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Blockchain and IoT in Supply Chain and Logistics: The Impact of Digitalisation Trends

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Running a business today goes beyond simple service provision. The competition forces companies to apply more complex approaches and offer value-added services to keep their business afloat and more importantly to keep the customers happy. 

Customer retention and customer loyalty is one of the most important factors that define the success of a company. Digitalisation contributes to this factor greatly these days and gains larger scale. The higher the customer expectations are the larger the digital modernisation a company requires, especially where customer satisfaction goes hand in hand with technical intricacies.

Logistics in these circumstances is one of the brightest examples of industries that undergo major digitalisation, namely wider integration of blockchain and Internet of Things (IoT) in the supply chain. The integration is equally important for business growth and for long-term sustainability.

Let us have a closer look at the main blockchain and IoT trends in supply chain and logistics within various business areas as well as how these trends improve the quality of services provided.

The use of blockchain technology in supply chain and logistics offers number of benefits and improves customer experience through better control, optimisation of work processes and security. All these – are available in real time.

Properly implemented blockchain gives higher trust rate between a shipper and a consignee and makes decision-making process much easier. All related parties are able to access information in real time. Moreover, the information will stay relevant and up-to-date for all participants. 

Blockchain technology in supply chain management and logistics is often used for:

– Transportation, shipment tracking and certification of goods

– Optimisation of business processes, for instance, routes optimisation or record keeping

– Security boost (minimising the risk of fraud, enhanced verification)

– Settling disputes, making payments and signing contracts.

When it comes to shipping containers, the amount of paperwork, permits and other freight documentation makes it a very time-consuming procedure. It is particularly true when it comes to international shipments. The overall cost of the related paperwork can vary from 15% to 50% of the material transport costs, not to mention the risks of human factor, fraud or similar. This is when blockchain can come to the rescue and connect networks between freight companies, hubs, ports and customs. This is exactly what Maersk and IBM successfully implemented within their collaboration.

They used blockchain to:

– Standardise the interface and elaborate legacy IT system

– Allow access data, shipment documentation, approvals and shipment statuses.

Another example of blockchain application is tracking the origin of goods. As customers show increased concern of the expanding counterfeit goods that are sold throughout the world, they want their purchases to be genuine and ethical. Apart from the economic damage, counterfeit products may become a life-threatening issue in the pharmaceutical industry in particular. Blockchain technology allows tracking the supply chain and see the product (including the certificate of origin) from the medication manufacturer to pharmacy and the end user. The barcodes and Auto-ID technology used for this purpose impose difficulty to making counterfeit products.

Blockchain technology also became irreplaceable for high-value cargos. Customers, who buy high-value products, including precious gems and metals, are able to check that the item belongs to a real owner, it was not stolen, the item’s origin is transparent and the characteristics and a serial number are present.

Another area where blockchain proved to be highly successful is food supply chain. One of the biggest disasters for food suppliers is the outbreak of the foodborne disease. In this instance, the suppliers need to act as quickly as possible to identify the source of contamination, isolate batches that were in contact with the infected items and stop contamination from spreading. This is the case when time determines everything. Blockchain technology allows simplifying the tracking process and speeds up the search. A great example of IBM and Walmart partnership enabled to create blockchain-based superordinate ledger that allows all stakeholders seeing real time information about food products on all levels of their supply chain – from the origin of good to delivery.

The Internet of Things (IoT) is another innovative technology that is successfully applied in supply chain a logistics. The use of IoT is so versatile that it extends from smaller applications like smart homes to industrial scale pipeline management. Basically, IoT is a network of physical things that is embedded with software and technologies to exchange data with other systems and devices over the internet. The information on transported goods is passed on through sensor devices and helps to improve multiple business processes in supply chain and logistics.

Namely:

– Simplify network interaction through establishing data exchange for all stakeholders. The information remains relevant and secure, which facilitates decision-making processes and enhances control over the freight shipping.

– Manage shipments with less human interaction. Containers with build-in sensors enable to control the environment required for goods transportation, including opening and closing of the container doors, and track their location.

– Control freight vehicles. The build-in sensors also allow monitoring the state of the vehicle, its fuel levels, vehicle’s location etc. This provides excellent transparency to logistic companies to stay in control of the full transportation cycle.

– Prevent breakdowns and profit losses. The IoT allows implementing targeted maintenance and Condition Based Maintenance (CBM) as and when needed as opposed to running scheduled vehicle inspection. This gives logistics companies advantage of predicting a breakdown rather than running an emergency repair risking profit losses.

– Support large volumes of data for different purposes. Non-volatile sensors that work with connectivity devices, routers and gateways transfer information via Bluetooth, Wi-Fi, or 4G and IoT-related protocols. The data is sent to a cloud storage and used for trends, statistics and forecast analysis.

– Manage all transportation cycles remotely. The IoT allows data travelling to any point from company manager’s mobile phone to despatch centre. The technology saves a lot of time, optimises processes and helps respond to deviations in real time.

– Control drivers. Human factor is important especially in transportation business. IoT through Electronic Logging Device allows getting information on the vehicle that includes number of hours on the road, speed levels, driving style, number of hours that a vehicle has been idle etc. This improves safety of staff and company assets and provides better performance efficiency.

– Reduce fuel consumption. IoT helps to cut costs and reduce fuel consumption by using fuel sensors combined with GPS and Engine Control Module. This provides a more transparent fleet management, eliminates chances of unauthorised use of fuel and reduces paperwork. 

IoT caused real transformation to supply chain management. It is particularly visible in complex areas, for instance, healthcare industry. Having so many interacting components – from patients to software – it is crucial that all participants receive real-time data. IoT-based framework makes these interactions simpler and optimises processes. The technology solves logistics issues and speed up the decision-making, which is pivotal in the healthcare industry, especially in delivery of donated blood. The IoT-based blood supply chain uses radio-frequency identification technology (RFIT) and barcodes on bags with blood that are connected to the inventory system and transmits data to hospitals and blood centres in real time. 

It is hard to underestimate the importance of using blockchain and IoT technologies in supply chain and logistics. Often the two are used together: to quickly process and transmit data coming from IoT end device it needs to be protected, which blockchain technology performs with ease. In addition, blockchain-based solutions can handle large scopes of data that supply chain and logistics manage on a daily basis.

The examples above demonstrate the undoubtful importance of blockchain and IoT innovation in supply chain and logistics. Digitalisation simplifies and optimises numerous business processes for companies and has a direct impact on customer satisfaction. It gives better control over transportation and delivery and enhances business performance.

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