27 Feb Efficiency in logistics is within reach
Efficiency in logistics is within reach
Originally written in Dutch by Martijn Siebrand, Programme Manager TKI Dinalog
Comprehensive integration of information, physical, and financial flows within the supply chain – a utopian concept? Not anymore. In fact, the long sought after dream of creating a more efficient supply chain is even closer than we think.
These days, keeping up with advances in the field can be challenging, with automation, robotisation, Internet of Things (IoT), Big Data, Artificial Intelligence (AI), and now, the blockchain. Which technology to devote attention to? And how does one make this decision? For years the industry has shared a desire to improve the transparency of supply chains. At the moment, there are a few trends that are clearly helping to turn this dream into a reality.
The technology has arrived in every way, the urgency is palpable, and the opportunities are ready to be seized.
What is blockchain?
A blockchain is a public, decentralised digital ledger. Every junction, or node, in the network possesses a complete copy of this jointly shared ledger. Transactions are processed and verified based on a complex set of mathematical principles. If the nodes don’t come to consensus – then the party is off. In other words, a hacker attempting theft would need to breach the entire network all at once in order to be successful, which has thus far proven impossible.
The tech – increasingly, blockchain is gaining attention within the tech sphere and beyond. This tech that first came to be within the financial sector is now steadily gaining traction in the world of logistics. Large and small parties alike are experimenting with applications for blockchain technology. This tech, which makes use of an open network of databases, and functions as a public, digital, and distributed ‘ledger’, could potentially be applied in all sorts of industries. Yet surprisingly, for many, the digitally distributed ledger remains elusive.
Currently there are a number of trends evident in logistics. The major global players like Amazon and Alibaba are moving toward total domination of the supply chain, complete from logistics to financing. An additional threat is posed by the lack of suitable staff available for logistics jobs. Some logistics services are not even able to operate due to a shortage of qualified drivers. Meanwhile, half empty trailers still fill the roads. Could this combination of developments help to spur more intense cooperation in the industry? What is the likelihood that parties from within the supply chain might come together to form a bloc against the rise of giants like Amazon and Alibaba? Will technology and a sense of urgency end up being enough to ensure better utilisation of logistical assets?
An opportunity for the Netherlands to present solutions
In the past, a business was typically built upon a foundation of trust between the people that went into business together. Eventually, the computer made its mark on the world of business, and then the Internet arrived. The proliferation of the worldwide web presented whole new worlds of opportunities. Now, consumers can connect to suppliers via mobile connection. Likewise, both worlds can communicate with each other via the Internet.
The potential of innovation in technology that has emerged over time has coalesced and grown. Now, we have reached a point where the question is whether processes are organised in the most efficient manner. Indeed, in many examples it has been evident that processes became unnecessarily complex. Consider this – the average commercial transaction typically involves 10 or more parties and approximately 30 (but often more) physical documents to manage. And this is only one example of the inefficient processes that plague the industry.
Now, a technology has arrived that will enable firms in the logistics sector to design processes in the most efficient possible manner. The distributed ledger definitively records transactions, allowing us to ‘digitise our confidence’ through radical transparency. It is in fact, this definitive nature that acts as a driver against parties attempting fraud. On the blockchain, it is immediately evident which parties commit fraudulent transactions, as these remain accessible. Additionally, logistics service providers are able to build ratings over time based on the services provided.
Blockchain further presents the unique opportunity to realise a smartcontract, which is a pre-programmed contract on the blockchain that enables, among other things, the pre-programming of compliance settings. The smartcontract executes itself with the help of blockchain tech. Examples currently becoming more commonplace within the blockchain are bills of lading or letters of credit. Blockchain technology also allows for the secure transfer of data or documentation between parties that otherwise have no track record yet with each other, and therefore no previously built trust. This, especially, presents a highly interesting opportunity for logistics.
State of development & opportunities
Around the globe, companies and initiatives are experimenting with this exciting new technology. In the Netherlands, we are especially interested in exploring the potential applications of blockchain in logistics. Already it is evident that applications in blockchain are serving either to void the role of the trusted third party entirely, or at the least to drastically alter that role. Without the need for a controlling third party, change will continue to accelerate in the supply chain. There is no better time than now to begin carefully considering what – If any – role your company will play in the supply chain of the future.
This article was originally written in Dutch by Martijn Siebrand for Dutch logistics sector news platform logistiek.nl, and later translated to English with permission. To see the original Dutch article, which describes blockchain in more extensive detail, click here.