Blockchain, the data-recording technology behind the virtual currency Bitcoin, is all the rage. This new technology, which makes data transmission and storage more reliable by preventing its modification once it has been recorded, is breaking into many sectors, but not everyone is clear about what it is and what benefits it can bring us. . How can blockchain help logistics?
In order to learn about the applications of blockchain in logistics and in the business world, we have interviewed Germán Sánchez, an expert in Blockchain from IBM Spain, after his participation in the Logistics 2017 fair. A walk so you can learn about the future of blockchain and Supply Chain.
Blockhain and logistics interview (Germán Sánchez, IBM)
In what aspects of the business world will the blockchain be applied – or is it already being applied?
The digital transformation in the world pushes us towards a much more collaborative environment. A very clear example is found in the Internet of Things where events are propagated from devices that can be located in vehicles or in household appliances. To cite an example, perhaps in the future we will not buy these appliances but the service they offer us.
Everything indicates that the future of business and the relationship between people will be much more digital and a technology like Blockchain will make it easier to record and store what happens.
One of the difficulties for the traceability of logistics is the lack of trust between the actors and companies. How can the blockchain help this?
Its added value resides precisely in its technological characteristics, where we find, in a very prominent way, the immutability of the information stored in the blockchain network. This means that participants in the network have the confidence that the information remains unchanged over time, which eliminates the need for information audits or mandatory monitoring by a third party.
In addition, it is also guaranteed that the established rules, whether operational, commercial or business in general, have been faithfully respected without the need for a mandatory audit. And finally, in the extreme case of requiring the presentation of evidence of the flow of a transaction, such as the signing of a contract, these can be extracted causally, in the order in which the events occurred, for their utility in each case that was necessary.
Demonstrating authenticity and transparency is essential in the world of consumer products and distribution companies.
What blockchain and logistics projects has IBM already launched and what does it have for the future?
IBM and Maersk have reached an agreement to develop a solution with blockchain technology in Hyperledger Fabric, to provide transparency and end-to-end security to the supply chain, obtaining advantages for all partners with cost savings in paperwork, reduced of fraud and errors, streamlining operations and opening opportunities to more players in the global and cross-border chain.
A single shipment of refrigerated goods from East Africa to Europe can pass through about 30 people and organizations, along with more than 200 interactions and communications, Maersk observed in 2014, creating dark and difficult to control areas.
In addition, if one takes into account that 90% of world trade products are transported annually by the maritime transport industry, the agreement between IBM and Maersk to apply blockchain technology in the management and tracking of the dozens of millions of containers that are in transit around the world.
IBM hosts the solution on the highly secure IBM Cloud network. This project addresses bottlenecks in the supply chain, which Maersk knows well, and regulatory barriers, two fragile points in world trade. The blockchain solution developed by Maersk and IBM is based on the Linux Foundation’s open source Hyperledger Fabric and is expected to be widely available to support different parties in a shipping industry ecosystem later this year.
Soon we will be able to make more projects like this public.
In your presentation at Logistics 2017, you commented that the blockchain means that the information no longer has to be point-to-point. How does it work?
This technology presents original innovations that can allow important changes in the digital relationship between people and entities. These innovations incorporate the decentralization of information and, therefore, an increase in information security in two important factors.
The first factor, which are all the systems that are part of the network, the users who are members of the network, who guard the data, safeguarding the integrity despite the fact that other members may lose all the information. Currently, centralized systems are responsible for safeguarding the stored data, which implies bearing the inherent costs, which are higher the higher the desired level of protection against computer failures or attacks, to name a few examples that impact the cost of centralized services.
The second factor is precisely the reduction in the cost of transportation and storage of information. In a decentralized network system, both are provided by the same members of the network that with their systems allow communication between them as well as a secure, persistent and fail-safe repository.
What are the advantages that blockchain can bring to logistics?
Blockchain has the potential to transform how industries conduct business transactions, including commercial ones. This will require the creation of an ecosystem where the entire industry, or a part, works under a new collaboration model, allowing companies to benefit from the effect of the blockchain network. To facilitate the creation of these new ecosystems, IBM has actively collaborated as one of the main contributors on a global scale. IBM has developed solutions and tools designed to reduce the time it takes to go from idea to execution.
The investment for the blockchain to cover the entire supply chain can be significant. How is return on investment achieved?
Demonstrating authenticity and transparency is essential in the world of consumer products and distribution companies, especially if the items are of high value. Some estimates claim that fake products can cost the global economy up to $250 billion a year.
Blockchain is the right technology for tracking high-value luxury goods, where buyers require origin information and history of ownership, as current paper-based processes are unable to prove the authenticity of the products.
By incorporating photos, analysis, and inspection results into the blockchain, reliability of authenticity and complete trust can be achieved.
Consumers are increasingly requesting more information about the place of manufacture and content of the products they purchase
Until now the main advantages of blockchain for logistics have been related to traceability. Are there other sections that I can help with?
Indeed, one of the greatest potential uses of blockchain technology is to solve the problems that the supply chain has faced for decades, reducing the historical mistrust between different organizations, including the fear that information could be transmitted to the competence.
Supply chains are increasingly complex, still plagued by inefficiencies and highly dependent on paper documentation and manual processes, blockchain offers the transformational opportunity for companies to reinvent their processes and better integrate with the participants in the supply chain, achieving:
Save of time and money.
Business risk reduction.
Increased trust and transparency between suppliers, collaborators and consumers.
Have an ‘end to end’ traceability of the value chain, available to the participants of the value chain.
Security also appears as one of the features of the blockchain. How does this translate to logistics?
Consumers are increasingly requesting more information about the place of manufacture and content of the products they purchase. In the United States, it is estimated that there are about 48 million foodborne illnesses each year, of which 128,000 require hospitalization. Regulatory authorities are increasing control requirements to improve food safety.
Blockchain allows digital tracking of products at each stage of the value chain, from suppliers to consumers. Digital product information, such as place of origin, lot number, expiration date, or storage temperature, are immutably recorded on the blockchain. In addition, it has the advantage that the information stored has been agreed upon by the components of the network, which guarantees the accuracy of the information.
By 2020 we expect almost two-thirds of the consumer products and retail industries to have fully operational blockchain.
Until now, blockchain and logistics experiences have been limited to very large companies and specific projects. How soon could it be used on a broader scale?
In 2018, a considerable boost is expected in blockchain implementations for companies in the distribution and consumer products sector internationally. By 2020 we expect almost two-thirds of the consumer products and retail industries to have fully operational blockchain.
Is it true that Walmart managed to reduce the time needed to check the traceability of a food from seven days to two seconds?
Yes: 2.7 seconds.
According to Ginni Rometty, CEO of IBM, the blockchain will do for transactions what the internet did for information. Do you think so?
Beyond the value chain, blockchain represents a new way of collaborating and doing business. The trust and transparency it provides make blockchain the ideal solution for multiple uses between collaborating companies, as well as between isolated departments that require reconciliation processes for complex transactions, such as:
Management of loyalty programs.
Management of commercial promotions.
Any instance where there are duplicate tasks and data, or reliable data is missing, is conducive to blockchain application.
Anything else you want to add about blockchain?
In essence, the end customer will fundamentally perceive an increase in the level of service. Although for this you may have to make some adaptation effort, which may be similar to the current use of mobile applications; you have to download them, install them, answer some questions to proceed to register the service as a user and then use them.
But the reward of this adaptation will be that users will have a much more efficient, secure and transparent service, thanks to the fact that all the participants in the ecosystem will be connected thanks to blockchain networks.