchange, Stinnes said.

Getting an accessible and consistent view of data is difficult, Stinnes points out. Blockchain is meant to solve that problem. "So this is why everybody is so excited about blockchain in supply chain in general and transportation logistics in particular."

3. Offer quality assurance

[Businesses] want Amazon Prime-type delivery on some pretty expensive, complex goods.
Greg CarterCTO, GlobalTranz

Using blockchain in supply chain logistics allows all the authorized participants in a transaction to access critical data to validate the milestones of that transaction, Carter said.

"For example, you have a repair depot and you're getting spare parts supplied to you and you're doing repairs for some critical device," he said. "You're able to ensure that the repair has been validated, tested, and maybe you include the test results at the repair facility in a public blockchain or a supplier blockchain." He said that blockchain should prove the test results, the provenance of the parts and potentially even the certification of the technician doing the repair.

4. Provide cost savings

Stinnes believes that implementing blockchain will also help companies save money.

"If you look at any one shipment, there are invariably places where it sits waiting for information to catch up, to be validated, to be understood," he said.

Blockchain has the potential to obviate a number of manual transactions currently required in transportation logistics practices, creating more efficiency and lowering room for error.

In turn, that creates cost savings because shipments will get to their destinations faster, Stinnes said.

"Lower inventories [should come] as a result of more responsiveness, and transportation costs will go down because of that efficiency gain along the way," he said.

5. Boost track and trace

With blockchain there's an "immutable record" of all the transactions and all the loads that move through the system, said Jason English, analyst and CMO at Intellyx, a digital transformation advisory firm based in Suffolk, Va.

"You can even do cold chain tracking, so you have sensors that report back the temperatures of pharmaceuticals or food that need to be kept at certain temperatures throughout the transport," he said.

Companies can use blockchain to track a product from its origin and determine whether it's made of the correct materials and whether it was actually made by the manufacturer that shipped it, preventing fraud by ensuring that fakes aren't being shipped. And in terms of theft, blockchain allows companies to determine if the chain of custody is interrupted at any point in the transport.

"You're confirming that orders have been picked up and they've been transported over [certain] geolocations and delivered at a certain time, so people have this immutable record that these products have always been tracked throughout the process of moving through the supply chain," English said.

Major barrier to adoption

Blockchain for supply chain logistics is still in its infancy, so it is rife with problems. The lack of standards is a major barrier to adoption, Carter said.

But as organizations realize the broader implications of the technology, the big vendors such as Oracle, IBM and SAP all try to rush in and design a standard.

"Not being able to talk amongst blockchains is actually a pretty big deal," Carter said. "And you can't stitch together different blockchains without some common way of both communicating and exchanging data."

Consequently, more consortiums and standards bodies are popping up to solve this problem. GlobalTranz is a member of the Blockchain in Trucking Alliance (BiTA), a group of executives and companies dedicated to developing and promoting blockchain technology standards in the logistics and trucking industry.

"BiTA actually very quickly came out with a draft standard for data exchange around track and trace that I think looks pretty tight," Carter said. "I'm thinking within the next five years we'll start to see more industry-specific consortiums and more domain standards."

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