How Blockchain is Revolutionizing the Logistics Industry

The logistics industry is ripe for disruption by blockchain technology. By bringing greater transparency, efficiency, and security to supply chain management, blockchain has the potential to solve some of the most pressing pain points in logistics.

In this comprehensive guide, we’ll examine how blockchain works, why it’s well-suited for logistics, and some of the key ways it’s already transforming the industry. We’ll look at use cases in shipment tracking, freight management, customs clearance, and more. We’ll also highlight some of the top companies pioneering blockchain for logistics.

What is Blockchain and How Does it Work?

Blockchain is a distributed digital ledger technology that enables secure, transparent record keeping without centralized control. Here’s an overview of how it works:

Records known as “blocks” contain cryptographically hashed and timestamped sets of data. The data could represent transactions, shipment events, trade documentation, or any other information.

These blocks are chained together chronologically into a ledger using complex mathematical algorithms. New blocks must refer back to previous blocks in an interconnected chain.

The ledger is distributed across a peer-to-peer network of computers known as nodes. These can be servers owned by participating organizations. When new data is added to the blockchain ledger, each network node verifies and records the transaction.

Once a transaction is approved by consensus of the nodes, it is permanent, irreversible, and visible to all participants. No single entity can alter or delete the data.

This decentralized, immutable ledger enables trust and transparency without third-party mediators. It also streamlines processes by eliminating redundancy and intermediaries.

Why Blockchain is Disrupting Logistics

Logistics involves many parties including shippers, carriers, customs authorities, brokers, warehouses, retailers, and more. It relies heavily on paper-based records like shipping manifests, bills of lading, customs forms, invoices, and more.

This fragmentation makes tracking shipments and resolving disputes extremely slow, costly, and vulnerable to errors. Blockchain greatly improves logistics by:

Increasing Transparency

• All parties can view shipment statuses, documents, and other data in real time. This enables proactive planning.
• Records like bills of lading can’t be falsified or destroyed since they are immutable. This prevents fraud.
• Provenance and journeys of goods can be clearly traced back through the supply chain.

Boosting Efficiency

• Getting all parties on a shared blockchain ledger reduces delays from paperwork, faxes, and data re-entry. Documents like customs forms can be pre-populated with relevant data.
• Enables just-in-time management of inventory and delivery by linking up all nodes in the supply chain ecosystem.
• Automates and streamlines processes like contract execution, payments, and cargo release.

Enhancing Security

• Records are tamper-proof and immutable once written to the shared ledger. This prevents unauthorized changes or destruction.
• Decentralized network architecture removes single point of failure. Outages in one node won’t disrupt the system.
• Reduces possibilities of cybersecurity breaches, hacking, and data theft compared to centralized databases.

Building Trust

• Trust is built between parties through the transparency and immutability inherent in blockchain data.
• Smart contracts enable automated coordination between parties based on pre-defined, rules-based workflows. This provides reliability.

Major Use Cases for Blockchain in Logistics

Many companies are already using blockchain to transform everything from cargo booking to customs clearance. Here are some of the major use cases gaining traction:

• Shipment Tracking and Provenance

Blockchain enables real-time tracking of shipments’ statuses and locations. GPS sensors in containers and RFID tags on individual goods can automatically update locations on the blockchain via internet of things integration. This automates cargo tracking and makes it more reliable than manual processes.

Blockchain also enables provenance tracking for high-value, sensitive goods like pharmaceuticals, by recording every transaction from manufacture to delivery. Counterfeits can be prevented by tracing authenticity through each step of the value chain.

• Trade Documentation

Trade paperwork like bills of lading and customs forms involve numerous parties, copies, and data re-entry as they are transmitted. Putting documentation on a shared blockchain ledger makes the data tamper-proof and shares it instantly with all authorized parties. Documents like customs forms and certificates of origin can be pre-populated with relevant data for each shipment.

• Freight Management

Smart contracts programmed into the blockchain can enable automated execution of tasks like release of payments, transfer of cargo ownership, and creation of inspection orders. This removes paperwork and slashes process times.

• Customs Clearance

Blockchain can drastically streamline customs clearance by allowing early submission of shipment data like certificates of origin, cargo manifests, and licenses. Documents can be digitally verified to reduce fraud. This enables pre-clearance and cuts delays.

• Supply Chain Transparency

Consumers and regulators demand transparency around issues like ethical sourcing, environmental impacts, and labor practices. Storing supply chain data on tamper-proof blockchain ledgers provides an immutable record that enables this transparency.

• Logistics Payments

Cross-border payments in logistics often involve cumbersome processes like currency conversions, wire transfers through multiple banks, and transaction fees. Cryptocurrencies built on blockchain allow faster, cheaper payments and transfers.

• Sensor Data Monitoring

IoT sensors in containers can automatically log data like temperature, humidity, vibration and shocks. Storing this sensor data on blockchain provides reliable monitoring of conditions. Smart contracts can trigger alerts on threshold breaches.

• Shipment Financing

Banks face high risks providing financing and letters of credit for shipments. Blockchain enables banks to monitor real-time shipment progress to quantify risks, and automate payments via smart contract. This unlocks new financing options.

Top Blockchain Logistics Companies

Many logistics companies and tech startups now offer blockchain platforms tailored for global supply chains. Here are some of the top players:

TradeLens

Joint venture between global shipping giant Maersk and tech provider IBM. It offers an open, neutral blockchain platform for sharing logistics documentation, tracking cargo, and more. Already has over 160 participants, including major ocean carriers, customs authorities, cargo handlers, and freight forwarders.

CargoX

Provider of a blockchain platform for secure, paperless transfer of bills of lading. This replaces traditional paper documents used to control custody of cargo. Over 700 entities have signed up, including major ocean carriers like CMA CGM.

DX Trek

Global IT company offering a blockchain solution to digitize trade documents like customs clearance certificates, invoices, packing lists, and more. Used by major automakers like BMW and Volkswagen to track components and optimize supply chains.

Modum

Zurich-based startup providing blockchain-based monitoring solutions to maintain integrity in shipments of pharmaceuticals, chemicals, and other temperature-sensitive products.

ShipChain

Logistics startup offering blockchain technology and internet-of-things sensors for asset tracking and monitoring. Integrates with legacy logistics systems using middleware.

300 Cubits

Hong Kong-based company providing blockchain solutions to streamline processes in container shipping. Offerings include booking deposits, real-time shipment tracking, and TEU tokens to incentivize eco-friendly shipping.

Fr8 Network

Austin-based startup using public blockchain to create smart contracts that automate and streamline processes in freight brokerage, overland trucking, and rail shipping. Enables transparent tracking and settlement.

VeChain

Singapore-based platform using blockchain and IoT to enhance logistics for food/cold chain, pharmaceuticals, luxury goods and more. Provides temperature-controlled container tracking.

Chronicled

San Francisco company using blockchain and IoT to authenticate goods and prevent counterfeiting of collectibles, pharmaceuticals, luxury items and more. Enables end-to-end supply chain tracking.

FedEx

Logistics giant FedEx has developed several blockchain solutions for its operations and supply chains including tracking high-value cargo, resolving disputes with customers, and more.

How Leaders are Using Blockchain in Logistics

To understand the tangible benefits of blockchain for logistics, it helps to look at how top companies have implemented it:

• Maersk — TradeLens

The Danish shipping giant has been an early pioneer in adopting blockchain to transform container logistics. Maersk teamed up with IBM to launch TradeLens — an open blockchain platform that promotes information sharing and collaboration across supply chains.

Over 160 organizations are already connected through TradeLens to exchange shipping data, track cargo, and more. Maersk has tested the platform on exports of flowers from Kenya to the Netherlands. They found it could reduce transit times by 40% by eliminating paperwork delays. TradeLens is enabled by over 20 port and customs authorities globally.

• Walmart — Food Traceability

Walmart began using blockchain to track food through its supply chains in 2016. For example, tracing mangoes from farms in Mexico to stores in the US took over 7 days with paper trails. By putting tracking data on blockchain, Walmart reduced tracing time to just 2.2 seconds. Better traceback capabilities help improve food safety.

• DHL — Customs Processing

When shipping air freight between China and Germany, DHL found that customs processing took up to 36 hours using traditional methods. By building a blockchain solution to share shipment data with customs officials earlier, DHL was able to cut customs processing time by up to 90%. This demonstrates the huge time savings possible.

• Maersk Energy Shipping

This Maersk unit trialed a blockchain solution for streamlining onboarding of new carrier vessels. Their proof of concept showed blockchain could reduce onboarding time from over 10 days to under 4 hours. Automating workflows delivers major cost and time economies.

• De Beers — Diamond Tracking

By digitally tracking diamonds on blockchain from mine to retailer, De Beers is ensuring traceability for over $180 million worth of diamonds each year. This helps verify origins and prevent “blood diamonds” from entering the mainstream supply chain.

• Walmart Canada — Payments

Walmart Canada partnered with DLT Labs to launch a blockchain network connecting over 70 trucking companies. By enabling fast, paperless freight and invoice payments, the network has slashed Walmart’s payment costs to carriers by over 30%.

• Maersk Oil Trading

This Maersk division piloted a blockchain solution for streamlining marine fuel procurement. It acts like a marketplace coordinating multiple parties to enable delivery of fuel orders to ships in Rotterdam port. This has already saved hundreds of thousands of dollars in demurrage costs.

Benefits Already Evident

Leading companies have already quantified many benefits from blockchain adoption:

• Maersk found using TradeLens could cut shipping document processing time by up to 40%
• Walmart saw a 2.2 second decrease in time taken to trace mangoes from farms to stores after adopting blockchain.
• DHL found blockchain could slash customs processing time by up to 90% in Germany-China shipments.
• A Maersk Energy Shipping trial showed blockchain could reduce new carrier onboarding time from over 10 days to under 4 hours.
• Cargo release times at ports saw significant drops in trials by Maersk and Rotterdam customs.
• Walmart Canada achieved over 30% reduction in payment costs to carriers through blockchain.
• Reduced losses and claims are being reported by shippers able to track cargo conditions in real-time.
• 25% faster transits were achieved using blockchain eBLs compared to traditional bills of lading according to CargoX.

Overall, measurable benefits around cost, speed, transparency, and security indicate blockchain is already delivering ROI. Trends also show fewer shipment disputes, delays, and losses with adoption.

Ongoing Challenges to Blockchain Adoption

Despite promising results, blockchain still faces challenges to mainstream adoption in the logistics industry:

• Many established legacy computer systems must be integrated with blockchain as an additional platform via APIs. This takes time and resources.
• Major ecosystem stakeholders like ports, customs authorities, banks, and regulators need to participate on blockchain networks to achieve full value. Onboarding all parties involves overcoming organizational inertia.
• Interoperability issues exist due to competing technology standards between different blockchain platforms.
• Blockchain integration costs can appear high, especially for smaller shipping companies and freight forwarders. Short term mindsets may deter adoption.
• Solutions are still in proof of concept or beta testing stages rather than large-scale production rollouts. Full-fledged adoption will take time.
• Legal and regulatory uncertainty persists around topics like smart contracts, data privacy, and blockchain’s legal standing in disputes.
• Consumer demand for supply chain transparency is still nascent — this can drive future adoption.
• Blockchain cannot replace physical transport assets — it needs to link with IoT sensors and other infrastructure.

Overcoming these challenges will require more technical progress, ecosystem collaboration, and supportive policies. But this represents a surmountable adoption curve that innovative first movers are starting to navigate successfully.

The Future Outlook

Most experts agree blockchain adoption in logistics is still in its early days but will continue ramping up exponentially. According to Allied Market Research, the global blockchain in logistics and transportation market size already reached $93 million in 2020. Looking ahead, the market is forecast to boom at a CAGR of 87% from 2021 to 2030.

Key trends that will shape blockchain’s future in the logistics industry:

• Mainstreaming in Global Trade

Blockchain is transitioning from proof of concepts to live production with major global shippers like Maersk, FedEx, DHL, and Walmart. Their continued adoption and network expansion will drive critical mass.

• Integration into Legacy Systems

Legacy enterprise resource planning (ERP) and transportation management systems need blockchain capabilities. Major software vendors are already developing integrations and partnerships.

• Expansion Across Logistics Subsectors

While ocean shipping led initial forays, blockchain is now rapidly expanding into air, rail, road freight, contract logistics, last mile delivery and more.

• Industry-Specific Platforms

Blockchain platforms tailored for major logistics segments will emerge, like for cold chains, e-commerce fulfillment, automotive supply chains, bulk commodities, and more.

• Sustainability Drive

Using blockchain to enhance traceability of carbon emissions, ethical labor policies, and supply chain transparency will be an emerging priority.

• Logistics Blockchain Startups

Startups will continue using blockchain and other emerging technologies to disrupt fragmented logistics sectors long resistant to change.

• Partnerships and Consortia

Collaborative development between logistics providers, software vendors, ports, government agencies and startups will drive standards and interoperability.

• Proof of Concept Testing

Testing use cases like document automation, asset tracking, and smart contracts will keep expanding as companies seek new applications.

• Quantifying Cost Savings

Companies will conduct more studies to assign dollar values to blockchain efficiencies. This will further build the ROI case.

• Regulatory Support

Forward-thinking governments are starting to provide sandboxes and create frameworks to enable blockchain innovation by logistics providers.

• Skill Building

Training programs at all levels from executive leadership to dock workers will familiarize global workforces with blockchain capabilities.

• Digital Transformation Catalyst

Blockchain’s benefits for transparency, collaboration, and process automation will accelerate logistics companies’ broader digital transformations.

Conclusion

Blockchain shows immense promise to address systemic inefficiencies, fraud risks, disputes, and lack of visibility in complex global supply chains. Leading shippers and logistics providers like Maersk and Walmart are already piloting pioneering blockchain initiatives.

Tangible benefits like dramatically reduced processing times, costs, and risks are starting to emerge as proof points. And collaborations between global shipping leaders, software providers, and standards organizations are overcoming initial hurdles to adoption.

While still at an nascent stage, blockchain is likely to disrupt the foundations of logistics in coming years. It can transform cargo booking, clearance, tracking, freight management and much more. As the hype gives way to practical applications, blockchain has the potential to become as transformative for global supply chains as the shipping container itself. Logistics companies should begin exploring strategic blockchain opportunities now to prepare for the next digital revolution in their industry.