You may have heard about blockchain technology and how critically important it could be to the logistics industry in the coming years. But for all the talk about blockchain’s significance, there’s very little explanation of exactly what blockchain entails and how it could change your business.
What is a Blockchain?
When you need to store valuable data, a blockchain ledger is there to ensure the protection and accuracy of that data. It’s the mathematical structure that originated in Bitcoin and makes those highly secure, untraceable, peer-to-peer transactions possible. Simply put, blockchain is like a giant accounting book that’s “virtually impossible” to fake.
In Bitcoin terms, every transaction creates a node, or a note to a computer in the network, which tells the ledger a Bitcoin transfer is taking place. This node goes out to the network verifying that the funds are available. Once validated by the network, it is accepted and becomes a part of a new block. Eventually, the block gets an encrypted digital fingerprint and added to the master ledger.
With all these layers of protection from falsifying data, blockchains create a strong consensus on the data recorded in the blockchain. Technologists realized pretty quickly that blockchains didn’t have to just track money. Given enough time, money, and programming, blockchains can be applied to a variety of digital and real-world transactions.
What’s the Big Deal?
Transparency, data verification, and the consensus a blockchain provides can more accurately track the source of an item, as well as prevent potential fraud or loss. Additionally, it could replace a standard paper-based system that traps containers in shipping yards.
Blockchain technology is a system that can’t be falsified under ordinary circumstances, and implementing a blockchain within a single company can be a way to give more transparency to clients and build trust.
Blockchain can also improve record management since one line of code can record a contract, an email, or a payment within the block related to a certain shipment. It may also assist with keeping everyone with access to the system on the same page, meaning you can spend less time addressing minor miscommunications and more time focusing on actual problems.
The use of blockchain between businesses encourages constant communication as well as consolidated and up-to-date recordkeeping. Logistics-focused companies are recognizing this value as noted by Dale Chrystie, the vice president of strategic planning at FedEx, when he said, “If I were to create a bumper sticker right now, it would be ‘blockchain: a team sport.’”
Blockchain consortiums — like the TradeLens initiative, which includes four of the top eight container lines and four top global terminal operators — are even bridging the gap between potential competitors in an effort to create more accurate and secure operations. These groups connect transportation providers, terminal operators, customs officials, shippers, and logistics providers to allow information and collaboration throughout a supply chain. While partnering with competitors might seem counter intuitive, doing so helps both companies succeed in today’s complex global market.
Blockchain Challenges
Serious long-term benefits of blockchain adoption for supply chain operations exist, but there are also some pretty steep challenges. The first challenge of blockchain adoption is the price. Since most blockchain software is written with a specific firm in mind, the development, acquisition, or purchasing costs are high. Additionally, you will incur the costs of hiring qualified people who can manage and train your employees in this new technology.
Another challenge you will incur is your current application environment and database structures. Either you will need to overhaul your environment completely to accommodate blockchain, integrate your legacy system into a blockchain configuration, or buy a new system that integrates with a blockchain. Regardless, it will take a significant investment both of time and money for this transition.
If you can clear these hurdles, the flexibility and power of blockchain technology can help improve your understanding of your own supply chain, while helping to ensure transparency and improve visibility at all levels.