Logistics Industry: Next Step to Global Economy’s Blockchainization
The writing’s on the wall for legacy logistics companies: Blockchain is taking over.
There is a new addition to the list of industries that are being conquered by the inevitable advance of the Blockchain. Today, it is steadily permeating the logistics sphere, which seems to be a perfect fit for the technology. This year we have witnessed the market signaling rising interest to how Blockchain can change the logistics and transportation industries.
Logistics and Blockchain: a perfect match
Blockchain, the underlying technology of Bitcoin, is in essence a very secure and effective way to share information between parties. It creates an immutable digital ledger of transactions which is maintained by a distributed network of computers.
The sharing potential of this technology, it’s tamper-proof architecture and full transparency makes it a perfect instrument to revolutionize the way we handle supply chains today.
Logistics is defined as a planning framework for the management of material, service and information flows. The logistics of physical commodities usually involves the integration of information flow, transportation, warehousing and often security.
Logistic chains often span numerous steps and hundreds of geographical locations. Understandably, this makes it increasingly harder to trace events in the entire chain, verify and validate the goods being transported and quickly react to unforeseen circumstances.
Moreover, due to the lack of transparency, it becomes extremely difficult to investigate illicit activities happening anywhere along the line.
Blockchain possesses the potential to solve all the aforementioned issues. Being a transparent public ledger, it will provide customers and auditors alike with simple and effective tools for tracing the entire journey a product took before arriving at its final destination. One crucial aspect of Blockchain is that it can only provide its full benefits if all members of the logistic chain have access to the network.
Other than tackling industry-specific issues, Blockchain brings to the table the usual package of instant benefits. Not only does it eliminate the unnecessary intermediaries and greatly reduces the workflow volume, but it also offers the fabled Blockchain security, reducing errors, preventing mislabeling of illicit goods and other fraud attempts.
As a resulting bonus, this new paradigm promises huge potential cost-saving advantages for the industry.
To this day, a number of efforts to integrate Blockchain into the logistics industry have been made.
Real world implementation: it’s happening!
In October 2016, the Commonwealth Bank of Australia and Wells Fargo - both members of the R3 consortium - have undertaken the first global trade transaction using technologies of Blockchain and smart contracts.
The transaction involved a $35,000 shipment of cotton from Texas, US to Qingdao, China and commenced successfully yet the project did not see rapid further development. The banks were apparently optimistic about the new technology but admitted that are not yet ready to go “full Blockchain.” As Chris Lewis, trade services manager for Wells Fargo, noted, "significant regulatory, legal and other concerns remain to be addressed."
Shortly after, a similar project was undertaken by the Port of Rotterdam, one of Europe’s largest shipping ports. The endeavor garnered support from a score of organizations and universities in the Netherlands and is scheduled for an extensive testing period for the next two years.
Corporations are also testing the waters. Maersk, the Danish shipping giant, had been investigating the ways to digitalize workflow and manage the company’s cargo more effectively and transparently.
In collaboration with IBM, Maersk is now researching its own unique implementation of the Blockchain technology relying on the Hyperledger Fabric framework, which will allow to track millions of container journeys per year and better integrate with customs authorities.
The largest US retail company Walmart is also employing Hyperledger Fabric, a Blockchain framework hosted by The Linux Foundation, in its pilot project of distributed ledger technology that will track the origin of pork in China and its transportation and warehousing in the US.
Numerous other corporations (Amazon, Alibaba, Kestrel, etc.) have already shown interest in using Blockchain for their logistic needs. Yet surprisingly this scene has been fairly empty when it came to publically funded startups. Only two such projects of note have popped up, the first being Blockfreight and the second A2B.
Blockfreight is an Australian-based company, founded by the industry veterans, that deals with container transportation and related activities. Essential features of Blockfreight are smart contracts build on the Ethereum blockchain and a tradeable token BFT:XCP, which will be used for all transactions within the Blockfreight network. This will allow the platform to track all shipping data and prevent fraud.
The threshold of Blockfreight’s crowdsale was set at a modest target of $1.9 mln with tokens being sold in several consecutive rounds. Today, being more than a year into development, the project is still very much in the experimental research and development stage. So far the work has not gone past system design and research of the underlying technology.
The other startup, Eastern European company A2B, is mostly involved with logistics markets of Ukraine and Belorussia. A2B is a service that provides direct communication between cargo owners and freight forwarding agents, handling most of the workflow volume while eschewing forwarding expenses.
Its new logistic model will not be built from scratch, but will rather be designed as a synthesis of an already existing and fully operational A2B Direct platform and Blockchain technology. Founders expect this move to enable cheaper and easier international transportation and allow businesses and customers to use both fiat and cryptocurrencies.
The platform’s ICO comes July 12th and will last a month. A2B seeks to raise €0.5 to €3 mln, with higher totals allowing the company to expand to Western European and American markets.
The path ahead is clear
As a means to global unhindered and transparent commodity circulation, the transportation and logistics industries are the vascular system of global trade. Like any other old industry, they are ridden with issues and the revolutionary paradigm of Blockchain is one way to solve many of them.
Introducing Blockchain and smart contracts into logistics potentially offers real-time cargo traceability, reduced workflow and increased transparency. Once built, Blockchain proves to be a much cheaper and safer infrastructure with higher scalability and ease of integration with other industries.
Adoption of Blockchain in logistics may not be sufficiently consistent at present because of perceived risks and skepticism, but with every successful project the future draws nearer and we can safely surmise that in several years Blockchain will spread across the industry like wildfire.