Fraud in logistics is a major problem. So many resources are wasted on trying to negate the issues, and although numerous risk analytics systems have been developed to try to improve the situation, nothing has proven foolproof. Blockchain technology may be the closest thing we have to a solution, and therefore, it has the potential to drastically change the industry as we know it.

Fraud in Logistics and Supply Chains Is Rampant

Supply chain fraud is on a dramatic increase. The consumer and industrial products industry has recently experienced a 39.1% incidence in fraudulent activity. Employees pose the greatest risk for committing supply chain fraud at 22.9%, vendors post 17.4%, and third-party entities represent 20.1%. It should also be noted that the types of fraud vary. It could be financial abuse, theft, or illicit transactions such as bribery, just to name a few. Any solution to the problem of fraud in logistics must find a way to tackle all of these issues at once.

Traceability Reduces Fraud and Counterfeiting

Much of this fraudulent activity could be attributed to a lack of transparency and traceability within supply chains. Fraud occurs when someone in the supply chain is taking advantage of the lack of transparency. It could occur in the procurement of raw materials, manufacturing of products, selling and distribution of products, or in reverse logistics. All of these different opportunities for fraud means that when it does happen, it can be incredibly difficult to trace it back to the source. In the end, this often leaves everyone but the culprit frustrated. As the global supply chain has grown, the demand for transparency has increased, and it is clear that handling everything manually is simply ineffective and outdated.

Enter blockchain, an incorruptible resource that can be used to track the actions of all parties within the supply chain.  While blockchain cannot necessarily prevent fraud from occurring, it does add a layer of transparency that can give an organization more visibility into areas where fraud may have occurred. This means that supply chain leaders can identify such instances and take appropriate action. People are much less likely to commit fraud if there is a chance that they will be caught, so in effect, blockchain increases transparency and thereby, accountability.

Integration Is Key

The opportunity to reduce fraud in logistics and supply chain management will require a diverse population within the blockchain. In other words, private blockchains will experience trouble adding value and gaining market share in comparison to the public blockchains developed for major supply chains.

Again, we find ourselves on the topic of private versus public blockchains. Instead of developing in-house blockchain solutions, more companies should turn to third-party-based platforms that leverage blockchain to increase traceability and transparency. For all transactions to be recorded, all systems must be capable of communicating with the overarching system. Therefore, integrated systems that can communicate with one another and validate information through the blockchain will be necessary.

Take Action Against Fraud in Logistics by Learning More About Blockchain

Fraud is arguably the biggest threat to modern supply chain and logistics management. As long as there are blind spots within your organization, you will always be at risk. Take the next step and learn how you can leverage blockchain to minimize fraudulent activity within your supply chains. Connect with us online to learn more.