Blockchain could prove hugely beneficial to improving accuracy and efficiency within the logistics market, according to James Robbins, CIO of ArrowXL. Here he explains how.
Whilst those professionals working within the logistics sector will be very familiar with the inner workings of the supply chain, they may struggle when asked to explain what blockchain is and how it works, despite this new-fangled cloud-based technology receiving a vast number of column inches over recent months.
Case in point, a recent research report published by MarketsandMarkets claimed that the blockchain market will rapidly grow at an annual rate of 79.6% to become a $7.68bn industry by the year 2022.
The study suggests that this growth will be partly due to widespread blockchain adoption across different sectors. Therefore, I wanted to take this opportunity to explain how the logistics and supply chain industries could take advantage of this technology over the coming years – but first I better explain what it is!
What is blockchain?
In basic terms, blockchain is a digital receipt that can efficiently replace paper-based proof of ownership with encrypted, secure and unique records. It is used to automatically update and reconcile a distributed and unalterable ledger in real time.
The ledger is maintained with records or transactions in the form of “blocks”. The blocks of information are added to the ledger in sequence to form an ever-growing “chain”, in which each new transaction contains a record of every previous transaction. Every single operation is recorded and cannot be altered, which delivers a level of trust and certainty previously not afforded to businesses and consumers alike.
How can logistics companies benefit?
So how can those organisations operating within the logistics sector benefit from blockchain? I firmly believe that this technology could help to eradicate recording errors and minimise any associated costs.
We are all too aware that the sector produces vast quantities of data that tends to remain in silos. Often where separate parties reconcile large amounts of information, errors can be made, and disputes can occur, whilst data can also be altered or lost. If this data was stored in a blockchain each party would have access to an irrefutable record of transactions for an item or product that can be in no way altered, which provides every stakeholder with absolute levels of trust.
I often think about the journey a TV makes from the factory in Korea to the UK via a long voyage at sea. Once it arrives in port, it will be unloaded and transported to a warehouse by a retailer’s logistics or fulfilment partner, before being handed over to the delivery company upon sale.
Finally, the product is delivered to its final destination, the consumer’s home. It is a complicated journey that involves a lot of paperwork at every touch point, which more often than not could be subject to human error. By recording this entire process – from start to finish – in blockchain, each party would have increased visibility and confidence.
The modern world is becoming increasingly dependent on authenticity and traceability of data held in disparate locations, which is driving the need for solutions like blockchain. I am certain that this innovative technology will continue to grow in prominence over the next five years and those organisations within the logistics sector that act the quickest will benefit the most.
Moving forwards, blockchain could completely eliminate recording errors, whilst enabling businesses to share data, detect fraud and track items in a more efficient manner, leading to substantial time and cost savings.
James Robbins, CIO of ArrowXL