How Blockchain Technology Can Transform Global Supply Chains & Logistics

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By Kamogelo Mmutlana, CEO, Barloworld Logistics

As part of our 2017 supplychainforesight study, we are actively exploring and identifying the key technology trends that are shaping global supply chains. By understanding major trends, as well as their inherent risks and opportunities, leaders and decision makers within the supply chain sphere can immediately begin to integrate and harness key platforms. Notably, blockchain technology is fast emerging as one of the most transformative trends – and one that can redefine and reshape many of the existing systems and processes within logistics.

Although it is still a relatively new and somewhat vague concept among South African businesses, blockchain technology is developing fast and is undoubtedly poised to impact key functions within logistics.     

The blockchain is essentially a distributed ledger that exists in multiple nodes on a network, rather than in a single, centralised location (very similar to that of the internet itself). This distributed ledger is shared through peer-to-peer networks on computers and devices throughout the world. A consensus mechanism is built into this ledger that enables transactions between parties to be verified by the network.

This means that the need for a third party to act as an intermediary, such as a financial institution, is no longer required. By integrating this technology, the blockchain can thus enable a strong and secure exchange for shared logistics, coordinating a vast array of activities in a highly efficient way.

Such activities can include sharing unutilised space in a shipping container or warehouse, to optimising truck fleets. Added to this, stakeholders can eliminate supply chain opaqueness by having a record of all logistics transactions in blocks.

It can, for example, provide insights around drivers, routes and on-the-move goods and services. Furthermore, blockchain technology can yield important benefits with regards to B2B transactions – such as cross border payroll processing and smart contracts.

Streamlining with Smart Contracts   

One standout example of this technology already in use is a platform called Ethereum, a decentralised platform that runs smart contracts. These are contracts steered by applications that ‘run exactly as programmed, without any possibility of downtime, censorship, fraud or third party interference.’

For logistics stakeholders, the Ethereum platform is set to facilitate in negotiating prices and monitoring inventory levels that will result in minimising transaction costs and building more agile supply chains.

Take the information used during an export or import process, for example. If import terminals received data from bill of ladings a lot sooner in the process, shipping terminals and freight forwarders could plan and execute more efficiently…without jeopardising sensitive information about the owners and value of the cargo.

Also, costly delays and losses due to missing paperwork will be avoided.

Turning Theory into Transformation

When it comes to the actual implementation of this technology, stakeholders need to ensure that the necessary levels of trust and understanding are in place.

At the outset, trust may very well be low among certain parties, especially those that are accustomed to paper-based solutions. This trust would need to be established  - especially with operators verifying quantities within a warehouse or on-road fleet management.

Looking ahead, a successful solution would have to provide a trustworthy, practical and simple to use alternative to achieve the wholesale buy-in that is required.

Ultimately, blockchain technology will need to be used in a way that can integrate into all logistics operations – and this integration will need to ensure that the core functionality of blockchain can be leveraged by all operational systems for each party (e.g.. Warehouse systems, ERP systems, Transport Management Systems, etc).

If such integration can be achieved, this technology can be nothing short of massively transformational for local supply chain and logistics stakeholders.