The use of blockchain technology in the logistics sector brings significant advantages in terms of security, transparency, and efficiency. To date, however, its application is still minimal. According to figures from PwC, the top three barriers to the adoption of blockchain technology are regulatory uncertainty (48%), lack of trust among users (45%), and the ability to link different networks (44%). Jason Simon, an expert on issues related to the cryptocurrency and eCommerce spaces, offers a detailed explanation of how blockchain technology could become a game-changer in small business logistics.
Blockchain technology consists of a kind of digital registry, which uses a network of replicated, decentralized, and distributed databases among all users. Its boom came about because it was the digital solution that made it possible for cryptocurrencies such as Bitcoin or Ether to function.
“Basically, the network is a set of computers operating as nodes in a peer-to-peer (P2P) network,” Simon explains. “All the machines are linked to one another, using a standard protocol for collecting and confirming data; that is, the information is not stored in a single location, but in a fully distributed manner. This makes it impossible to steal or illegitimately modify the data contained in any of the nodes.”
When analyzing the impact and advantages of this technology in the logistics sector, several important points stand out. First of all, it is important to understand that there are different benefits for small transportation service providers. According to Simon, SMEs and freelancers linked to transport can benefit in several ways.
Simon says that limiting intermediaries is one of the main benefits. “The authenticity of this technology makes it feasible to produce self-managed communities of users, united by enforceable rules. Likewise, the use of smart contracts streamlines negotiations and automates processes between companies. The result is that traditional intermediaries are no longer necessary,” he adds.
Another big advantage is digital identity. These suppliers can prove their documentation and identity securely, unequivocally, and automatically. On the other hand, it also improves trust between actors. The fact that all transactions carried out by actors in the supply chain are unalterably recorded increases the reliability of their relationships.
Likewise, since the history of each supplier’s activities is recorded in an unalterable way, it is very easy to compare their reputation and professional image with the reality of their services. “Distributors and logistics operators also benefit from this technology. Medium-sized and large companies in the logistics sector will benefit both in terms of the transparency of their processes and in terms of interoperability with other market players,” Simon asserts.
First and foremost, greater transparency will be created. Each logistics operator can record in the common network all the information it deems appropriate regarding its operations in real-time, as well as regulate the accessibility of this information to third parties. Since the information recorded is immutable, this technology offers an unprecedented level of transparency.
It is also noted that a reduction in IT integration costs could be generated. Collaboration between logistics operators and customers usually requires the integration of each company’s IT systems. However, with common blockchain networks, integration between systems is much simpler.
Increased traceability is another advantage. Because of the IoT (Internet of Things), blockchain technology can give superior traceability of transported goods. All actors in the supply chain can access a common network of reliable information. Obviously, the ideal context is one in which everyone in the logistics chain participates in such a network.
Processes will also be greatly improved. The use of smart contracts will reduce costs and increase process efficiency. These are automated, which speeds up their execution and limits human error.
More financial products will be available. Thanks to encryption systems and the reliability of the information, financial institutions will be able to provide greater security and speed in payments. In addition, the certainty of the data recorded in the blockchain network makes it possible to offer financing and insurance models that are more flexible and tailored to the reality of logistics operators and their customers.
And last but not least, it must be made clear that customer loyalty will be a fact. It is feasible to expect that logistics operators themselves will create their own cryptocurrencies with which to offer reward mechanisms and customer loyalty.