Blockchain In Logistics Industry: The Way It Modifies The Transportation System

Nataliia Kharchenko
November 23, 2018
156 Views

Logistics and blockchain have more in common than you may imagine. But, as a fact, the combination of blockchain and logistics can bear large benefits both for consumers and transportation companies. To implement this, it is necessary to find an appropriate software development company that is experienced in blockchain technology.

For a start, let’s immerse deeply in blockchain usage in logistics.

Blockchain as a modification of logistics

When you buy specific products, do you the route of this product, how did it reach the shop and your table? This process includes many stages, so it is very difficult to track the total chain and be sure that the delivery process was transparent. It concerns especially food products since consumers need to know where it came from, how it was packed, and so on. Besides that, the country of origin has a direct impact on the quality of food since food from some exotic places can be infected with different harmful bacilli. But the problem is that the formation of the detailed supply chain with all documents costs more than the transportation itself.

When the transportation is being performed, it is necessary to implement about 200+ operations with documents and goods. Operations can be the following: approvals at least from three agencies, special documents formation that include information about the quality of goods, country of origin, chemical composition, and many other formalities.

But with the implementation of blockchain, the total delivery process will become much simpler, check it out.

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1) A packing list for goods is made by the supplier and it is available for everybody who takes part in the transportation process;

2) When the point 1 is done, it becomes the reason for the smart contract development that is sent to all agencies in charge;

3) In the meantime, the consignee can already monitor all the information about products, container loading, approvals and so on;

4) So all parties are aware of all related activities, what was done, the route of goods, the information is available for all parties.

Thus, blockchain makes it possible to bring new solutions to the logistics industry.

Blockchain as a container

When the decision regarding the creation of one universal container for transportation was made, it revolutionized the transportation system and simplified many processes. It was done in the 1950s and since then one container was used both for sea transportation and train/truck transportation. In fact, blockchain became some kind of universal container, it made it possible to create one digital protocol for all procedures – real-time goods tracking, simplification of documents drawing up, the increase of the whole process efficiency. Such organization like BiTA was created to develop standards for logistics blockchain. BiTA stands for Blockchain in Transport Alliance.

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Advantages of blockchain technology in logistics  

The goal of blockchain is to provide consumers and carriers with the optimization of transportation processes and transparency. Thus, consumers will have more trust towards new goods, and participants of the transportation process have a permanent access to the delivery process which is quite necessary. But first things first.

Documents processing

To arrange transportation, it is necessary to draw up a bill of lading aka B/L. In fact, B/L is an agreement on the transportation, all terms of delivery, countries of loading and destination, and other important points are indicated. With the help of blockchain, all these important points can be recorded to blockchain, the process becomes more transparent and everybody can monitor the transportation chain. If something unexpected occurs, blockchain immediately notifies about it and smart contract blocks the process.

Choice on routes

Small transportation companies may have more advantages over large logistics companies. Smaller companies can offer preferable routes for customers, and blockchain removes decentralization, so it gives more flexibility to logistics companies and costs reductions as well.

Faster certification

Conventionally, the certification process is rather long and it takes a serious approach and proper verification. Blockchain changes it, automation of certification can be enabled, and blockchain also facilitates the increase of documents protection from third parties. Smart contracts ensure that the delivery will be done on time or funds will be returned.

Say “no” to fraud

All financial processes can be seen by participants of a specific transportation, but nothing can be changed or eliminated. So fraudsters should leave with nothing. Brokers that prefer cheating will have to deal with documents on a legal basis.

No intermediaries

Blockchain helps make transportation process shorter and remove some processes that become automated. That is intermediaries that participated in this process before can be eliminated. It will lead to substantial costs reduction and improved documents processing. Apart from this, the total transportation process goes faster.

Smart contracts availability

And now it is time to speak about smart contracts more in detail. Smart contracts make all bargaining processes safer and transparent. Smart contracts automatically monitor the fulfillment of obligations and if something is done improperly, smart contract blocks the process and everything will be resumed only when all conditions will be fulfilled. A smart contract is a feature that should be taken into account during logistics app development. Experienced software developers know how to implement it.

As you can see, the list of advantages is rather large, and we are sure that this list will grow exponentially since the potential of blockchain is enormous. Well, now let’s proceed to ways of blockchain application in logistics, how it can be used and check out some examples.

Ways of blockchain application in logistics industry: examples to keep up with

Despite the fact that blockchain is a new technology, it may already revolutionize many areas, and logistics area is not the exception to this rule. Let’s spell everything out.

Tracking

As we have noted above, all the route from one point to another now can be easily tracked. In addition, the condition of goods also can be monitored, transportation companies can see whether everything is packed well and so on. Blockchain allows users to see each package and if everything is wrong with it, it is broken or defected, participants find out it quickly. Then the removal process of broken goods will be made faster since it is known what goods are defective.

Real case: Does everybody know Walmart retail corporation? We think yes because it is one of the largest retail networks in the world. They have collaborated with IBM company to provide their consumers with the highest level of transparency and let them know the whole route of goods. Employees can scan all products and then they see the whole information about these products, how they were delivered, and other important data. So blockchain technology is in use. Other companies can boldly make use of blockchain as well to increase customers’ loyalty and have more information about the product.

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Improved freight process

A large number of documents required before to implement important processes can be eliminated with the help of blockchain, so transportation companies arrange freight much faster and save on a large amount of money.  Also, blockchain helps users avoid mistakes and ensure the fulfillment of all terms.

Payment operations

When you process payment procedures, the first thing you should remember about is a security. Blockchain technology makes all payment operations much more secure, and this process can be modified for the better. All invoice payments can be done with cryptocurrency and it is impossible to hack such transfer. At the same time, the payment process becomes completely transparent.  

Real case: Tallysticks company offers freight forwarding and transportation companies smart contracts for logistics, and customers can modify the smart contract according to their requirements and make payments more securely.

Safety of origin

Apart from business owners, consumers at shops can also verify where the product came from to be sure that it is safe and it doesn’t contain unnecessary compositions. Consumers can see the country of origin, how it was delivered and when. Also, the quality of the product is also indicated. Consumers know that they buy a high-quality product and they feel comfortable.

Business goes fair

Companies that are involved in transportation processes can allocate budget fairly for each company since blockchain accurately divides each segment of the workflow. Now, if you plan to hire a freight forwarding company, you should know the total price you will have to pay. When companies use blockchain, you will get a fair price for all services.

Settle all disputes

Unfortunately, there were precedents before when one or another term of the contract for transportation wasn’t indicated clearly, and it became the reason for disputes and lawsuits. However, with the help of blockchain, the situation can be changed drastically – blockchain stipulates all conditions accurately, and if one condition is not fulfilled – a further process is impossible. Smart contracts will let partners do their business fairly.

Drawbacks of blockchain in logistics: weak sides you can face

Talking about benefits and pros of blockchain in logistics, we cannot ignore weak sides that also exist. You should know about it and consider it if you plan to start using blockchain for logistics area.

The number of employees may reduce

Unfortunately, since many processes become automated, human participation is already unnecessary. However, it may seem a good idea, but at the same time many people will become unemployed and this is far from being good.

No uniform standards

It is worth noting that since blockchain is not adopted on the governmental level yet, so the lack of one uniform standard can bring some problems and failures in blockchain functionality. A government should apply one standard to ensure a proper workflow process using blockchain.

Expensive integration

And the last but not the least reason why blockchain integration is not so simple is its cost. Since the use of blockchain leads to the reduction of costs consequently, the development of blockchain software and logistics app will be rather high, and you also need to use a first-rate equipment. Moreover, hiring employees skilled in blockchain can also become necessary.

That is what we wanted to tell you in our detailed article. We hope that this article will help you avoid many obstacles on your way and make use of all benefits of blockchain in your logistics business. Be clever, and follow the right road!

 

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