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Blockchain: Benefits for the supply chain

Blockchain: Benefits for the supply chain

Author: Melvin Pearce/Wednesday, June 5, 2019/Categories: Services

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Currently, moving goods from origin to destination is complex and lacks a single source to store and track all transactions and participants involved. That can potentially be solved with blockchain technology.

Blockchain can simplify the complex and fragmented processes commonly found within the supply chain. Blockchain can create smart contracts and transparency in documents and transactions, increasing supply chains’ efficiency, agility and innovation. Smart contracts are computer code hosted on a blockchain that defines/executes the terms of an agreement between parties.

For every shipment, numerous parties are involved; transactions get executed (bills of lading, invoices, proofs of delivery, etc.). Blockchain records transactions, tracks assets and creates a transparent and efficient system for managing those documents. Each transaction becomes a permanent ledger record that is easily validated.

The Blockchain in Transport Alliance (BiTA) is a consortium of transportation and supply chain leaders developing industry standards for blockchain use. BiTA members share a common mission to develop a standards framework, educate the market on blockchain applications and encourage the use of those applications.

BiTA is investigating use cases and developing a common framework the industry can use to build blockchain applications. Through think-tank events, networking, meetings, webinars and online collaboration, members work with peers on common issues and share best practices.

The BiTA community’s focus is on community aspects (networking, education, marketing and commercial outcomes). It is BiTA’s voice to members, external organisations and stakeholders. The BiTA Standards Council provides a forum to develop industry standards and best practices. It focuses on data formats and the interoperability of blockchain platforms. It is a separate industry group governed by a standards board.

The Council is developing industry standards that: improve trust and enable transparency in the supply chain; and drive technological efficiency, ideally resulting in cost savings for those that adopt the standards. BiTA is not defining a single technology solution; it seeks interoperability and compatibility between solutions used across the supply chain. BiTA standards will be open source and royalty-free.

The key issues that concern leading companies in the freight technology industries that have a vested interest in the development of blockchain technology

While there are challenges that blockchain can solve, it will not solve every problem. Questions to consider about blockchain are: can traditional database technology meet needs; does more than one participant need to update data; does data need to be private; will the database be attacked or censored; do users need to trust each other; is a trusted third-party needed; do changes need to be controlled?

If there is a need for transparency, security and the elimination of intermediaries, blockchain is a solution that allows real-time visibility of freight assets across the supply chain.

Blockchain benefits

  1. Monitors performance history – Allows parties to see evidence of participants’ past performance, including on-time deliveries, on-time pickups, etc.
  2. Maintains high-value assets history – A trusted/accurate record of asset history is imperative to ensure it complies with standards from the factory floor to delivery.
  3. Improves quality assurance – Every authorised member of a transaction can access data to validate milestones and reduce unsubstantiated disputes.
  4. Monitors real-time freight capacity – Available truck capacity changes constantly. Through blockchain transparency, capacity is visible.
  5. Improves payments and pricing processes – Payment processing/settlement is secure in a blockchain and transaction information is accessible.
  6. Deters fraud – Every transaction is visible to those on the network. Nothing can be removed without detection; transparency deters fraud. Through notarization/ nonrepudiation, shippers can securely track the creation and modification time of a document or transaction, thereby confirming authenticity.
  7. Prevents theft – A blockchain can contain detailed information and rules, such as requiring photo IDs for freight pick-up/delivery. Added precautions improve security and reduce freight theft. A blockchain also enables the secure transfer of titles for smart properties.
  8. Proves provenance – Blockchain ensures that every shipped good includes a digital “passport” proving its authenticity/provenance. Passports include data, such as where/when the product was manufactured and what steps it took throughout its journey.
  9. Issuance of smart contracts – Smart contracts are considered by many to be the most important blockchain feature. Entrepreneur magazine states: “With smart contracts, agreements can be automatically validated, signed and enforced through a blockchain construct – eliminating the need for mediators and therefore saving the company time and money.”

Barriers to widespread blockchain adoption (risks/difficulties)

Despite blockchain benefits, there are concerns which are slowing the technology’s widespread adoption. Among them are:

Lack of standards: For blockchain to succeed, all constituents must agree to data characterisations (i.e., what details will every bill of lading carry, what will the proof of delivery or invoice contain? What actions should trigger if data is missing or not validated?). Cost: Developing/maintaining the software/hardware required to run blockchain is expensive. Additionally, companies need qualified people to run blockchain, which can be expensive.

Legacy system integration: Companies must integrate blockchain into legacy systems. According to nasdaq.com, “Many organisations are reluctant to make a move to blockchain solutions because of the meticulous planning, time and money that would be required to achieve successful company-wide implementation.”

Maturity: Blockchain is an emerging technology. While many anticipate its impact, blockchain is still uncertain. Also, blockchain has few standards or industry specifications for its adoption and use (which is the reason for BiTA’s existence).

Why the industry needs common standards

When businesses cannot agree on a common framework, the government steps in and regulates the activity. This slows down processes and creates bureaucracy that increases cost. There is no example of government intervention in which costs were reduced. If the industry does not define the framework within which blockchain resides, the result may render blockchain moot.

The potential blockchain has in the logistics industry

Quite simply, it has the potential to revolutionise the $8 trillion global logistics/transportation/freight industry. Blockchain may be the solution to transparency, security and reducing or eliminating third parties. There are many use cases – payments, provenance and visibility of commercial assets, driver ID, smart contracts, instantaneous settlement of transactions – virtually every challenge with freight tracking and delivery may be solved with blockchain.


Chris Burruss

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