On the eve of 2019, business media and leaders named blockchain and cryptocurrency as two trends that would majorly shape the logistics industry.
Blockchain, with its ability to record transactions between parties in a secure and permanent way, presents powerful possibilities for global logistics. Imagine automating dozens of manual tasks for greater efficiency and accuracy and gaining a single-dashboard view of the full logistics supply chain, from shipment specifications and cargo conditions to container temperatures and customs milestones.
Now, a year later, is blockchain delivering upon the hype in international business?
It’s easy to think so. Headlines continue to announce blockchain’s impending transformation of trade and logistics and the business press continues to highlight compelling examples like U.S. grower Curry & Co. which uses Intel’s Connected Logistics Platform and blockchain to deliver blueberries faster and fresher.
Especially amid rising and intensifying complexities in global trade, it’s tempting to see blockchain as a panacea or magic bullet for efficiency, savings, and competitive advantage. Yet as with any emerging technology, it’s important to proceed with caution. Globally focused businesses must separate the hype from the reality and be aware of the challenges that must be overcome for blockchain to realize its full potential.
Universal adoption is critical—and we’re not there yet
Companies and regions have been leveraging the latest technologies for unifying and managing global supply chains. Examples include Singapore’s Transport Integrated Platform and JP Morgan’s Interbank Information Network.
But these solutions are, to date, specific and siloed. For blockchain to work to its full potential, all parties must play—and right now, most companies are not quite ready. In a survey by Logistics Management, 97% of respondents reported being in the early experimental or proof of concept stage of their blockchain initiatives, with only 3% reporting a working solution.
Complicating matters even more, there’s a growing number of companies in the increasingly complex landscape of global shipments.
Previously, large firms only had to coordinate assets for shippers and receivers. Now there are far more players which means logistic hubs are juggling multiple stakeholders, from regulatory approval to hardware like containers and fuel. They’re tracking every single aspect of the transaction.
From the cargo crews loading the goods to the customs official conducting a regulatory inspection, all parties involved in global shipments must have the sufficient IT infrastructure, staffing, and technological savvy to be players in a blockchain network. But chances are, most do not. According to Deloitte’s 2019 Global Blockchain Survey, lack of employee skills and understanding and unclear ROI are causing many companies to hold off on blockchain for now.
Blockchain advancement and adoption is poised to be a team sport. The solution will not come from one stakeholder group, but from public-private collaboration or hybrid solutions. With this synergy, we’ll start to see the benefits of distributed ledgers and digitalization in what we know as traditional trade finance.
Trust and transparency are easier said than done
A huge benefit of blockchain is its accuracy and permanence, bringing immutable, time-stamped records of transactions. Players given access can then see who made and owns every single transaction.
But is every company quite ready to have their data seen in such a fashion, particularly by rivals? IBM and Maersk encountered this issue when attempting to recruit other carriers to their TradeLens distributed ledger technology platform.
In some markets, sharing data can have legal implications as well. Take the EU’s GDPR, for instance. The things that make blockchain so appealing, the data integrity and decentralized method, don’t line up with some key provisions of the GDPR—and that’s a problem.
What does this all mean for global businesses in 2020 and beyond? Be aware of the challenges, especially before jumping in to a blockchain solution. And be ready to move fast when the missing pieces fall into place—because once the full logistics ecosystem is on board with blockchain, those who haven’t adopted it will be left behind.
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