Blockchain For Commodities Logistics

Streamlining operational logistics for improved speed and profitability.

Matthew Averay
Nov 10 · 4 min read

The implementation of blockchain technology promises to improve productivity and profit margins in the commodities mining industry. As we identified in our last article, the implementation of blockchain-based systems will soon impact every level of the commodity supply chain. One of the key ways to improve productivity and minimise loss is by improving the accuracy and reliability of logistics systems. At The Enegra Group, we are directly involved with assisting mine logistics in Indonesia and developments in this sector are of particular interest to us.

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Global logistics operations are estimated to be worth a staggering USD $8.1 trillion annually and this figure is expected to double within the next three years. This lucrative industry suffers from losses associated with inefficiency, theft, middlemen, cyber-attacks and product degradation. Lost or stolen cargo is believed to cost the marine shipping industry up to $50 billion a year and the same problems impact commodity mining supplies. Innovative implementations of blockchain technology are now set to improve profits and reduce risks across the industry.

Toyota developed the famous process of inventory management known as Just In Time method, which is taught in management schools around the world today. The car manufacturer identified that significant risks and costs are associated with stock management at each stage of the production process. Too much or too little stock generate loss and risk. The Just In Time method aims to deliver the right volume of stock for each production stage without holding more stock than necessary. This not only streamlines the production process but also optimises stock management and cost.

The value of the Just In Time method is reflected in commodity logistics through the benefits of streamlined delivery and inventory management. The implementation of blockchain technology can now improve these processes and promises to significantly increase profitability. Although the technology has yet to be comprehensively implemented in commodity industries such as coal, the speed and profitability it delivers will be key factors in driving the wider adoption of blockchain across commodity logistics.

There are several key advantages to using blockchain-based systems over traditional paper processes. As a commodity unit moves along the production line into the distribution stream, its progress can now be digitally registered on the blockchain. This digital process is significantly superior to a paper system as there are fewer opportunities for error. As blocks of information are created on a blockchain they store the information of all previous transactions, creating an immutable record that reduces individual and systemic errors. Continued analysis of the logistics data can then identify bottlenecks to improve profitability.

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The benefits of digitalisation extend beyond the financial and environmental costs of managing a paper trail. As blockchains can be made accessible to any authorised online participant, logistics chains can be managed in innovative new ways. Thanks to increased bandwidth for data transmission, mining operation centres can now be located away from the mine, in some cases even in different countries. This allows greater centralisation of data which delivers cost-savings and gives management a broader view of operations. Blockchain-based structures can now enhance and secure that data, delivering the integrity required across large networks.

Trust is a key issue within the management of any logistical data system. Participants at every stage need to be assured that an accurate quantity of goods will be delivered within the correct timeframe. The combination of technologies such as QR codes, automated monitoring and photographic evidence all contribute to the high quality of data which can now be entered onto blockchains. The immutable nature of blockchains ensures that the data cannot be tampered with, improving trust and reducing friction across networks.

The current global lockdown has precipitated the start of an economic recession in Indonesia. This is the country’s first recession since the Asian Financial Crisis of 1997 and it will have significant impacts in a country that has traditionally been a regional powerhouse. Although extremely concerning, recessions can be transformative periods which lead to renewed economic growth after they end. During the current economic recession, there will be opportunities to improve the commodity logistics sector within Indonesia through the implementation of blockchain technology. These improvements will increase industrial efficiency and assist in the speed of recovery and minimise the recession period.

Enegra Group Ltd (LL15959) is a commodity trading company focused on resources in Southeast Asia. Equity in Enegra has been tokenised via the EGX security token. For enquires related to the purchase of EGX please contact support@enegragroup.com.

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