24 July 2018 by Spencer Symmons
Just as the industrial revolution transformed global trade with the proliferation of railways and shipment of goods, the digital era has given us the means to connect across the planet like never before. Naturally, manufacturers have capitalised on this global connectivity to achieve economies of scale in production, with some building pan-regional factories, to support growing customer demands.
In turn, the supply chain ecosystem has become increasingly complex; a vast network of globally dispersed land transportation providers, ocean carriers, freight forwarders, customs brokers and governments all interacting within the same product lifecycle. Today, nearly all of the world’s leading companies must rely on a digital infrastructure to monitor and manage products from their earliest origins to their final destination.
Yet, despite digital transformation, most companies are still restricted in their visibility and insight on the whereabouts of their products. In fact, manual and paper-based processes are still prevalent in the process, and information about the status of goods is locked away in organisational silos. Due to the sheer volume of point to point communication and the lack of transparency within the supply chain itself, information is easily lost along the way.
While our computerised systems may have sufficed for efficient supply chain management only a decade ago, a sudden increase in our global exchange of knowledge, trade and capital around the world has prompted a reconsideration of the methods used to manage and oversee the product lifecycle.
Blockchain is a neutral, transparent and unalterable database living in multiple locations and shared by a community. By recording transactions on ‘blocks’ and across multiple copies of the ledger that are distributed over a number of computers, blockchain offers a highly secure and transparent method of making transactions. Of course, most of us know blockchain as the core system that underpins the cryptocurrency Bitcoin, but the capabilities of this technology extend far beyond supporting a currency.
Traceability and transparency form the foundations of logistics. However, as supply chains have transformed over time, companies have not updated the underlying technology for managing them in decades. The nature of blockchain technology offers companies an opportunity to rebuild their approach to supply chain management; it provides them with the ability to gain an integrated global view, as opposed to disorganised snippets of information.
Further to this, blockchain provides consensus: at no point within the supply chain can a dispute arise regarding a transaction, since all entities on the chain have the same version of the ledger. Perhaps more importantly, records on the blockchain cannot be altered nor erased, and everyone on the blockchain can clearly see the chain of ownership for a particular asset.
Today, the cost of processing documents and information for a container shipment is estimated to cost twice the price of the physical transportation itself. Blockchain addresses this problem by providing a distributed, permission platform that digitises trade workflow and eliminating frictions such as costly point to point communications.
At its most basic level, blockchain technology allows increased visibility for each and every piece of inventory: when a product moves from finished goods to in-transit, the transaction status will be updated for everyone in a matter of minutes, with full traceability back to its point of origin. While this technology may still be in its infancy, the early results of its integration within the supply chain have shown promise for improving efficiencies and promoting transparency when tracking shipments end to end.
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