Blockchains are going mainstream. Once a tool for speculation, the blockchain has proven itself an effective and reputable technology along with 5G, artificial intelligence, robotics, and the cloud. For the last five years, blockchains have been gaining broad adoption among industries including banking, IoT, real estate, and healthcare. Blockchain technology has even been adopted at the government level. State governments in the US, including the government of Illinois, are using blockchain technology to secure documents. Let’s talk numbers to back up our statements about blockchain technology gaining steam.
Current state of blockchain adoption
According to Deloitte, almost 1,500 senior executives say that their doubts regarding the blockchain’s utility are diminishing. There are leading logistics companies using blockchain and increasingly investing in blockchain-related projects.
The supply chain industry is among the active adopters. Small to midsize enterprises are joining giants like Walmart, Maersk, and UPS in using distributed ledger technology to improve business processes. Blockchain technologies have been estimated to reach a value of $375.6 million in the global supply chain market in 2021 and are predicted to grow in value at a CAGR of 69.5 percent from 2021 to 2030.
However, it would be an exaggeration to proclaim the blockchain a magic wand for solving complex supply chain challenges. The reality is that most major blockchain projects are in the testing phase. Still, the examples of companies we cover in this post prove how useful blockchains are in ensuring greater supply chain visibility and traceability. Walmart, for example, has recognized the usefulness of blockchains and is promoting their adoption by requiring suppliers to use blockchain technology.
But how can blockchain benefit logistics? Below, we focus on how a midsize company with a supply network can benefit from blockchain logistics technology. In this article, you will learn about the opportunities for blockchain in logistics and see:
- how you can guarantee to your partners and customers that your products meet required quality indicators
- the challenges associated with blockchain projects
- how to mitigate those challenges
But first, we’ll take a look at companies that have already adopted blockchain technology. How is blockchain useful for logistics?
Blockchain in logistics: real-life examples
Let’s show how a few medium-sized companies and their customers are already benefiting from blockchains. How is blockchain used in logistics?
Brilliant Earth is a bridal and fine jewelry brand. The company has implemented blockchain technology to securely track the origins of its precious stones and assure buyers of the company’s credibility. Brilliant Earth uses a blockchain-powered database to track all supply chain steps, from mining through manufacturing.
Distributed ledger technology improves jewel tracking by securely storing each supporting document, such as invoices and certificates. When an individual buys a blockchain-tracked jewel, they can see the entire chain of custody.
Details buyers can view include the provenance of a jewel, where it was sourced (and the advantages of sourcing from that region), data on the carat, the lot number, a photo of the rough jewel, and a video of the polished jewel.
Naturipe Farms, LLC
Naturipe Farms, LLC uses blockchain technology to track berries from the place of harvesting right to the point where they get into the buyer’s hands. As soon as farmers pick and pack berries, they put QR codes on the packages. Buyers can scan these codes with a phone to see where the fruit was harvested and even check the farm’s sustainability practices.
Moreover, the blockchain helps Naturipe Farms solve the issue of timeliness. The traditional approach is to track food using handwritten paperwork accompanying all shipments. But this often leads to delays in getting perishable food through customs.
Want to understand what blockchain functionalities help these companies provide credibility and visibility of product data? Take a look at the image below.
Blockchain in a nutshell
These are the main characteristics of a blockchain:
- A blockchain is a database that stores encrypted blocks of information and links them to create a chronological ledger that is the single source of truth.
- Instead of being copied or sent, digital assets on a blockchain are distributed, making records unchangeable.
- Assets are decentralized, enabling complete real-time access and visibility to all network participants.
- A ledger of all changes ensures document integrity and therefore credibility.
- Great security capabilities like anonymizing data and requiring permissions to limit access make blockchain technology reliable for helping businesses build relationships of trust with customers.
- A blockchain ensures that the history of digital assets is unchangeable and transparent thanks to decentralization and the use of cryptographic signatures.
Let’s see how all these advantages are applicable to a supply chain.
How blockchain enhances logistics
Why does logistics need a blockchain? Manufacturers with their own supply chains, distributors, and consumers can take advantage of blockchains to save time, save money, and improve services.
Simplified record-keeping. Manually maintaining supply chain records is cumbersome. A blockchain ensures that all details get into the ledger. And as information entered once can’t be changed, it can be viewed in its original form whenever needed.
Real-time tracking. A blockchain improves real-time tracking of products, letting you know their current locations and freshness. Tracking freshness is possible if a blockchain is paired with sensors and RFID tags. If a blockchain is linked with connected IoT devices, you can implement real-time alerts on temperature deviations.
Data transparency. All supply chain participants can see changes made to the shared ledger. Similar to a Google Doc that you create and share with a group of people, a blockchain ledger is distributed, not copied or sent. This decentralized distribution allows all participants to access it simultaneously. There’s no need to wait for changes from another participant, as all changes are immediately recorded.
Cost effectiveness. One of the main problems supply chain companies face is their dependence on an intermediary that connects them with consumers. For example, a manufacturer often sells goods to a wholesale business that resells them to a retailer. The wholesaler usually processes all data needed for delivery manually. However, this document processing increases delivery costs. A blockchain functions on a peer-to-peer basis, which helps to avoid interruptions by third parties and ensures a considerable reduction in delivery costs. This is a great cost benefit of blockchain in logistics.
Dispute settlement. Cargo delivery often results in disputes if, for example, products are misplaced or their delivery is delayed. Disputes are difficult to settle and may take weeks to resolve. Settling disputes also requires an organization to expend resources. A blockchain helps to settle disputes quicker and easier thanks to the availability of immutable and real-time information about cargo. As a result, lots of disputes may be settled in minutes.
Decreased paperwork. The typical paper-based workflow is time-consuming and prone to human error. As a blockchain ledger automatically saves supply chain information, there’s no need to ensure manual record maintenance. Documents can be stored on the blockchain accompanied by transaction details, removing the need to exchange paper.
Enhanced customer–supplier relationships. A blockchain helps vendors preserve the quality of goods throughout delivery and allows consumers to make sure they buy authentic, fresh, and standards-compliant foods and goods. This helps vendors build relationships of trust with customers, which increases customer loyalty and retention.
Speaking of this last benefit, let’s view common blockchain logistics use cases and identify how blockchain technology can help your business:
- meet parameters that determine product quality
- eliminate a third-party guarantor to ensure quality
- increase consumer confidence by eliminating counterfeit goods
How a blockchain helps a B2B company prove product quality: blockchain logistics vs traditional logistics
A blockchain ensures trust between parties in cases where trust is either unjustified or unproven. This leads parties to want to participate in business dealings that they wouldn’t otherwise engage in or would require a mediator to moderate. Let’s see how a blockchain can help to build trust based on the example of a supplier of semi-finished products.
Imagine a small or midsize business that works in the B2B sector, supplying semi-processed goods to larger manufacturers and consumer operators. Here are the problems this company faces.
Problems faced by a supplier of semi-finished products
The semi-finished product supplier has to meet requirements for the quality of the product and its raw materials. Doing so requires great effort and impacts the product and process life cycle, including procurement, processing, storage, and delivery. At each stage of this life cycle, the company has to prove its ongoing compliance to be credible and competitive.
Proving compliance in a traditional way becomes uneconomical. A company that wants to provide its clients (on behalf of end consumers) with a label asserting the product’s quality needs to engage a third-party guarantor, whose services are paid. These costs are multiplied depending on the number of links in the company’s supply chain.
Moreover, a company has to pay for receiving different certifications and passing checks by several auditors. And one more thing: the quality assertions that such a company issues may be accepted without further guarantees by old business partners only. This requires a company to perform multiple quality analyses on each lot of each raw material and goods as well as at each stage of processing to stand out among competitors that don’t do the same.
How a blockchain helps solve this problem
A blockchain-powered app can come to the company’s aid, allowing the company to issue a unique quality certificate for feedstock and final products, lot by lot. When a company receives the outcomes of quality and lab tests performed in accordance with specifications and protocols, it can add them to the blockchain. These outcomes can also be accompanied by quality certificates and supporting lab documentation.
If a company is involved in food supply, it can’t reuse a quality assertion and can only apply the outcome of a test to the examined batch. The use of smart contracts can guarantee that lab tests aren’t reused. Smart contracts are electronic agreements stored on a blockchain. They are automatically executed when agreed terms and conditions are met. The terms of a smart contract, for instance, might require that tests be original.
Thanks to the above-mentioned blockchain capabilities, a B2B supply chain organization can maintain complete ledgers of transactions, ensure that partners execute contracts, strengthen the security of sensitive and confidential data, and consequently increase sales.
How a blockchain helps a B2C company attract and retain customers
A B2C company might sell goods that need to meet high quality standards, such as works of art, jewelry, high-priced equipment, medications, spirits, baby food, and Kosher or Halal products. To increase their sales, businesses should consider the following factors.
Consumer attitudes towards buying such products
Customers don’t always trust labels. Moreover, it’s obvious that there’s always a risk of fraud for high-value items like diamonds or pharmaceuticals. Additionally, according to an Accenture survey of over 20,000 consumers from 19 countries, 47 percent of consumers agree to pay more for a shopping experience that exceeds their expectations.
To ensure customer trust and improve your service, you might want to enable your customers to know where and when a product was made, its manufacturer, its expiration date, how long it spent in transit, and its ingredients. Providing consumers with easy access to such information not only increases their confidence in the goods they buy but allows businesses to charge more.
If you want to provide your customers with this level of transparency, a blockchain-based app might be a great solution.
Creating a blockchain-powered app
You can create a web app that’s capable of retrieving a product’s history from a blockchain endpoint by scanning a barcode or QR code. A QR code can be used for storing and accessing product information. Consumers, carriers, and warehouse managers can scan QR codes with their smartphone cameras or Bluetooth scanners. A QR code can be placed both on a box (package, bottle, can, etc.) or on a pallet.
Using a QR scanner app would benefit the following types of users:
- Manufacturers could use QR codes to prove the authenticity and quality of their products.
- Transportation companies could prove transit routes and durations.
- Distribution companies could justify higher prices by proving product authenticity.
- Consumers could be confident that the price they’re paying is justified, as the product is safe or authentic.
You can implement such functionality in a standalone app or add it as a food trust feature to your food purchasing and delivery software. Check out the image below to see the general feature set you might need to add to your software solution.
When considering adopting blockchain technology, you should take into account associated challenges to avoid wasting time and money on developing an ineffective software solution. Let’s see these blockchain key logistics issues.
Challenges you might face when building or using your blockchain-based platform
The two challenges we mention below are important for B2B and B2C businesses to take into account before developing a blockchain-based app. They are associated with ensuring data quality and understanding the app’s technical complexity.
Inalterability is not the same as quality
Once information is added to the blockchain ledger, it’s impossible to change it. But what if a manufacturer mistakenly adds a product’s country of origin as Turkey on a digital certificate when it’s actually Greece? Many issues may occur when added data is incorrect. Regrettably, the technology itself does very little, if anything, to solve such problems.
Existing ways of mitigating the issue:
- Educate users on the risks of blockchain-based software and provide them with clear instructions on how to use the system.
- Ensure several stages of data validation by numerous employees before data gets written to the blockchain.
- Thoroughly design points where information enters the blockchain and come up with approaches to deal with unavoidable cases of poor data.
- If possible, remove or decrease the human element by accessing systems containing the information you need via APIs.
The blockchain is an extremely complicated technology
Blockchains are not simply distributed ledgers but distributed applications. A blockchain’s code runs on hundreds of servers that store copies of data and communicate with each other to execute transactions and keep data synced. A blockchain is an incredible and complex ecosystem. However, this complexity makes it tough to upgrade and maintain.
A blockchain-enabled app is a great option for supply chain issues that can be solved with a limited and clear feature set that is not projected to change. Such a platform should incorporate straightforward and specific user scenarios with few or no variations.
Despite the challenges we’ve discussed, blockchain technology is well suited for processes and issues involving numerous participants, like enhancing product traceability. In such cases, you are likely to get a payoff from the efforts you make at establishing a blockchain-enabled app. If you have any questions regarding blockchain-related software development, let us know.