Opportunities for Supply Chain from Blockchain and Internet of Things
During last periods we have observed a continuously growing push to commercialise applications related to blockchain and IoT, due to higher level of technology developments.
Also Supply Chain, and in particular Logistics and Transportation industries are embracing the above.
Before discussing about the impact on Supply Chain operations, let me recall some terms’ definition.
A Blockchain is a digitized, decentralized, public ledger of all cryptocurrency transactions (see ref.).
Constantly growing as ‘completed’ blocks (the most recent transactions) are recorded and added to it in chronological order, it allows the participants in the market to keep track of digital currency transactions without central recordkeeping. Each node (a computer connected to the network) gets a copy of the blockchain, which is downloaded automatically.
Internet of Things is a network of connected devices (see ref).
Relevant devices have unique identifiers in the form of an IP address that have embedded technologies or are equiped with technologies that enable them to sense, gather data and communicate about the environment in which they reside and/or themselves.
The convergency of Blockchain and IoT can transform every element of Supply Chain industry.
Systems based on blockchain can work together, sharing data from IoT devices used in transportation and logistics.
This integration will generate a lot of advantages for transportation providers, as operations can be streamlined and safe and, consequently, cheaper and quicker.
Think for example to the insurance risks when carriers are claimed for damaged goods or late deliveries…
In the past when you were talking about logistic processes, the area of influence you were referring to was limited to operations inside the owned business. With eCommerce and omnichannel applications, logistic’s scope is wider and the counterpart is no more a internal department, bur the final client that means the real market. The result is a continuous search for greater attention to elements that have now become much more critical as they impact on the market’s perception of the brand.
Furthermore because of the scale and complexity of the involved systems, Supply Chains have high transaction costs and often have to contend with discrepancies and errors in documentation manually produced. At the same time, the goods may suffer damage or theft. These problems often result in accidents, particularly – based on my experience – in the clothing sector.
Blockchain has the potential to make the procurement, logistics and payment system more efficient:
- To reduce the manual process of documentation on the import / export of products,
- to ensure compliance with local regulations
- to monitor the delivery of goods
- to prevent losses
This means that Blockchain can support to reduce overall costs, improve security, increase fairness and minimize fraud throughout the process.
Thanks to blockchain, logistics operations will benefit in terms of traceability, to guarantee better service to their clients, and fraud management to be protected from unsafe or outlawed behaviours.
Internet of Things to support business during the criticality, not to merely substitute human work.
The daily challenge of the responsible of logistics and transportation is for sure the ability to accurately and efficiently manage the average time (right thing, at the right place at the right time), but mostly to guarantee smooth goods flow during the peaks, when you have all eyes on you.
Standardised machine-to-machine information sharing can free human capacity over the management of out-of standards activities.
Unexpected order waves will not request more capacity, frequently generating mess and errors, with tremendous impact on costs and company’s reputation. IoF can help enterprises to can gain visibility into their assets and better streamline operations.
Today there are already a lot of applications involving IoT. For example RFID for improving traceability and visibility, reducing shrinkage or optimising routes. But these applications, if limited to substitute human works can generate poor benefits, in particular considering the significant amount of investment and deployment effort.
The expectation from integration between blockchain systems with IoT should be to completely change the consolidated Supply Chain operations, generating concrete competitive advantages.
For sure both Blockchain and Internet of Things are today more popular in conferences than during business-as-usual meetings and it is very difficult to propose this discussion from bottom to top.
Being a revolution in the consolidated habits, the management of these projects is very delicate as it needs a strong leadership supported by convinced sponsorship from the top.
Finally, it does not make sense to invest today in Supply Chain, Logistics and Distribution reengineering projects, without considering what will happen in a couple of years, or probably before.
