Blockchain Technology Can Reshape Global Supply Chains
Blockchain technology has been drawing the attention of logistics companies for some while now. With the complex and incredibly cumbersome procedures involved in arranging transportation from one point to another, the blockchain seems like a long-awaited deliverance to them.
The problems faced by the logistics industry are very tangible; huge amounts of paperwork, insurance and legal issues, customs clearance, cargo tracking and abundance of intermediaries are but a tip of an iceberg. Freight forwarders spend a fortune on maintaining the system completely encased in red tape.
The opacity of extremely long supply chains also disturbs retailers and consumers: with thousands of miles to go and dozens of borders to cross, origins of a product may become unrecognizable. Problems with smugglers and drug traffickers just build on top of that and also require due diligence and thorough control on behalf of multiple parties.
All those problems can be automatically solved by blockchain technology; being an immutable ledger of data, it ensures that the entire supply chain remains visible and controllable. It also enables freight forwarders to keep track of all movements of their cargo effectively and brings a great deal of automation to the paperwork involved in logistics.
However, most importantly, it cuts intermediaries off the whole endeavor, and therefore makes international transportation much less expensive. The ‘blockchainization’ of logistics may eventually lead to a noticeable drop in prices as delivery of a product would no longer be expensive.
This appeals to lots of businesses and nation states that have already experimented with ‘blockchainizing’ their supplies.
For instance, Wells Fargo and the Commonwealth Bank of Australia have tested the technology by sending cotton from the USA to China using smart contracts. A somewhat similar experiment was held in the Netherlands, where several companies and firms use the blockchain to arrange their supplies. Logistics giant Maersk sided with IBM to introduce blockchain technology to cargo tracking.
Those solutions, however, address only a part of the problem. Still, several projects are working on the creation of a full-fledged system that could use the blockchain to take care of all the complexities of the industry, with Blockfreight and A2B Direct being the most prominent of them.
Blockfreight is a startup from Australia that seeks to use Ethereum-based smart contracts and its own tradable token BFT:XCP to bring innovations to container transportation, and tackle the issues related to fraud. The project has even launched a crowdsale with somewhat reasonable cap of $1.9 million to fund the development of a platform that could make it all possible.
A2B Direct took a different approach; it has already developed a platform that works similarly to Uber, and facilitates interaction between freight forwarders and cargo owners while taking care of all involved paperwork. Still, the company opted to introduce blockchain technology into the platform to enhance its capabilities. It is holding a token sale in order to fund its expansion in overseas markets, and seeks to raise €500,000 to €3,000,000 ($57,1430 to $3,428,580).
All those instances show a great promise that the blockchain will finally become a part of international logistics. This will make things much easier not only for parties directly involved in the transportation of goods, but also for end customers who will be able to read the entire supply chain like an open book, and pay much less for the products they need or want.
Even though progress in this regard is only at early stages, if more and more companies and nation states embrace the changes, in just ten years the whole world may change beyond recognition.