Have you heard about blockchain in logistics? Well, you may not be familiar with the term blockchain, but chances are you’ve heard of crypto currencies like Bitcoin or Ethereum. You’re probably wondering where we’re going with this. Well you see, these digital currencies rely on blockchain as a digital record keeping system that’s secure, transparent and incredibly hard to tamper with. To add a little more complexity here’s what blockchain means in technical terms, blockchains are a digital ledger that work by recording and verifying transactions in a decentralized network of computers, using cryptography to secure.

Okay great, why do you care though? and what does this have to do with you as a shipper of freight? Although blockchain was initially the backbone of crypto currency, it’s now proving to be a very successful resource in the world of logistics and other large sectors. Let’s take a deeper look into how blockchain is being used across logistics and how we can all benefit.

Blockchain in Logistics

Freight shipping consists of one of the most complex networks in the world. This is because freight supply chains involve multiple parties, including, you the shipper, carriers, customs officials, brokers, warehousers, and insurers. All of which, might individually work on your shipments. Now, these different parties could be anywhere in the world, and they more than likely work on incompatible systems, outdated technology and might even sometimes even keep manual records of important documentation. This makes sharing data incredibly difficult, and creates a ton of inefficiencies. So, this is where we enter blockchain into the chat. Here are the benefits of using a blockchain system:

Key Benefits of Blockchain in Logistics

1. Reduced Risk of Fraud & Enhanced Security 🔐

Through utilizing blockchain all of the different parties that we just mentioned above can view, record and share information in sequential “blocks” in real time. Each block has a cryptographic hash (used to verify the validity of data) from the previous block protecting any sensitive information from cyber threats, a timestamp and transaction data such as: who, what, when, and where.  These blocks are connected by a chain and this chain is immutable, meaning the data cannot be altered without consensus from the entire network. As blockchains can be used to track orders, payments, accounts, etc. they’re great for reducing the risk of fraudulent activity, unauthorized changes and cyber threats.

2. Improved Transparency & Real Time Visibility 👀

We covered this a little in the above benefit. But blockchain works by creating a single, shared ledger where all participants can access and view real time data, majorly reducing errors, and eliminates data silos (data that is isolated from others), while offering an unmatched level of transparency. By having full visibility into each stage of the shipment, companies can easily identify bottlenecks and inefficiencies.

3. Smart Contracts for Ease & Automation 💻

One of the biggest advantages of blockchain in logistics is the use of smart contracts. Once predetermined conditions are met, contracts including payments, customs clearances and tracking updates occur automatically. This makes shipping freight much more seamless, by eliminating the need for manual verification and reducing administration tasks.

For example, smart contracts can:

Automate payments once a shipment is delivered ✅

Trigger customs clearance when the required documents are verified ✅

Update tracking information instantly without manual input ✅

4. End to End Traceability 🔚

There are a ton of industries that require strict product tracking. This is made so much easier with blockchain as it offers complete traceability. Using unique identifiers each product or shipment can be tracked on its’ entire journey from origin to destination.

5. More Efficient Customs Processing 📃

Inefficiencies in customs procedures usually contributes to cross-border shipping delays. Traditional customs clearance procedures involve physical paperwork and manual verifications, leading to delays and additional costs. With blockchain, all necessary documentation, such as bills of lading, customs declarations and certificates of origin can be digitized and stored securely on a shared ledger. Customs officials can access these in real time and speed up clearance processes.

Key Challenges of Blockchain in Logistics

Although blockchain is great in many ways, there are still some limitations that can effect the overall experience of blockchain, including:

1. Scalability 📉

When a blockchain has to handle a large volume of transactions or data storage at once, they can become overwhelmed and struggle to process the actions quickly, which is a big issue in logistics as these updates need to happen instantly.

2. Data Accuracy 👩‍💻

Human errors will be minimized using blockchain, however not entirely diminished. Errors in data entry can compromise the system.

3. Network Adoption 👥

To get the best out of blockchain, all parties must adopt the technology. This can present challenges in itself as some may have reservations due to the maturity of the technology and a hesitant willingness to change. As we know people tend to stick to what they know. Hey, if it’s not broken why change it, is a lot of people’s mindsets.

4. Adoption & Cost 💵

There is a substantial upfront investment required in the hardware, software and training which can unfortunately out price some smaller companies hoping to adopt the new technology.

Conclusion

Blockchain in logistics seems to be addressing long standing inefficiencies, increasing transparency and enhancing security. So, looking to the future, it looks like a promising piece of technology for the freight world, for also enhancing efficiency and preventing fraud. Concerns over the challenges that we see with blockchain currently are at the forefront of a lot of people’s minds. But pay close attention to developments in blockchain as it matures we could see a whole new way of processing freight, from the way we book loads all of the way up to making payment. With the growing number of scams we’re seeing in the freight industry at the moment, we’re very welcoming of new ways to improve the security and safety of shipments.

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