Blockchains can help ease challenges in the logistics sector

The global logistics sector went through particularly rough waters with disruptions, delays and low demand in the last couple of years due to the pandemic. The sector is not yet through the tunnel, with unexpected geopolitical tensions involving Russia and Ukraine and the recent lockdowns particularly in China hindering the sail.  

But there is a silver lining as organisations have embraced technology with increased appetite for technology adoption like never before. A new set of smart technologies accelerated this digital transformation. From artificial intelligence to machine learning, cloud computing to robotics and from autonomous vehicles to the internet of things are being integrated to enhance the efficiency of the value chain. One technology that stands among all these and has the potential to revamp the sector is blockchain which has become the latest buzz word across the industries and the governments.  

According to a recent study, the global market for blockchain technology in supply chain management will reach $3153.7 million by 2028 from $262.9 million as of 2021. It will see a whopping 51.3% compound annual growth rate. The study predicted that the Asia-Pacific region will be the fastest-growing region, though the North American markets lead the way as they adopted this distributed ledger technology very early.  

Blockchain, a type of encrypted digital ledger for recording transactions, was originally invented for crypto-currencies and to timestamp digital documents. But it has now expanded its footprint across sectors beyond the financial industry because of its proven inherent strengths. A block, which is one of the transactions in the distributed ledger, is chained through a network and connected to thousands of computers.  And every transaction should be confirmed by each of the `node’, making the data tamper-proof, transparent, secure, immutable, and safer.  And the best part is that we are still at a nascent stage and this new-age technology is growing in capabilities. The true potential is yet to be realised in the supply chain industry, too. 

On the other hand, the challenges of the logistics sector remain tougher. Managing the increased flow of information, lack of speed and efficiency in deliveries, poor inventory tracking, and discrepancies in payment and invoicing continue to hamper the movement of goods. Besides, the logistics system itself is becoming more complex with more stakeholders and geographies involved in the process and at the same time, the customer demands for efficiency, agility, accountability and performance are increasing.  

Blockchain is set to play an important role in supply chain against this backdrop as the very nature of this technology that ensures trust, transparency, decentralised structure, quality data, improved security and privacy, reduced costs, agility, visibility and traceability, immutability, smart contracts, and individual control on data. These elements will go a long way in addressing the current concerns of delays, disruptions, human errors, high paper-work and administrative costs, chances of fraud and proliferation. 

Blockchain has proved beneficial globally in facilitating smarter inventory management and enhanced efficiency apart from ensuring higher security and reliability. The decentralised technology works with the principle of equal freedom and responsibility by all nodes which have to confirm and monitor each transaction. This allows buyers, manufacturers, lenders, logistics companies, and government agencies to securely share and authenticate information on a real-time basis. It helps in cutting down the paper-work and human interventions which have been the continuing bottlenecks for the sector. 

As it records data in blocks and duplicates across the network, data management is transparent. Since there is no one authority, there is mutual trust between the partners. The data is tamperproof and the chances of forgery are ruled out across the value chain. Real-time inventory tracking is one of the key aspects of blockchain. This helps in limiting issues like product damages, food spoilage and spurious products as anybody can track the items anywhere and detect the problems. This end-to-end tracking also ensures transparency. Blockchain is poised to ease out a lot of challenges the sector faces.

Shalabh Raizada

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Shalabh Raizada is the chief information officer of Stellar Value Chain Solutions.