Blockchain Technology for Logistics and Supply Chain

Blockchain Technology for Logistics and Supply Chain
6 min read

It was only a matter of time until blockchain hit the logistics mainstream. The technology’s ability to record transactions between parties permanently and securely has a multitude of uses in the logistics industry. However, the logistics players are just at the beginning of their path to find the clear benefits of blockchain.

Some of the world’s largest companies including Maersk, Microsoft, Alibaba, and Amazon now invest heavily into the technology. That’s a lot of money getting in on the blockchain action, and why would it be different? The World Economic Forum estimates the integration of blockchain will reduce the supply chain barriers to global trade. Just this aspect is providing businesses with the potential 15% increase ins sales and 5% increase in the GDP.

Perhaps the most exciting part of the tech up-take is that blockchain solutions are tailored to each company: any business can use the tech in a way which best suits their needs. Startups are stepping into this blockchain revolution to fundamentally change how logistics companies operate. Transmetrics, together with BitFortune, have gathered the most interesting examples of blockchain projects in logistics and supply chain:

The Big Players

Picture Credit: Mike Kononov on Unsplash

Retail chain Walmart is using blockchain to focus on food safety, tracking, and traceability. For example, the company is already carrying out tests using the tech to track food products like mangoes from Mexico and pork from China. The system uses sensors to record temperature in a blockchain system. In this way, the company can assure quality and food condition during transit. Unilever, Nestlé, and Dole are also using similar methods. The tech makes it much easier to track down problems. Last year, it took two months for experts to trace the source of a salmonella outbreak in Mexican papayas. Blockchain reduces such processes to seconds.

Meanwhile, the world’s largest retailer is also incorporating technologies based on the blockchain. Lynx, a subsidiary of Chinese e-commerce giant Alibaba, announced the successful integration of blockchain for its cross-border logistics operations. Their system is capable of keeping track of all the relevant data about an imported shipment such as the details about the production, transport method, customs, inspection, and even third-party verification.

Microsoft is also getting in on the action. The tech giant partnered with Adents, a supply tracking solution provider, to develop a new product – tracking platform using Blockchain and AI. The new solution, called Adents NovaTrack, boasts end-to-end traceability and visibility from the point of origin along the whole supply chain, allowing users to trace single product items within a case. Initially, the solution was designed for the pharmaceutical industry in order to fight the distribution of fraudulent copies of drugs. Currently, the developers are reportedly targeting other high-value industries.

Blockchain Startup Superstars

Blockchain Logistics
Picture Credit: Citizens Reserve

But what about the smaller blockchain technology companies? Well, arguably it is them – the startups – who are at the forefront of this blockchain revolution. They are the players harnessing the tech to its full potential for larger companies to then use. Take for instance Zerv. In May, Californian startup Citizens Reserve announced the launch of the permission-based blockchain protocol Zerv which aimed to become an “operating system for the supply chain”. The network, enabled by an asset-based token, seeks to provide frictionless transactions between all key participants within the supply chain, including manufacturers, suppliers, distributors, retailers, and consumers.

The automation of commercial processes is also getting a revamp thanks to the startup Libelli. The company is developing a blockchain system to act as an escrow agent between buyers and sellers. This system creates a smart contract system which bypasses the need for other parties like banks and eliminates the traditional letter of credit paperwork. Libelli claims these streamlined processes cost ten times lower than current rates charged by banks. Most inefficiencies in logistics and supply chain, especially in product traceability, supplier payments, transportation, and contract bids, can now be unlocked by services like Libelli.

Another startup, OriginTrail brings trusted data sharing to global supply chains by utilizing blockchain technology. The supply chain is often presented as one of the best use cases for blockchain, but the current decentralized solutions cannot provide the needed level of performance, scalability, and efficiency in supply chains. Since 2014, OriginTrail’s protocol is solving this challenge with a trusted decentralized network and has already succeeded in joint projects with BTC Company and the Chinese online food marketplace Yimishiji.

And don’t forget about ShipChain, a startup set out to design a comprehensive blockchain-based tracking system. The system tracks products from the moment they leave the factory’s door to when they are delivered to the customer’s door. Relevant information emanating from all stages in the supply chain is recorded in a blockchain-based system. The system can then execute smart contracts once set conditions are met. For instance, once a driver from a delivery firm has confirmed a successful delivery, the system can automatically mark the item as done and assign a new duty to the driver.

Blockchain for Shipping Companies

Blockchain Logistics

Shipping is the best example of where blockchain possibilities are being realized on the scale of the largest logistics companies. There are more than 50,000 merchant ships involved in the global shipping industry. Multiple customs authorities regulating the passage of freight. Therefore this industry has become a major area of focus for efficiency gains through blockchain. For example, Israeli container shipping company ZIM is testing how to digitize the bill of lading: an essential shipping document which holds critical information like destination, product description, quantity, and handling. The project teamed up with Sparx Logistics and Wave Ltd to successfully complete the pilot run.

During the trial, which was hailed as a ‘holy grail’ blockchain application in logistics, participants issued, received, and transferred bills of lading through a blockchain system. Containers being shipped from China to Canada used the Wave application to issue, transfer, endorse and manage shipping and trade-related documents through a secure decentralized network. The application is free for shippers, importers, and traders. The containers were delivered to their destination without any issues.

“First, logistics companies need to digitize, standardize, and cleanse their data. Then, after the implementation of the industry-wide standard, companies must form an ecosystem of supply chain partners. They will use the standard in a shared, permissionless blockchain environment.”

The adoption of blockchain-based digital lading bills will enable accurate documentation and fast transfer of original documents. This will make supply chains more efficient and reduce unnecessary transaction costs. According to industry estimates, more than 10% of freight transportation invoices contain inaccurate data: this is the type of inefficiency ZIM aims to amend.

Also, consider the partnership between Maersk and IBM. The two giants have combined to streamline ocean freight with a blockchain system which tracks international cargo in real-time. Some experts predict that the partnership will track millions of shipping consignments annually, reducing fraud and delay in the process. Lastly, another blockchain-based partnership to recognize is that of the Port of Rotterdam and CargoLedger. They aim to track shiploads to improve efficiency and quality control in supply chains and establish a transparent, secure system to innovate cargo management and handling.

Blockchain in Logistics: What is Next?

So if the blockchain revolution is as good as it seems, why isn’t everyone doing it? Well, progress doesn’t happen overnight. Just as the internet eventually overthrew the intranet as the main technology, permissionless blockchains will do the same. But there are still a few steps required for logistics companies to completely adopt the new way. First, logistics companies need to digitize, standardize, and cleanse their data. Then, once an industry-wide standard is implemented, companies must form an ecosystem of supply chain partners to use the standard in a shared permissionless blockchain environment. However, the argument to adopt blockchain is simple: it brings much-needed reliability to data, saving time and money for everybody.