Page 51 - Linkline Autumn 2016

The Future of Logistics and Supply Chain is Blockchain
You might have heard the name in relation to fintech, or that cashless currency, bitcoin, but those aren’t the only reasons you should be taking note of it. This latest phenomenon is blockchain. People are calling it the biggest technological innovation since
the internet – and if you think that’s just hyperbole, you might want to reconsider. Right now blockchain is burning through the financial sector at ferocious speed. Though many bankers would not be able to tell you exactly what it is, that doesn’t mean that they aren’t clamouring to adopt it for fear of being left behind. And bankers aren’t the only ones who should be thinking this way. The advantages of blockchain aren’t limited to finance; that was just a logical starting point. It will soon play a major role in nearly every industry, including logistics and supply chain.
What is blockchain?
At its most basic level, blockchain is a digital ledger that records data and transactions. Bitcoin – blockchain’s most famous appli- cation so far – is not a blockchain in itself but merely built on one. Blockchain is like iOS or Android, it is an operating system that other applications can build on top of. What gives it its revolutionary po- tential is that it can provide an incomparable level of digital security, as well as a high level of transparency. Just consider how bitcoin compares to other players in the finance industry; banks, insurance companies, credit card companies have all been hacked repeat- edly, at huge financial cost, but to this day bitcoin has never been breached. The reason for this is because blockchain is a distributed computing environment; its data is located everywhere rather than in one vulnerable, centralised location.
Furthermore, blockchain ledgers are open and transparent. Any trans- action can be tracked and also can be identified. On the blockchain
it is much harder to conduct bad business practises, or illegal or unethical practices. If a corporation was to make an incredibly risky credit swap or investment, people or other companies would be able to see them do it.
Perhaps the best way to think about blockchain is to use traditional banking as an analogy. If the blockchain were the entire history of a bank’s transactions, then a single block within the blockchain would be a single bank statement. The difference between the bank and
the blockchain is that it is not controlled by a single organisation. Any block added to the chain has to be verified by a majority consensus of participants in the system. In a large enough chain, no single entity would be powerful enough to manipulate the system.
How will blockchain benefit logistics and supply chain?
If one was to compare blockchain development to the development of the internet, they could say that blockchain is now approximately where the internet was in 1990; the first web server and browser had been invented, but they didn’t have widespread use yet, the internet was a long way away from discovering its full potential. In other words, blockchain still hasn’t found its google.
That blockchain will change supply chain management is inevitable, but to what degree it will change it is still unknown. As a technology built to bring security and transparency to all types of transactions, one of its biggest beneficiaries will undoubtedly be chain supply. Products will be easily tracked from manufacturing to sale, each time they change hands, creating a permanent and immutable transaction history. This will dramatically reduce the time delays, added costs and human error that hinder supply chain today.
Consider how the technology could improve the following tasks:
• Recording the quantity and transfer of assets, such as pallets, trailers, containers, as they move between supply chain nodes.
• Tracking purchase orders, change orders, receipts, shipment Notifications, or other trade-related documents.
• Assigning and verifying certifications or properties of products (consider the growing importance of tractability in the food sector).
The CharTered InsTITuTe of LogIsTICs & TransporT 51
BLOCKCHAIN