The global supply chain today has taken most logistics out of the control of companies, making them vulnerable to risks, as they commit to deliver value to customers.
Companies, on their part, generally, took this in their stride – until the global shutdown with the pandemic of 2020.
Tracking goods and paperwork as borders closed amidst a rising pandemic, was chaotic, and global trade was compelled to focus on logistics. Kevin Holian, Vice President Global Operations at Boston-based New Balance Inc, once said, Logistics is a little bit like plumbing in your house. As long as it’s working well ¦you don’t tend to worry about it or care about it. But the moment that stops working properly, it escalates to probably become perhaps the most important issue in your home and certainly in your business.
Moreover, the global supply chain includes the entire range of transport modes “ road, rail, air and sea, with each employing local systems to handle its part of business before handing over to the next.
Inevitably, each process involves physical paperwork “ business phone calls, faxes, couriers, mail, and face-to-face meetings, with mind-boggling voluminous stacks of paper, including several copies of different documentation needed at each point of handling, such as consignment notes, insurance policies, loading and unloading contracts, declarations for customs clearance, packing lists, shipping specifications, quality and origin certificates, invoices, bills of health and veterinary certificates.
IBM and Maersk found that paperwork in a particular trade interaction amounted to 15-20% of the total cost. Thus, traditional supply chains, being data-intensive and costly, are inefficient, at best of times.
Mariam Obaid Al Muhairi, project manager at the Centre for the Fourth Industrial Revolution, in UAE, said, What has become abundantly clear over the last three months is a general lack of connectivity and data exchange built into our global supply chains.
Adding to the woes, are outdated technology and archaic processes, leading to inefficiency and vulnerability in the supply chain. A recent report by the Business Continuity Institute showed that approximately 46% of companies use Microsoft Excel to predict, monitor, record, measure, and report on performance-affecting supply chain disruptions.
Michael Ignatiadis, an experienced supply chain professional said, The pandemic has been a wake-up call for digital transformation of supply chains. If you have good data, you can better predict what the supply chain will look like next week, next month. If you don’t, you can find yourself in the dark.
Even pre-pandemic, global businesses were drawn to considering blockchain solutions for their supply chains, after Walmart, and its technology partner IBM tested two proof-of-concept food traceability projects, using blockchain technology. One project traced mangoes sold at US Walmart stores; the other traced pork sold in stores in China. Consequently, with the help of this system, Walmart can now trace the origins of more than 25 products from 5 different producers. Recently, Walmart Canada used blockchain technology to reduce inefficiencies for freight and trucking payments. This resulted in a 97% drop in invoice disputes.
With the pandemic jolting global supply chains, and creating serious misgivings about global trade, there has arisen the need to regain trust in these systems. And blockchain technology could be the answer, as future supply chains begin factoring resilience and adaptability into their calculations, and fundamentally changing their very foundation.
Therefore, what businesses find attractive amidst supply chain disruption in a pandemic, is transparent and secured data that blockchain technology can provide.
Blockchain technology can provide the complete history of a product from start to end. As Don and Alex Tapscott, authors of Blockchain Revolution, said, The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.
Indeed, blockchain is an innovative method of tracing product supplies; it is a decentralized ledger system, with speedy, digital flow of information in real time, with every new entry on the ledger immediately seen by all participants in the transaction. All can verify that no one has interfered with the consignment, because all inventory can be tracked, with each item provided a particular code. Moreover, every computer in the network has its own copy of the blockchain, and, with no central server, a single point of failure and fraud is eliminated.
Therefore, the best place to originate blockchain is where the transaction takes place. For many companies, the first step, therefore, is using purchase order and stock-keeping units. Woven around the concept of What I see is what you see, blockchain offers the unique feature of a single source of truth for shippers and carriers, and provides companies the opportunity to improve tracking and tracing shipments, while leaving little room for human error and miscommunication.
Thus, a thoughtfully designed blockchain removes intermediaries, reduces costs, and increases speed and reach, while enabling more transparency and traceability for business processes. Through access to accurate, real-time location information, transport and logistics companies are finally able to get a handle on one of their most frustrating problems of not knowing at any given time, where the cargo is.
Forecasts by analysts indicate that blockchain will generate an annual business value of more than US$3 trillion by 2030, with about 10% to 20% of the world’s economic infrastructure functioning on blockchain-based systems.
With zero hard-copy paperwork, and files all integrated into a single system, updated in real time simultaneously at all nodes, and safe from single server cyber-attacks, blockchain takes care of fraud, illegal and unethical practices, corruption and human error.
As technology futurist Ian Khan says, Blockchain truly is a mechanism to bring everyone to the highest degree of accountability.
