Blockchain for Logistics: Preparing for the Opportunities

Without a doubt, blockchain is currently the most talked-about new technology — it’s also the most confusing, especially for supply chain and logistics professionals who are trying to understand its potential role and benefits. What are some of the potential use cases for blockchain in logistics? What are the main barriers to adoption? What should companies do today to adequately prepare? Those are some of the questions I discussed with Jason Kerner, Vice President, Solutions Engineering at project44, in a recent episode of Talking Logistics.

What is Blockchain?

With all of the confusion and lack of understanding about blockchain, I started our conversation by asking Jason to define blockchain. “At its core, blockchain is distributed ledger technology,” says Jason. “What that means is that you have a shared or distributed database technology that allows you to record transactions. Everybody participating in that workflow has a copy of that ledger or shared database. This eliminates intermediaries and potential trust issues.”

Jason added, “At its core, blockchain is just a way to record transactions of value or a transfer of assets in a way that you have consensus across multiple parties and they trust that the data hasn’t been altered and only permissioned individuals can see it. Think of it as a very large spreadsheet that you keep adding rows to and those rows represent a block in a blockchain.”

Blockchain Use Cases in Logistics

“Blockchain is about trust and transparency,” said Jason, “so when you think about use cases you have to ask ‘Where do I potentially have challenges or gaps with trust and transparency when I’m working with third parties?” because that is ultimately what blockchain is trying to solve for.”

Jason provided a number of use cases of how companies can use blockchain to improve logistics processes. For example, in less-than-truckload (LTL) rating workflows, companies oftentimes will use third-party rating bureaus because they might not trust that carriers are applying the right discount or rate to a shipment. “With blockchain, having transparency and a single version of the truth everyone can use creates trust in the process,” says Jason.

Another example Jason offered is in tracking shipments. Having a transparent, time-stamped and unalterable view of movements across different carriers and modes by appropriate parties provides a lot of value through end-to-end visibility, something logistics professionals have long sought.

Barriers to Adoption

What are some barriers to adoption? Jason offered three key reasons why supply chain professionals are holding back at the moment.

First, there is a general lack of knowledge about blockchain, its use cases and potential benefits. That may be changing with all of the blockchain sessions at conferences today. Second, as a new and developing technology, there are currently over 70 blockchain frameworks out there today, many of them industry or use-case specific. Companies are reluctant to invest in a framework that may be obsolete six months from now. Jason recommends going with one of the current leading frameworks such as the one IBM is heavily investing in.

The third barrier is more difficult to overcome. Jason says a lot of companies, even large ones, are still using EDI, manual transactions, and spreadsheets to run parts of their supply chains. Jason states that companies should take a holistic view and undertake digital transformation to create supply chains using API communications capable of sharing data across applications and platforms. Blockchain technology can leverage the API links to share the distributed ledger information.

Getting Started

Given these barriers, I asked Jason how companies should get started in exploring blockchain for their operations. Jason says supply chain professionals must first become knowledgeable about blockchain technology, its use cases and potential benefits by attending webinars and conference tracks on this subject, and by seeking out experts to learn from. Next, companies must “future proof” their supply chains by upgrading to API-based technologies that are compatible with blockchain. Finally, Jason recommends staying away from large, expensive implementations. The field is changing too fast to warrant these big bets on one of the current frameworks. Instead, he recommends finding small, quick-to-deploy use cases to try where transparency can have immediate impact.

Jason and I discussed many other aspects of blockchain in logistics, so I encourage you to watch my full conversation with him for additional insights and advice. Then post a question or comment and keep the conversation going!