A growing number of logistics, transportation and distribution companies have begun using blockchains to solve transaction-related headaches. Perhaps the biggest advantage of the technology is that no one company has control of all the data. Rather, all parties contribute to the chain of information in real time, so the need for reconciliation of each other’s internal records is removed.
There has been a lot published of late around the blockchain buzz — much of it rather confusing. Following is a distillation to hopefully shed some clarity: Blockchains are part of a digital ledger with a data structure that enables the creation and sharing of large amounts of transactions while avoiding error or fraud. Blockchains are unlike traditional databases and ledgers because they do not have a central administrator or authority. Instead, they work via a decentralized, anonymous structure. The system uses cryptography to ensure constant accuracy of every transaction. (See infographic.)
A blockchain consists of three components: a transaction, a transaction record and a system that verifies and stores the record. Once information is stored, it is very difficult to change or delete because altering a record retroactively will affect all subsequent blocks in the network. For instance, if someone were to introduce or create a forged transaction, remove a transaction, or duplicate a transaction, all of the other users (who have copies of the ledger) would notice a mathematical irregularity and reject the new piece of data. Interestingly, the blockchain requires no trust from its users, yet it delivers trusted transactional data.
With these benefits in mind, it’s no wonder that the logistics field is enjoying a new level of transparency as a result of achieving this single truth of the status and location of goods. For example, when an export consent document is created for a trade bank or government, the exact same documentation format is used from end to end, making fraudulent annotations difficult or impossible to insert. If there are any discrepancies, the import bank can withhold payment until the issues are resolved. With the huge volume of transactions in international trade, this streamlining is a big deal.
Furthermore, Blockchain facilitates compliance by requiring the verification of the actual gross mass of containers before they can be loaded on ships. Every party in the transaction has access to a container’s sequential events and encounters from origin to destination. And from payment- and receipt-verification perspectives, no one can cheat the system by misrepresenting goods, tariffs, taxes or even entire shipments.
The opportunities for logistics, transportation and distribution companies are truly endless, as the often painful process of making sure everything is done right throughout a value stream becomes much less stressful and error-prone. Indeed, many experts agree that blockchains are generating a less expensive, yet reliable way to know the status of a transaction. Anyone focused on making a process leaner will appreciate the value this brings.
Ron Crabtree, CIRM, SCOR-P, MLSSBB, is chief executive officer of MetaOps, a master MetaExpert and an organizational transformation architect. He is the author or coauthor of five books about operational excellence and the online magazine at MetaOpsMagazine.com. Crabtree also teaches, presents and consults. He may be contacted at firstname.lastname@example.org.