For centuries, businesses and, in some cases, entire industries have been built on the simple principle of trust between multiple parties. However, this trust business is about to be disrupted and transformed with the advent of blockchain technology.
Blockchain can be defined as a distributed ledger technology that can record transactions between parties securely and permanently. By ‘sharing’ databases between multiple parties, blockchain essentially removes the need for intermediaries who were previously required to act as trusted third parties to verify records and coordinate transactions. However, blockchain effectively liberates data that was previously kept in safeguarded silos by facilitating the move from a centralized to a decentralized and distributed system.
What kind of impact could this have on everyday life? Imagine in healthcare, sensitive data from all stakeholders – ranging from patients to medical companies – could be shared using the highest encryption and data protection levels to improve service efficiency and quality greatly. Or in finance, companies and customers could potentially adopt a common digital currency as an alternative to traditional money, reducing the cost of transfers and enabling microtransactions. And in logistics, data sharing across the supply chain could help higher levels of transparency, empowering consumers to make better choices about the products they buy. These are just some of the many opportunities that blockchain presents. Despite its brief history, blockchain is currently enjoying a rapid rise to prominence in corporate agendas as well as in the media. Mainstream awareness can be largely attributed to its original application as the underlying technology of digital currencies, particularly bitcoin.
Besides adopting this technology in powering cryptocurrency networks, there are open questions about where blockchain is headed, when it will yield positive results, and who will benefit most from it. What’s clear at this point is that blockchain applications may have one of the most profound impacts on the logistics industry, especially the supply chain. Basically, a lot of companies are interested in blockchain for creating more efficient workflows, but supply chain management is one of the big killer apps. This is because global supply chains are highly complex, with diverse stakeholders, varying interests, and many third-party intermediaries – challenges that blockchain is well suited to address. In the logistics industry, blockchain can be harnessed in two key ways, namely, to drive efficiency and enable new business models:
Drive efficiency: Blockchain can potentially improve efficiency in global trade by greatly reducing bureaucracy and paperwork.
For example, a multi-stakeholder process with a lengthy paper trail could be replaced with an automated process storing information in a tamper-evident digital format. Another example is the automation of services that currently require intermediary insurance, legal, brokerage, and settlement services. Blockchain could be used to track a product’s lifecycle and ownership transfer from origin to store shelf, even as it changes hands between the manufacturer, logistics service provider, wholesaler, retailer, and consumer.
It would facilitate and automate each business transaction, enabling a more direct relationship between each participant (e.g., automating payments and transferring legal ownership between parties).
Enable new business models: Micropayments, digital identities, certificates, tamper-proof documents and much more can be introduced and radically improved using blockchain-based services. For example, driver training organizations could replace easy-to-fake paper-based certificates with tamper-proof digital versions, leading to new identity-related services.
Just as the Internet began a revolution of communication, blockchain technology could disrupt current business practices and models with significant benefits insight, the overall blockchain market is expected to boom.
Reasons for the rapid growth are the rise in banking, financial services and insurance applications, including digital currencies and identities, as well as the continuing development of this technology and growth from major vendors. And while blockchain is not yet fully mature, its huge potential suggests this is the right time to learn more. Companies need to understand how blockchain technology can empower groundbreaking innovations, what obstacles must be overcome, and the likely value and tangible rewards it can deliver, especially in logistics.
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