5 things to know about blockchain and its impact on logistics

In our consumer-based world, the supply chain is the network of all the people, activities, technology and resources involved in the making and selling of a product from its creation to its delivery to the user consumer. In short, it is the journey of the products that we consume, and in a society that is increasingly aware and interested in ethically sourced and produced products, the supply chain is more important than ever.

The blockchain is a recent technology that enables peer to peer transactions, dissolving the need for a trusted third party with its innovative technology of an infallible ledger. While its original use was for the cryptocurrency, Bitcoin, the blockchain is a potential catalyst for an entire societal shift, changing the way we do deals, make payments, and store data.

A blockchain could be used to track a product’s journey along the supply chain, ensuring that sellers and consumers are receiving the item they paid for. For food and other perishable items, it’s important to know where the product has been and how long it has been there. Blockchain allows a timestamped way of keeping track of goods as they are moved around the world. Every time a product switches hands, the change can be permanently documented on the blockchain.

In 2006, there was an E-Coli outbreak caused by spinach, and just last year there was a scare with romaine lettuce. Transparency in the food shipping industry removes the panic and the search to find the source of contaminated food, which in the case of the 2006 outbreak was just one lot from one supplier, and it put chaos on the food industry for 2 weeks.

The supply chain contains three main components: material flow, financial flow, and information flow. When the supply chain is long and complex, it is difficult to keep track of products and transactions, but the blockchain can organize information and finances in a way that is safe and streamlined, decreasing fraud, providing security, and removing added costs and inefficiency.

If a consumer or seller cares about ethically sourced and environmentally sound products, the blockchain allows them to see where their products are coming from and gives them the opportunity to do business with the companies that operate similarly to the way they do.

Unfortunately, there is a lot of corruption in our world, and in the supply chain, it can be difficult for all parties to trust one another in terms of quality goods and safety standards. Through the blockchain, smart contracts can provide accountability and security to suppliers, manufacturers, procurers, and shippers involved in the supply chain. They allow for if-then programming, meaning they can hold data or a payment until the terms of the contract are completed. Smart contracts are basically the use of the blockchain to make transactions with other people that are transparent, unchangeable and immediate, again removing the middleman of a lawyer or notary.

Because it is also nearly impossible for anyone to tamper the records of a blockchain, once data is entered, it cannot be deleted or changed, only added to. This is incredibly useful in the world of business where the integrity of transactions is what gives them value.  

The blockchain is also good for a globalized market, because through it, you can safely send funds anywhere without the use of a bank. Enabling peer to peer business, the blockchain has the ability to create a truly decentralized sharing economy, removing the need for the gate keepers, fact checkers and third parties that make up our society.

The blockchain and the supply chain have the potential to work together in a way that tremendously benefits shippers, consumers, sellers, manufacturers, and everyone involved in the making and distribution of a product. Because it is such a new technology, people are still learning and understanding costs and benefits of adopting it into their business model. Walmart is one of the companies to spearhead the movement, partnering with IBM to use a blockchain tracking their pork shipments from China.

While many people believe the blockchain to be useful and innovative, it will be a long time before it is the main technology of the supply chain. The next few years are bound to normalize the technology as more and more businesses and individuals use it, understand it, and share its benefits and handicaps.  

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