How blockchain can drive transportation and logistics forward

04 April 2019 5 min. read

The much-hyped innovation of blockchain has been said to have myriad possibilities, as companies across the industrial spectrum seek to safeguard their supply chains and increase efficiency. A new survey has found that it can drive transportation and logistics forward, bringing rise to several benefits, including addition transparency in its value chain, financial improvements, and better customer alignment.

While blockchain technology’s applications have long been speculated about thanks to the growing prevalence of cryptocurrencies, it is now a very real mechanism used by businesses worldwide to implement powerful solutions to some of commerce’s most pressing problems. Early experimentation with variations of blockchain technology proved most fruitful in the financial sphere, but it has also proven extremely useful in supply chain management and logistics.

A blockchain is a shared digital ledger which can be used to record and store transactions between multiple participants in a network. Changes made to the blockchain record must be approved by participants through an automated process. As a result of the fact information cannot be deleted, only appended, a blockchain provides an evidentiary trail of information back to the point of origin, meaning companies can locate and prevent fraudulent activity in their supply chain, should they leverage the tech adequately.

In September and October 2018, Boston Consulting Group conducted an online survey of global companies in the transport and logistics (T&L) industry in  order to assess their understanding of blockchain and their progress in adopting the technology. Despite the promises of the technology, however, BCG’s survey of executives from more than 100 T&L companies found that most industry participants have not taken a deep look at blockchain’s potential applications.

How blockchain can drive transportation and logistics forward

Commenting on why uptake may still be slow, report co-author Jacqueline Govers, a Partner at BCG in Amsterdam, said, “Many T&L executives regard blockchain technology as at best mysterious or at worst ripe for exploitation. In fact, the underlying concept is fairly straightforward. Simply put, because blockchains create data transparency, they help to establish trust among participants in complex networks... Blockchain can help the [transport and logistics] industry address these pain points by providing an immutable shared data repository, promoting trust among participants, and enabling automation of repetitive processes.”

A wide variety of pain points impede information sharing and create costly inefficiencies for modern T&L firms. In order to encourage more firms to tap into blockchain’s potential, BCG identified nine areas which can be aided by the technology.

Inefficient data and document management is possibly the most costly of these pain points. In the age of big data, leveraging blockchain to make the most of a company’s data could open up major untapped revenue opportunities. At the same time, blockchain can help with regulatory compliance efforts, helping secure supply chains at a time when laws firms can be stung by huge fines when failing to safeguard their data. It also goes without saying, then, that blockchain can help prevent the direct impacts of trade-based money laundering and fraud as well.

Efficiency savings

Further increasing efficiency in the industry, according to BCG, suboptimal equipment utilisation can also be tackled, while blockchain negates the need for a cumbersome letter-of-credit process, thanks to the digitalisation of the supply chain. Non-transparent pricing and booking can also be avoided, meaning it is easier for members of a value chain to get a fairer deal for their efforts, and avoid being exploited. 

BCG also asserted that blockchain’s rapid and efficient mechanisms mean that complex claims and changes in ownership can more rapidly be resolved, avoiding more lengthy back-and-forths between different suppliers. T&L executives can also use blockchain to reduce the cumbersome methods of traceability in their supply chains, though BCG warned that to make this happen, T&L companies must start to establish trust as the foundation of a collaborative blockchain ecosystem. Finally, T&L firms could use blockchain to improve on complex processes of reverse logistics, since a blockchain provides an evidentiary trail of information which can rapidly be used to work back to the point of origin.

Govers concluded, “With some T&L companies taking the first steps toward forming a blockchain ecosystem, other companies must decide whether to participate or adopt a wait-and-see attitude. In our view, the benefits of being among the first to join these collaborative efforts far outweigh any advantages of a cautious approach... As customers increasingly demand higher levels of trust, security, and automation, no T&L company can afford to remain on the side-lines while its competitors seek to resolve the blockchain paradox.”