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What the Blockchain Technology Means For the Logistics Sector

The logistics industry is a synonym for all the processes that should be executed in order to achieve a certain goal. Over the year, multiple administrative and logistics processes were performed using paper documents, which led to numerous errors and laborious manual work. The aforementioned processes were changing as the digitalization advanced, converting into more effective and less laborious tasks. However, the main objective was not the effectiveness, but the efficiency. The problem of the efficiency in the logistics sector seems to be solved with the appearance of the blockchain technology.

Since the creation of Bitcoin the benefits of the blockchain technology attracted a lot of attention from different sectors. Banks, governments, insurance companies, food companies and even online video games industry discovered the form of implementing the blockchain technology to make their processes more efficient. The logistics sector is one of the main sectors when it comes to the adoption of the blockchain technology at the moment.

It is important to know that implementing the blockchain technology in this case comes to the use of smart contracts. Smart contracts are encrypted contract that have the ability to be fulfilled automatically. By integrating smart contracts in the supply chain of a company, the entire process is modified and uses the benefits of the blockchain technology such as immutability, decentralization, security and real time information.

The companies that decided to experiment with supply chains and logistic processes based on the blockchain technology took advantage of this revolutionary technology to improve their production, shipping and tracking.

The encryption and decentralization of the smart contracts makes it impossible to overwrite, modify or delete the information stored in a blockchain network, because the data is not stored on one computer or on one server (centralized data). Instead, the data is cryptographically written on hundreds of computers in the network.

This means the companies that use data stored in a blockchain network have high security levels against malicious attacks that try to steal their information, which means the companies’ inventories are secure. At the same time, the problems with duplicate data are eliminated and the transparency of the information is much better as well.

Likewise, by adopting the blockchain technology, the companies can reduce or eliminate completely administrative costs, thanks to the digitalization of the processes. As we have mentioned earlier, the digitalization revolutionized the logistics sector by making the processes more effective. However, a large part of the data of the logistics companies is still on paper or on operating system that require physical confirmation, due to diverse vulnerabilities.

The blockchain technology allows the companies to change the game and digitally manage and encrypt their data by using smart contracts. This implies that the companies or governments need to stop using physical work for any type of process and thus drastically reduce their paper and ink consume. When they do this, a blockchain platform steps in and allows them to easily access contracts, accounting files, requests, etc. All these documents are valid and verified and without the necessity to have them on paper.

In this case, the employees in charge of maintaining archives and processing requests could be transferred to other areas where their contribution could be greater.

It is important to have information in real time in the logistics sector. With the blockchain technology, the participants have real time access to the information stored in the chain. This means the clients and providers have access to the information related to the status of the good, product or request during the entire process.

Moreover, the smart contracts are fulfilled automatically and there are no multiple versions of the same document, which makes the negotiation process quicker, because it is no necessary to wait for the changes proposed by the other parties involved in the process. This possibility drastically reduced the time necessary to reach commercial agreements with other companies, for example.

The access to the information allows the final consumers to know the origin of the product in question, together with details such as its production date, weight, shipping date and delivery date. This information helps fight the falsification and frauds.

The detection of frauds is another advantage of the blockchain technology. Since we known the information stored in a blockchain network is immutable, encrypted and decentralized, adding false elements to a blockchain network is almost an impossible task.

By registering an inventory in a smart contract, it becomes a file almost impossible to infringe. According to Logistics Bureau, a consulting company working with companies such as Shell, Unilever and Adidas, assured it is technically impossible to arbitrary modify the storage conditions, payment and shipping dates and other data.

The blockchain technology gives more power to clients by giving them access to production details of a certain product. This allows the buyers to verify the authenticity of the provided information backed up by a smart contract, which means it could not be tempered with.

The blockchain is implemented in big companies, conglomerates and even governments that decided to make use of the benefits of the smart contracts by adapting them according to their specific needs.

One of the best example of the use of the blockchain technology comes from China where this technology was used to combat the food falsification problem. Alibaba and Walmart initially started using the blockchain technology to show their clients the origin of the food products offered in their shops.

It is important to know that the consumers in China are afraid the food they are buying might be false, because there were numerous cases where products were not compliant with the sanitary standards.

Currently, the clients of Alibaba can find out the name, weight, age, color and other data about the products they are buying. This information helped increase the trust of the buyers in the products.

Another example of implementation of the blockchain technology is FedEx, a logistics company from the United States of America. The company decided to use the blockchain technology to store its data, with the goal of offering its clients real time information about the location of their packages during each phase of the supply chain.

Finally, Dubai also uses the blockchain technology to try to reduce its administrative costs by transferring all the manual processes related to visas, licenses and invoicing to a blockchain network.

The implementation of the blockchain technology is part of a strategy called Smart Dubai, whose goal is to convert Dubai into the Blockchain City in 2020. By eliminating all types of manual processes, the city is hoping to be able to redistribute 25.1 million productive hours per year and also reduce the paper consume. At the same time, the entire country would become more efficient.

It is easy to see that the implementation of the blockchain technology transforms the way in which the logistics sector is operating. It allows the companies in the sector to reduce, distribute and eliminate operational costs and give more power to the clients. At the same time, the risks of fraud between retailers, clients and producers are eliminated.


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