Application of blockchain technology in logistics
- 6. May 2019
- Posted by: Blockruption Team
- Category: Applications
What is blockchain?
To understand how blockchain technology can be applied to logistics and the shipping industry, you must first understand how blockchain works.
Blockchain creates an unalterable ledger of records that are approved by a consensus from a decentralized network. This network is essentially thousands or millions of computers around the world that independently verify the data when a transaction is initiated.
Each member in the network that verifies it creates a record block which is then linked with all the other verified blocks to create the blockchain. The information that is stored in the blockchain is essentially existing in a shared and continuously reconciled database, making it impossible to corrupt. This allows for the digital information to be distributed with the security that it cannot be altered.
How can blockchain be applied to logistics?
One of the major complications in the logistics and transportation sector is the large number of individuals and organizations that have to work together. While they are working to complete the same task, such as deliver a product to a consumer, the different members in the supply chain have often had competing interests.
This can lead to distrust, which often adds complexity to the process to allow for verification and security. As a result, the overall cost and time spent moving items through a supply chain increases.
Blockchain technology offers a solution to each of these problems. It eliminates the need for different members of the supply chain to trust each other explicitly, as the data in the blockchain is independently verified and incorruptible. This means that manufacturers, customers, and shippers can share and analyze data securely and in real time. This also leads to a reduction in costs and time that it takes to move a product through the supply chain.
There are also applications to cross-border logistics, as the high level of data integrity has the opportunity to improve the speed and accuracy of clearance through customs.
One of the most well-known examples of blockchain technology being used for logistics relates to coffee. A pilot program was recently launched that tracks worldwide coffee trade from the farmer all the way to the consumer, with the end goal being a boost in supply chain productivity and industry transparency.
The system essentially ensures that farmers receive a fair price for their coffee beans, as payments are transferred directly to the farmer as soon as their specific coffee beans are sold. This also gives consumers insight into exactly where their beans came from and how much they actually cost.
This type of blockchain is being replicated in other industries as well. Blockchain is currently verifying that seafood is correctly labeled by tracing it from the boat to the end consumer, and it is working to eliminate fraud in the pharmaceutical industry by getting rid of break-downs in the supply chain that allow counterfeit drugs to enter the product supply.
Introducing blockchain in your processes
As you can see, blockchain technology offers some amazing solutions for the logistics and shipping industry – it can eliminate fraud and errors, minimize costs, reduce delays, improve inventory management, and increase trust between members in the process.
If you want to stay ahead of the competition and prepare for the future in the transport sector, it is vital that you stay informed. Consider hiring a consultant to analyze your current processes and see how you can incorporate blockchain technology in your logistics process.