Blockchain In Logistics: How The Blockchain Technologies Are Changing The Transportation Industry

Innovative technologies conquer the world by covering new areas of life and business every year. And the market of logistics and cargo transportation is no exception. Moreover, the logistics industry is particularly acute for innovation, and here's why!

In recent years the popularity of delivery services has grown many times over. Not least, this trend was influenced by the coronavirus and the social distancing it caused. No wonder logistics processes have become so crucial.

Therefore, companies have no choice but to adapt to the increased demand for delivery and adapt their transportation services accordingly. A good solution to the problem is the use of blockchain in logistics.

Blockchain is a great technology that promises to recast and modernize the way we’re dealing with the logistics and transportation industry. And we’re happy to explain to you how and why. In our article, we’re going to detail the topic from A to Z and discuss various perks blockchain provides us with. You’ll learn how to simplify delivery and minimize related costs by making logistics more transparent and efficient. 

Anyway, read on, don't miss your chance to get to the top! After all, those who have built a blockchain-backed logistics platform today are likely to be among the market leaders tomorrow.

Why Does Logistics Matter So Much?

Today's logistics market is huge and will only get bigger. The global logistics market size is expected to be worth around USD 18.23 trillion by 2030 with a noteworthy CAGR of 10.7% from 2023 to 2030. Astronomical figures, right? And that's quite natural!

The thing is, most companies cannot function at the proper level without adjusting their logistics processes. Business and logistics are inextricably linked, no matter what industry it is.

But what is logistics? What is its essence?

At its core, logistics means the transportation of goods from one place to another (say, from production to the consumer). It involves the performance of various operations intended to ensure minimal time and financial costs during product delivery.

And on top of that, logistics remains a rather inefficient industry in the context of the global economy. We could name a lot of reasons to explain such a phenomenon, including too many contractors, confusing supply chains, too much paperwork, and so on.

That’s why you cannot do without innovative technologies. Of course, there are various digital solutions you're welcome to take advantage of, but one of the most impressive examples is the opportunity to build blockchain-based software for the logistics industry. This way, you get a chance to achieve amazing results and greatly improve your transportation services, whether it is product delivery or something else.

• According to forecasts, blockchain implemented in the logistics system will improve and accelerate trade at the global level (by 15+%).

Do you still doubt it? Then keep reading! With our article, we'll try to convince you and prove our point.

Basics of Blockchain Technology

Deloitte conducted a special study and found out that 60% of companies (at least among those surveyed) believe that blockchain can revolutionize business processes. And more than half of the respondents are ready to introduce the technology in question into their IT ecosystem.

Alas, many people associate the blockchain only with bitcoin, but in fact, there are a lot of possible use cases. Among them is the ability to organize financial transactions between banks around the world, the development of an efficient supply solution, the creation of a reliable contract signing system, and so on. And of course, let's not forget about the blockchain technology market in logistics and transportation.

Blockchain is a real boon to organizations, which share valuable information but have no reason to trust each other (and why would they?). Let's explain with a simple example to illustrate our point.

Imagine two people having a bet on what the weather will be like in New York on a certain day. Their dispute can be resolved in three ways:

• disputants may trust each other (which is hardly the most reliable way to interact);

• they can make a contract (which takes time and money);

• they’re welcome to involve a third party who must choose the winner.

Blockchain is this third party. What's more, the technology allows using the second item of the above list too: it's about signing self-executing smart contracts (see the section on advantages of blockchain in logistics, where we discuss the topic at length).

Now let's briefly describe how the blockchain works. So, each transaction is being recorded in a special block, copies of which are stored on different nodes. And these very nodes form the chain of blocks (which explains the name ‘Blockchain’). 

Each block contains links to its ‘neighbors’, so any unplanned manipulation in one of them disables the entire chain. But most importantly, the blockchain is a decentralized system (there is no single control center, all participants are equal).

Blocks usually contain the following:

• data on the operation performed (for example, date, time, transfer amount, if it is a payment);

• information about the participants in the transaction;

• unique identificator.

Basically, blockchain is a sort of public “Internet book”, which cannot be faked and changed. It describes what belongs to whom.

Do you want to better understand how the blockchain works? Our article has the information you need.

Why Build Blockchain-Based Software for the Logistics Industry?

A modern supply chain can consist of dozens of stages and stretch for thousands of miles around the world. It leads to logistics becoming more complex and expensive. Let's say, mislabeled, misdelivered, or stolen cargo alone results in multi-billion dollar losses each year (up from $50 billion per year). 

So before discussing the blockchain technology market in logistics and transportation, let's talk about the challenges the area faces on an ongoing basis:

• Too much documentation. Any business process, including transportation and delivery, is inevitably associated with paperwork, signing contracts, and so on. All this complicates the already slow logistics processes.

• The need to securely process payments. Many interactions between participants in logistics operations revolve around money (invoicing). Alas, processing various payments takes time and effort… moreover, offline-based financial relationships lead to unnecessary bureaucracy, which reduces the effectiveness of the whole thing. And without reliable digital solutions (such as logistics and transportation blockchain technology), it is very difficult to achieve good results.

• Problems with food delivery. As statistics show, more than 1.5 billion tons of food are being lost every year, partly due to inefficient transportation. These figures can be significantly reduced through blockchain-based tools.

• Difficulty in tracking cargo and vehicles. Without digitalization, real-time tracking of the transportation process is close to impossible. As a result, there is a risk of losing part of the cargo and missing critical vehicles.

• The expensive transportation process. Paperwork, the involvement of multiple parties, the need to ensure constant communication between them, and other aspects of logistics increase the cost of transportation services. Also, don’t forget about the financial losses caused by the unproductive use of vehicles (some are working too often, while others are just standing around). Happily, all these activities can be simplified and improved and thus made cheaper (to find out the details, go to the section where we describe the advantages of blockchain in logistics).

• Problems of misunderstanding. In traditional (offline, so to speak) logistics, there is too little transparency of processes and understanding of who is doing what at a particular point in time, who is responsible for what, and so on.

• Costly disputes between parties. According to statistics, almost 150 billion dollars are frozen daily (!) due to various kinds of disputes between cargo transportation participants. One of the things to blame for this is the lack of transparency we just mentioned.

As the example of companies that have already built a blockchain-backed logistics platform shows, certain innovations are quite capable of solving the above problems. And we're here to tell you how. 

Logistics and Transportation Blockchain Technology 

Blockchain makes logistics more efficient, understandable, transparent, and, most importantly, secure. Everyone involved in the process wins: customers (because they can track the product with ease), companies with a fleet (since they manage it in a better way), auditors (by getting the opportunity to verify any transaction in a few clicks), and so on.

There is one more story we’d like to share with you. We’re sure it’ll finally convince you the game is worth the candle! 

According to the FDA (you've heard of this company and its significant role, haven't you?), Mojix, Tag One, and Wholechain were among the winners of the competition as companies, which offered the most cost-effective solutions for tracking food supply chains. And all three organizations were able to win thanks to the use of blockchain in logistics.

Let's clarify a little, shall we?

• Mojix resorts to a decentralized blockchain system to optimize the supply chain through its maximum automation (and digitalization);

• TagOne uses blockchain to minimize the legal risks associated with logistics processes (an inevitable part of the supply chain);

• Wholechain helps different companies coordinate fragmented supply chains using blockchain solutions (Food City is among such companies).

By the way, the FDA has officially recognized the promise of blockchain technology in relation to tracking products, including their transportation. And that says a lot!

Advantages of Distributed Ledger Technology in Logistics

• Speeding up the logistics process. Too much paperwork, misunderstanding of the parties involved, and other problems described above slow down transportation and logistics services. Luckily, the blockchain can remedy the situation by introducing a single digital system. 

• The impossibility of falsifying data. There is no way to change the information entered into the blockchain system. Therefore, any data regarding the transportation process will remain unchanged no matter what happens.

• Logistics transparency. We’ve already explained to you why the transparency of transportation processes is so important. And you must admit, it’s not bad to be able to check the data on the issue of interest at any given moment, get reliable information, clarify the delivery time, find out the latest updates, уес. Blockchain technology made all of this possible.

• Useful third-party integrations. Digitalization of business and implementation of blockchain in logistics is a wonderful basis for additional integrations with third-party solutions such as the Internet of Things (see below). It results in your company operating at full capacity like never before.

• Effective fight against cyber fraud. Transactions become secure because the information stored in the blockchain cannot be changed by a third party.

• Monitoring the productivity of carriers and suppliers. You hardly object to the idea of monitoring how carriers and suppliers work, who is more efficient, who is more profitable to cooperate with. Blockchain is a great solution to help you keep an eye on the situation.

• Optimization of carrier routes. Receiving data on freight capacity in real-time, you can timely adjust the routes of carriers, choosing the most convenient ones.

• Smart contracts. One of the great advantages of blockchain in logistics is the opportunity to use digital self-executing contracts to complete various deals and conduct transactions. Third parties are no longer needed to guarantee the fulfillment of a particular task; rather, their role is being performed by the blockchain system itself through smart contracts (which self-terminate if the agreed conditions aren't met).

• Improved payment system. What is blockchain concerning payments? Let's briefly list the main benefits you'll get:

  • automated billing;

  • paying bills online (which can also be automated);

  • reduction of paperwork;

  • acceleration of payments;

  • reducing the number of errors in transactions;

  • security.

• Checking the origin of the goods. By using sensor tags (which you can take full advantage of if you've built a blockchain-backed logistics platform) you’ll have a real chance to detect scam attempts to mislabel illegal goods.

• Budget savings. According to IBM, the use of blockchain is likely to result in logistics companies saving nearly $40 billion a year. The main explanation is the acceleration of all processes through their automation. Besides, increasing the security of transactions and reducing the number of possible errors also play a role in lowing logistics costs.

  • Here is a good example of savings through blockchain technology. Imagine a situation with missing delivery dates. Usually, it leads to various fines, which may require solving a problem in court (and it takes a lot of time and money). Fortunately, the blockchain captures all the data, which cannot be changed later. So the case won’t go to court.

• Reduced paperwork. As you probably already understood, the blockchain reduces the need to deal with papers, digitalizing the signing of contracts, and other similar tasks.

• Minimization of the human factor. We humans can make mistakes, which is only natural. That’s why it’s important to adopt innovative technologies, including blockchain. It’ll help you reduce the impact of the human factor (or even eliminate it completely).

• Greater efficiency. All of the above advantages of blockchain in logistics increase its efficiency, improve transportation services and make the business more profitable. 

Blockchain is a great and very promising technology, but it won’t be able to give the desired result by itself. Ideally, it should work in conjunction with other digital solutions… such as the Internet of Things.

IoT & Distributed Ledger Technology in Logistics Applications 

Almost everyone has heard about the Internet of Things (IoT). And although the concept is usually related to the comfortable management of the home environment (the so-called smart house), IoT is increasingly being introduced into other areas too, be it agriculture, real estate, healthcare, or logistics.

We won't now detail how the Internet of Things works (follow the link if you need detailed information on the subject). Let's just say it's about a system of devices and objects (things) connected to a network. It works autonomously without human intervention. And in order to get the most out of it, you should combine IoT with such solutions as AI and, of course, blockchain.

How the IoT improves the logistics system

As the Cisco report showed, more and more businesses are improving logistics processes using IoT: in recent years, the number of such companies has tripled. And this is hardly the end!

But why is IoT gaining popularity? What's the use?

We’ve already explained to you the reason to build blockchain-based software for the logistics industry… now we’ll discuss the same regarding the Internet of things:

• Tracking the movement of vehicles throughout the supply chain using special GPS sensors; 

• Collection of data on the condition and location of goods. For example, modern sensors can monitor fluctuations in temperature, humidity, and other things and give a signal if the investigated parameter reaches a critical mark. It’s especially important when it comes to perishable goods. 

  • According to statistics, at least 30% of all perishable products never make it to the store shelves (they spoil along the way).

• Fleet management using modern telematics solutions and GPS positioning sensors. They collect real-time data to give the fleet owner an idea of the condition and location of each vehicle.

• Improved route planning based on IoT data. The sensors provide information about the fuel consumption, time spent on the road, and other parameters affecting delivery efficiency. And the fleet owner can use this information to plan the best routes.

What does blockchain have to do with it?

Now let's consider the interaction of the IoT and blockchain in logistics applications.

In fact,  it's simple!

Special sensors read information about the object, whether it is the temperature/humidity of the product, the location of the vehicle, and others, and transmit it to the system. Further, the data is recorded and stored in the blockchain; and, of course, each item gets a unique digital identifier.

BTW!

The problem of insufficient security of the Internet of Things system remains acute. However, the blockchain helps to solve it at least partially.

Problems of Blockchain Implementation 

Before you decide to build blockchain-based software for the logistics industry, you’ll have to work around a number of pitfalls such as:

• Choosing how to store data. Keep in mind that each company may have its own approach to storing data. It can be a problem when collaborating on a blockchain.

• A large flow of processed information is also challenging. How do you manage all the data so that the process is efficient?

• The need to integrate the blockchain with the existing IT infrastructure. Your company already has experience with logistics and other business processes. You decided it's time for a change (and you’re right!)... but the adaptation period hasn’t been canceled too.

• Keeping eye on the development of blockchain technology. The blockchain is still evolving and you have no choice but to evolve with it. 

Now is the time to look at globally popular companies, which have already tread this same path and solved all the above problems (meaning, each of them has successfully built a blockchain-backed logistics platform). Their experience and example can be rather inspiring.

Successful Market Players

• Walmart was one of the first to implement blockchain technology to improve logistics processes, in particular, to track the supply of pork from China. It is no exaggeration to say that the company knows the history of every piece of pork.

• Nestle uses the same blockchain system as Walmart, IBM's Food Trust. The company oversees the origin and transportation of products such as mashed potatoes, milk, and palm oil. 

• Unilever has chosen a different blockchain solution, namely Provenance. The main purpose is to track the supply of tea.

• The eminent diamond corporation De Beers is using the blockchain to track the history of their gemstones: from mining to sale. So the company gets a chance to prove to consumers they're owning genuine diamonds.

• When discussing blockchain in logistics applications, the Swiss corporation Modum cannot be ignored either. Its key goal is to help pharmaceutical companies ensure data integrity. The proposed solution uses smart contracts and external sensors to monitor environmental conditions during the transportation of pharmaceuticals.

To get more examples of the successful use of blockchain technology to improve business processes, follow the link.

According to forecasts, the logistics and transportation blockchain technology market will have reached almost $890 million by 2025. So it's time to innovate your business processes. 

To stay competitive and meet the growing demands of the logistics industry, companies should develop an enterprise blockchain system to enhance transparency and efficiency.

Our company is happy to help you achieve maximum results. We’re skilled enough to offer you exactly the solution you need. The proof is our vast experience in developing applications of various types. Write to us without delay.

FAQ

1. How is Blockchain used in logistics?

Blockchain in logistics is a combination of encryption and the reliability and transparency of the delivery process. It helps to avoid discrepancies in the documentation: for example, if the carrier and the consignee interpret the delivery time differently, the on-time delivery indicator suffers.

2. How will blockchain affect supply chain transparency?

Blockchain technology has the potential to transform today's complex supply chain and the logistics industry as a whole for single manufacturer, stores, and inventory management.

Each deal and transaction is added to the decentralized database as a new chunk. Each fragment receives a unique numerical cipher and is associated with information about the previous fragment or the completed action, thus building a chain of interconnected transactions that are in compliance. In this case, a plurality of data chains is placed in successive blocks of information, where each new block contains information about the previous one. 

At the same time, all participants in the process see the entire chain and therefore, there is visibility of the path of the goods and the current state of the transaction. This allows you to link different counterparties with each other without the need for their direct interaction, for example, a manufacturing plant, logistics, transport, brokerage, companies, warehouses, customs, and the recipient.

3. What are the main opportunities for using blockchain in transportation?

Implementation of smart contracts - programmable digital contracts that are automatically executed after the completion or fulfillment of predetermined conditions. Scanning smart contracts can automate key manufacturing processes. Given the amount of complex documentation in the supply chain, there is the potential to create smart contracts in many areas for speed, trust, and security.

Increasing trust and security. Everyone in the chain can see documents, payments, and more. The records that store transaction information on the blockchain cannot be erased, which ensures a high level of transparency. This circumstance can be extremely useful for speeding up payment processes or credit checks.

Quality control, corporate social responsibility, maintenance, accountability, and reporting - all these aspects of supply chain business administration can be effectively optimized with the help of the blockchain.