Industry experts are excited about the potential of logistics and freight forwarder blockchain technology. A working prototype of a logistics blockchain application has been developed. This tracks pharmaceutical products through every step of the supply chain, from product pickup at factory to the customer purchase point at a store. This level of tracking prevents tampering with the product and logistical errors or mishaps.
What is a blockchain?
A blockchain is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”. This technology is a new way to authenticate and record transactional data by using a distributing computing network secured with advanced cryptography. Blockchains are expected to have many applications, including:
- Medical and identity records management
- Transaction processing
- Documenting provenance
- Food traceability
- Voting, balloting and polling
Blockchains are, however, likely to have a far wider impact than the Internet.
The best-known application of blockchain technology at this time is used within the finance world to provide cryptocurrencies (transaction processing) such as ‘Bitcoin’. Matthias Heutger of DHL Customer Solutions & Innovation said, “The experiments with blockchain in finance are well-known, but we believe logistics is an area where the new technology will have a truly profound impact.”
Blockchain is an ideal technology for logistics and freight forwarding. Consider the case of the working prototype. It is used to track healthcare shipments within a pharmaceutical supply chain. All supply chain events that occur to each uniquely identified product are recorded and validated in real time. As the transactions are stored in a blockchain, the data is completely secure. It is not possible to alter, erase or tamper with the supply chain records. This ledger can be made accessible to all stakeholders in the supply chain including:
As each product is uniquely identified, it would be easier to determine if pharmaceuticals have been stolen or misappropriated. The inherent irrefutability within a blockchain ledger is seen as one of the greatest benefits in this particular application. Eliminating the ability to tamper with supply chain transaction data will assist in reducing the entry into the system of counterfeit products, or simply incorrect processing of data. Ensuring correct and legitimate products are distributed from manufacturers to doctors will actually aid in saving lives.
Testing on the prototype blockchain application indicated it could handle more than 7,000,000 unique serial numbers and 1,500 transactions per second. The prototype could be extended to include leaner and faster logistics, improve transparency and traceability, and provide automatic processing with ‘smart contracts’.
What benefits can logistics and freight forwarder blockchain technology bring?
Logistics and freight forwarder blockchain technology can be applied to solve the problem of poor efficiencies, lack of transparency and inadequate security in global networks. It has been forecast that US$2.1 billion will be spent on blockchain technology in 2018. This is more than double the US$945 million spent in 2017. Annual spending is expected to reach US$9.7 billion by 2021. So it looks like it will only be a matter of time before we start seeing some of the benefits logistics and freight forwarder blockchain technology will bring.
Leaner and faster global logistics
The logistics and freight forwarding industry operates on an infrastructure that is susceptible to systemic inefficiencies and which often falls victim to fraud. Unnecessary intermediaries collect fees and increase the shipping price. The complexity and unclearness of logistics and freight forwarding make it hard to put checks and balances in place. Storing supply chain transaction data inside a blockchain brings complete visibility to the process. This would allow for the elimination or reduction of unnecessary brokers and other intermediaries. Resources could be used in the most effective way possible and eliminate artificial markups by rent-seeking brokers. The function of manually stocktaking warehouses could be dramatically reduced, or possibly eliminated, as through blockchain there would be complete confidence in supply chain data.
Freight forwarder blockchain technology may bring leaner and faster global logistics
Improved transparency and traceability
A shipment from India to the United States may require up to 30 different parties to give approvals and verify its progress throughout the journey. Upon reaching the United States, up to 200 different supply chain events may have occurred. These supply chain events are between shippers, carriers, regulators, retailers and wholesalers, and even customers. Using blockchain technology to store supply chain transaction data greatly improves transparency and traceability of products. For example, shippers within the blockchain would be easily able to pass on information such as compliance with carriers.
Freight forwarder blockchain technology may bring improved transparency and traceability in supply chains
Automatic processing in logistics with smart contracts
A key benefit of blockchain technology is the efficiency that can be created by using smart contracts to allow for automatic processing. Smart contracts are self-executing contracts. They are implemented within a blockchain. Smart contracts are fulfilled only when predefined conditions are satisfied. This can be used to remove or limit the intermediaries involved in shipping escrow. When supply chain transactions are recorded and authenticated, smart contracts can be used to automatically release payments in escrow with delay, dramatically reducing the time and costs of having them processed by an intermediary.
Freight forwarder blockchain technology may bring automatic processing in logistics with smart contracts
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