More than a hundred years ago, supply chains were relatively simple because trade was local, but over time and globalization, they became too complicated.
Given the complexity of managing today's supply chains - hundreds of international (geographical) locations, a pile of paperwork and bills, parties and dozens of people involved, it is challenging to maintain high quality and eliminate potential human error.
The main problem is the lack of transparency between customers and manufacturers, poor communication between manufacturers and suppliers, as well as difficulties that may occur at each stage of delivery. Fortunately, blockchain technology is there to help address this challenge.
Precisely because of the complexity and non-transparency of supply chains, there is interest in a blockchain that could transform the supply chain and the entire logistics industry.
Today, more and more industries are exploring the possibilities of blockchain. Due to Bitcoin, the most popular cryptocurrency, this technology has already demonstrated countless opportunities in the financial field. Entrepreneurs from many industries are trying to take advantage of this technology in a variety of domains, and its capabilities are quite impressive.
You need to know the capabilities of this technology so you can choose the correct implementation strategy to improve the quality and performance within supply chain management.
What is a blockchain and how could it help supply chains?
Blockchain technology is a standard digital book or database that stores a register of ownership and transactions over a peer-to-peer computer network. It is secured by cryptography, and over time its history is locked into blocks of data that are cryptographically linked and secured. Appreciated for its ability to verify, record publicly, and distribute transactions in immutable, encrypted books.
The technology is designed to support transactions of bitcoin, a digital cryptocurrency that operates independently of the central bank. Blockchain provides a platform for creating and distributing general ledgers or records of every bitcoin transaction millions of computers connected to networks in all parts of the world.
Because of encrypted transactions and books, blockchain technology offers greater security than the banking model. Instant online transfer eliminates the two-day and three-day bank clearing process and the associated costs of transferring money from one account to another.
Because of blockchain hype in the world of cryptocurrencies, many still assume that this is its only application. In the past few years, researchers and practitioners’ attention has shifted to the application of blockchain technologies to other domains as well.
Blockchain technology can improve supply chain management in several ways. Blockchain technology can increase the efficiency and profitability of most (if not all) companies. Still, many wonder if this technology can solve supply chain problems and increase profitability?
Thanks to its ability to ensure the consistency and public availability of data flows, blockchain technology can increase the efficiency, reliability and transparency of the entire supply chain and optimize input processes.
Because the blockchain allows funds to be transferred anywhere in the world without using the services of a traditional bank, it is suitable for a globalized supply chain. Blockchain in the supply chain ensures reliability and integrity, helps cut logistics costs and optimizes operational and research challenges. Blockchain records cannot be deleted, which is essential for a transparent supply chain.
Blockchain technology can combat the complex problems faced by the current supply chain and logistics industry. Blockchain distributed ledger technology allows transactions to be recorded in a block that circulates in multiple identical copies across multiple nodes while maintaining a transparency factor. The DLT (Distributed Book Technology) blockchain provides a consensus on the reliability and integrity of transactions taking place in the supply chain.
Why is it important to understand blockchain technology?
There are many ways to use this technology. The main advantages of the blockchain are its transparency and ability to optimize the digital information ecosystem. Blockchain allows companies to use smart contracts that automate the entire purchase process while saving time and costs, which is precisely what the Hubbig digital platform does. Blockchain can help companies make the supply chain more secure and improve the flow of transactions. Each product gets a specific label that allows companies to secure their supply chains in just a few clicks.
A note allows you to store information about authenticity, origin, certificates of ownership, storage location, and records. Therefore, all the necessary information is stored in one place and is easy to get access to, which makes the supply chain completely transparent. At the same time, blockchain technology helps cut fraud and theft of goods.
By understanding its capabilities, many startup companies are beginning to use this promising technology even in areas unrelated to cryptocurrencies and finance. First of all, blockchain offers many solutions for those who seek to improve security and make sure that working with digital data is more transparent.
The logistics industry includes many parties: manufacturers, customers, suppliers, auditors. Blockchain technology offers benefits for every link in this chain. It enables clients to check the product, i.e., the complete chain of its production, and auditors can easily check all transactions. Once added, information stored in the blockchain cannot be changed by third parties, which makes this technology more secure than any other solution.
The impact of blockchain on the transportation industry
The effect of blockchain is far-reaching as it affects suppliers, manufacturers and end-users. The key is to adapt to new trends.
Our way of life depends on the transport of products, services and values. Elizabeth Drew, a writer with many years of experience in logistics, emphasizes this sector's role in the global economy: "The logistics industry provides jobs to more people than any other industry. It is continually growing, and we need to implement creative solutions to cope with the growing transport needs."
Blockchain increases efficiency and reduces costs because data is available in near real-time. For example, the use of blockchain technology is of great benefit in the maritime industry because information can be verified through a reliable source. Improved data can lead to a more transparent storage chain and cut several discrepancies and contentious costs incurred by exceeding deadlines.
Blockchain verification allows transparency when cargo loading that is synchronized with GPS data to reduce the possibility of theft. It can also eliminate common issues of double mediation and lost paperwork.
The "Internet of Everything" creates new challenges related to connected devices. They require a higher level of security, and blockchain is the best solution so far because advanced encryption methods and smart contracts ensure its protection. These blockchain features help fight theft, corruption, ransomware, premiums, and tracking issues.
Examples of good practice
Maritime transport is the best example of an industry where efficiency can be increased through blockchain technology.
One of them is the Israeli container transport company ZIM, which tested how to digitize the bill of lading. This essential shipping document has crucial information such as destination, product description, measure and cargo handling. During trial testing, they issued, received and transferred bills of lading via the blockchain system.
For containers shipping from China to Canada, they used the Wave app to send, certify, and manage shipping and trade documents via a secure decentralized network. The containers are delivered to the destination in this way without any problems and in the safest way. Shippers, importers and traders can use this application for free.
The Walmart retail chain uses blockchain to focus on food safety, tracking and traceability. For example, the company is already conducting tests using a technique to track food products such as mangoes from Mexico and pork from China.
Through the blockchain system, the company can ensure the quality and exact condition of food during transit. Unilever, Nestlé and Dole also use similar methods. Blockchain technology makes it easier to find problems and speeds up finding sources of salmonella in food products.
Lynx, a subsidiary of Chinese Alibaba, has announced successful blockchain integration for its cross-border logistics operations. Their system can track all relevant data on the import shipment, such as details of production, mode of transport, customs, inspection and even third-party certification.
Technology giant Microsoft has also implemented this technology. It has partnered with Adents, a provider of supply tracking solutions, to develop a new platform for tracking products from the point of origin along the entire supply chain using blockchain and AI.
Blockchain implementation challenges in logistic
Many obstacles and challenges are facing the industry - from the cost of implementation to the standardization of blockchain technology.
Considering all the possible benefits that blockchain technology can offer in thriving supply chain management, there are also several significant challenges that the logistics industry could face in adopting blockchain.
Lack of support in the industry: Although blockchain is quickly attracting attention, it still lacks the usual standards and practices. When logistics and supply chain management companies embark on technology research, they are often discouraged by the lack of a common framework.
Limited understanding of blockchain: One of the biggest problems of blockchain is that many of companies in the logistics industry do not have a basic understanding of what a blockchain is and often confuse it with IoT or artificial intelligence.
Poor data quality: The blockchain supply chain relies heavily on data entry and the people who collect the data. For example, if a food supplier has to monitor a product, it may need its parameters - weight, destination, etc. If the person working on the data entry accidentally or intentionally set the value incorrectly, the output product will be confusing.
There are several ways companies can overcome these risks
Advocating for regulation. Monitoring the use of technology, as well as a set of guidelines that developers need to follow, will make the industry safer.
Creating and joining communities that introduce blockchain into the supply chain. Building a community is key to spreading technology. Through papers, e-books and other promotional materials, give companies a better understanding of technology and the benefits of blockchain in logistics.
Knowledge sharing. Investors and business managers continue to treat the blockchain as an unreliable trend or a bubble that will soon burst. By sharing knowledge about technology applications, you can increase the level of trust in the blockchain.
Make a long-term plan for blockchain adoption. Redesign the current way of working within the company and replace it with blockchain.
Find partners interested in adopting a blockchain. The most impressive blockchain innovations are the result of successful collaboration. For companies seeking blockchain adoption, the partnership is crucial.
Market research. Find a few examples of successful use of technology to prove to investors that blockchain technology is capable of providing a high return on investment.
To solve the problems of blockchain adoption, new technology must be integrated into the existing IT ecosystem. Certain types of transaction data are shared with different partner applications, and the same can be done with a blockchain. This approach allows companies to use existing information in local databases and, at the same time, take advantage of new technologies. Living data can be moved to the blockchain architecture, integrating with existing systems. Disadvantages associated with block input and data deduplication errors can be eliminated using data mapping technology.
The transport and logistics industries require new technologies to improve existing processes, reduce costs, increase supply chain transparency, and reduce potential errors.
Blockchain technology offers a solution to current problems. There are particular challenges related to the blockchain implementation, but the more companies start applying this technology, the more joyful and successful examples of its use will be. Several effective implementation strategies are now being tested, and the industry will change forever with more organizations involved.
Adopting blockchain-based digital invoices will enable the right documentation and fast transfer of original documents. It will make the supply chain more efficient and reduce unnecessary transaction costs. According to industry estimates, more than 10% of freight bills contain inaccurate data and this is precisely the kind of inefficiency that needs to be changed.
For logistics companies to fully embrace the new way, a few more steps are needed. First, logistics companies need to digitize and standardize their data. Then, once the industry-wide standard is applied, companies must form a supply chain partner ecosystem to use it in a shared blockchain environment. The argument for accepting a blockchain is simple: it delivers much-needed data reliability while saving time and money.
Blockchain still has its limitations and challenges. The lack of a regulatory framework, poor understanding of technology within the community, has yet to alleviate. However, even as a stand-alone investment, blockchain will be of great importance in terms of traceability and transparency within supply chains.
If you want to digitize and speed up the process of sending and receiving shipments, do it in the shortest possible time, with smart contracts and online orders, choose the Hubbig digital platform and ensure simpler and easier business.