The logistics and supply chain industry has been one of the main fields for Blockchain adoption in the past few years. In 2018, the number of companies looking into the technology to ease the process of delivery and make the supply chain more traceable will likely continue to grow rapidly, as the latest players to announce plans for Blockchain adoption were South Korean electronics giant Samsung and Walmart, the world’s largest discount retailer.
While Blockchain’s potential to improve the logistics industry has already been academically proved, the number of industry players continues to grow. At this point, it includes such giants as Maersk, IBM and FedEx. Blockchain is becoming a useful tool for tamper-proof product tracing for any supply.
What does Blockchain offer for the logistics industry?
The supply chain is complex, and, in the globalized world, supply chain management seems more complicated than ever. Payments between the involved parties (vendors, suppliers and customers) might take days to get processed while contracts are being reviewed by lawyers and bankers, ensuring extra cost and delays. Moreover, when cargo passes through dozens of geographical locations before arriving at its destination, it often becomes difficult to trace where the product actually came from, as the documents can be lost or forged.
Blockchain, being an immutable, decentralized, and cryptographically encrypted ledger, offers full transparency for an industry dealing with supply chains that tend to include numerous steps and hundreds of geographical locations and checkpoints.
Most importantly, it dramatically decreases the importance of paperwork and also allows you to keep track of who is accountable for delivery at each handover. Further, Blockchain records when property changes ownership or custodianship.
Areas where Blockchain is used for logistics
Samsung revealed its plan to use Blockchain for its global supply chain on April 16. The technology will be introduced through the company’s IT subsidiary, Samsung SDS. According to vice president and Blockchain chief at SDS Song Kwang-woo, the usage of technology might cut costs by up to 20 percent.
SDS intends to transfer 488,000 tons of air cargo and 1 million 20-foot-equivalent (TEU) shipping units this year, including organic light-emitting diode displays and Galaxy S9 phones. Cheong Tae-su, professor of industrial engineering at Korea University in Seoul, told Bloomberg that the Blockchain might shorten the time lag between product launches and actual shipments, making it easier to accommodate consumer demands in emerging markets like China.
Natural resource mining
In April 2016, a small Canadian startup called Peer Ledger was incorporated. Its primary focus is to introduce a permissioned Hyperledger Fabric-based Blockchain to the minerals mining industry. Peer Ledger helps to ensure that purchased minerals come from ethical sources. In the words of the company’s CEO:
“This is important because of the damage buyers are seeing being done at the source mines among the indigenous people who live in the area. When I say damage I am talking about children being raped and used for labor in mines. End users of these metals are trying to use their purchasing power to prevent that.”
A recent Deloitte report highlights the potential usefulness of Blockchain in the natural resource mining industry as well, mentioning that the technology efficiently accommodates the growing reliance on data and ensures transparency. “Just as organizations like Fair Trade impacted the coffee industry, it’s not a far stretch to think through ways in which Blockchain enabled solutions could transform the relationship with mining companies and communities,” the report states.
In 2017, Walmart and a group of food giants including Unilever, Nestlé, and Dole partnered with IBM to explore how Blockchain technology could benefit their food supply chains.
The companies agreed that Blockchain could significantly strengthen the security of their data (like in many other industries, the food industry involves many parties, including farmers, vendors, retailers, consumers, etc.) and improve the traceability of foodstuffs. The latter is particularly important for the food industry, where investigations into food-borne illnesses require additional swiftness (for instance, in 2017 the U.S. Food and Drug Administration had to investigate a fatal Salmonella outbreak linked to papayas imported from a Mexican farm; Blockchain can reduce the process of finding the supplier to seconds).
To test out the technology, Walmart used Hyperledger Fabric, an open-source Blockchain originally built by IBM. The food giant started to trace Chinese pork, and later used the technology to record the delivery of Mexican mangoes. As Frank Yiannas, vice president of food safety at Walmart explained:
“Consumers today want more transparency about where and how a product came to be…If you shine a light on the food system, that leads to transparency.”
In late April, Yiannas made an announcement at the MIT Technology Review’s Business of Blockchain conference, saying that Blockchain was able to shorten the time it took to track produce from six days to two seconds.
In May 2015 Leanne Kemp founded Everledger, a global digital registry for diamonds powered by distributed ledger technology (DLT). One of its main goals was to tackle the problem of “blood diamonds” extracted in war zones and sold to finance oppressive regimes. The technology allows access to the full account of a particular diamond’s history and eliminates the possibility of forging documents.
In January 2018, De Beers Group, a large international corporation that specializes in diamond exploration, mining, and retail, announced that is looking into Blockchain technology to improve the transparency of the diamond value chain and get permanent digital records for every diamond registered on the platform.
De Beers also mentioned that an initial proof of concept trial was successful and resulted in a working prototype. The company’s CEO Bruce Cleaver said in a press release:
“Diamonds hold enduring value and represent some of life’s most meaningful moments, so it’s essential to provide assurance that a diamond is conflict-free and natural. By leveraging blockchain technology, we will provide an additional layer of assurance to consumers and industry participants, with every diamond registered on the platform having a record as everlasting as the diamond itself.”
Fura Gems, another important player in the industry, has also introduced its plans to use Blockchain. The company’s head of investor relations, Vikram Pathak, told Forbes:
“People can go in and see that if there’s a particular stone where the chain hasn’t acted in quite the right way – maybe there’s a part of the tracking which has been missed – that allows us to question whether the stone is free of conflict, or even if it’s a genuine stone.”
Shipping and Logistics
In 2016, Marine Transport International (MTI), a freight forwarder based in the United Kingdom and the United States, revealed the launch of what could be the world’s first public Blockchain in the global shipping industry to improve security and distribution of shipping container data.
Further, in 2017, Blockchain in Transport Alliance, a consortium with the goal of popularizing Blockchain in the logistics industry, was founded. BiTA educates its stakeholders on the application of Blockchain technology in the trucking, transportation, and logistics industries. At this point the alliance has been joined by players as big as FedEx, Uber and UPS. BiTA uses OriginTrail, a purpose-built protocol for supply chains based on Blockchain technology, and provides the alliance’s members with an open source implementation kit free of charge.
Moreover, Maersk, the world’s largest shipping company, finished the initial test of a Blockchain-based system that would manage the company’s cargos. As with the case of Walmart described above, the system was built in collaboration with IBM and its Hyperledger Fabric framework. FedEx’s vice president of strategic planning and analysis Dale Chrystie announced his company’s membership by saying:
“We have millions of records a day in our system, and we think of blockchain as a secure chain of custody that could transform the logistics industry. We believe it holds a lot of promise in that space and would streamline all that data exchange in a very secure way”
Finally, on March 12 logistics giant DHL announced it had partnered with Accenture and created a Blockchain-based supply chain prototype, although the collaboration involves tracking of pharmaceutical supply only.
“DHL and Accenture created a blockchain-based serialization prototype with nodes in six geographies to track pharmaceuticals across the supply chain,” the joint press release announced, pinpointing the technology’s utility that allows secure and efficient distribution of data among the stakeholders, including manufacturers, warehouses, distributors, pharmacies, hospitals, and doctors.