Blockchain, Logistics and Supply Chain: Overview of Possibilities

We are only just beginning to understand how blockchain can help secure and streamline various industries. The sectors in which blockchain can improve logistics and supply chain are numerous—agribusiness, international trade, luxury goods, wines, pharmaceuticals, real estate and construction, aeronautics, automotive and so on.

Let’s take a closer look at a few areas that blockchain can improve logistics and supply chain:

Food

The case of the agri-food industry is today the most convincing to illustrate the impact of blockchain on the supply chain.

The cost of fraud in the food supply chain is estimated as high as $40 billion a year. In 2013, the horse meat fraud scandal again highlighted the shortcomings of the food traceability system across Europe. Such cases are recurrent in the agri-food industry (like the Chinese adulterated milk case in 2008, etc.) and all point to a lack of transparency in the logistics chains of the sector.

The blockchain, as a distributed, transparent and incorruptible register can help fight against the opacity of these supply chains, and lead to a much faster diagnosis of sources of contamination. Walmart’s vice president of food safety says the technology could be the “Holy Grail” of the supply chain. Blockchain enables all stakeholders of a supply chain to write down each step of the process of manufacturing a food product, from its production to its point of sale.

Depending on the case, the registration on the register can be done manually—by photographing the documents with a smartphone and putting them online on an ad hoc platform, or automatically—via the use of connected sensors, attached to the product, able to automatically transmit data, such as location, temperature, humidity, etc., and record them on the blockchain.

Then, each stakeholder who has been granted permission to access this blockchain can check which participant has entered given information, on what date and at what time, etc. In other words, the blockchain allows timestamping and transparency of food tracking, without an individual or entity unilaterally modifying or deleting information. The various actors of the industry can, therefore, detect in real time where and when the fault or the fraud was committed.

Many experiments have started for several months, to record the course of different commodities (tuna, fish, mangoes, etc.). In France, Carrefour announced in February 2017 the future use of the blockchain for the transparency of its animal sectors. Walmart, testing the blockchain in China since 2016 for the traceability of pork, announced in June 2017 that its first results are “very encouraging.” The blockchain has reduced from days to minutes the time needed to trace the origin of the products, to react more quickly in case contaminated products are discovered.

Shipping & International Trade

The implementation of a blockchain would greatly reduce fraud and errors, as well as current transit times and shipping. The stakes are high: 9 out of every 10 commodities shipped around the world are shipped by sea, and the cost of processing and administering commercial documentation accounts for nearly a fifth of ocean freight costs.

Today, international shipping of goods needs to be inspected on average by nearly 30 organizations during its journey, which represents a significant cost.

Also, the process is still largely based on paper and manual checks. If a paper document is missing at one stage of the process, for example at an intermediate point, it is a whole container (or several) that must remain in place. The transport can then be delayed by several days; worse, it is sometimes necessary to discard the entire container because storage conditions during the waiting do not always allow good conservation of goods.

For these reasons, the digitization of international shipping via the blockchain could save up to 20 percent of its total cost.

In concrete terms, the system would work as follows: when one of the actors in the supply chain signs a document associated with a given container, a digital version of the document would be created. A unique and encrypted digital fingerprint associated with this document would then be written on a blockchain accessible to all other stakeholders (note that it is also possible to directly store the data on a private blockchain). In the event of a posteriori dispute, everyone could re-read the register and make sure that no one has modified it in the meantime.

The use of different sensors and NFC or RFID chips would facilitate the collection of data on the position of the cargo, and its conditions of transport, and write these data automatically on the blockchain used.

Luxury Markets

Blockchain can also be an effective tool to fight fraud in the field of luxury goods. One startup—Everledger—is using blockchain in the diamond industry. They’ve developed a digital register that lists diamond transactions, with the aim of making the diamond market more transparent, from mines to jewelers. With this system, blockchain will eventually be an effective deterrent system for fraud. Once the database is sufficiently developed, if a seller is not able to prove by cryptographic evidence that he or she owns the legitimate rights to the diamond, the value of the jewel would decrease considerably.

Everledger lists 40 attributes (size, color, purity, carat weight, the location of extraction, etc.) for the registration of each diamond—which constitute 40 metadata from which a unique serial number is created. This serial number is then engraved microscopically on the stone itself and added to the blockchain along with the 40 metadata.

Although there are already paper certificates proving the origin of diamonds, a blockchain is unalterable, continuously updated, and accessible from anywhere in the world. Moreover, the fact that the register is not in the hands of a single actor but distributed makes it easier to bring together several major players in the sector.

Pharmaceutical industry – drugs

The pharmaceutical supply chain is now plagued by many challenges of drug traceability and the fight against fraud. The World Health Organization (WHO) estimates that more than 10 percent of drugs in circulation in developing countries are fake drugs, resulting in tens of thousands of unnecessary deaths.

The use of a blockchain could help fight this scourge, by registering the fingerprints of each step of the chain of manufacture and distribution of a drug. All the actors of the pharmaceutical supply chain, as well as the patients, could then directly check the origin and the integrity of the medicines.

Blockchain is often confused and conflated with Bitcoin—or cryptocurrency in general. It is also generally marketed and perceived as some sort of magic solution that will solve every problem. Neither of those are true, but the reality is that there are some valid scenarios where blockchain can be beneficial—like reducing fraud and increasing the transparency and security of logistics and supply chains.