Logistics will always contain risks, but the use of blockchain in supply chain management can go a long way in prevention and mitigation. The applications of blockchain in supply chain management are growing, and supply chain leaders now have a unique opportunity to bring end-to-end visibility to the darkest and most secluded parts of their organizations via blockchain. Let’s look at the problem of risk management in logistics and how traceability through blockchain reduces those risks.
Logistics Risks Lead to Higher Freight Spend
Logistics risks impact freight spend in multiple ways. According to Freight Waves, the threat of employee fraud, counterfeit products, and illegal business practices, forced companies to increase their expenditure on risk analytics by 35 percent in 2017. Less visibility often means significant delays on shipments which thereby, increases carrier risks. The self-fulfilling cycle continues with more delays leading to increased freight spend.
Another common issue in freight and logistics is the time-sensitive paperwork process which is a huge part of global trade. Compliance mandates can put a shipment days behind schedule for things as minor as checking the wrong box on a form or missing a single document. Additionally, even if a shipment’s paperwork is completed flawlessly, another item in the same shipment with paperwork discrepancies can potentially cause everything to be delayed. Essentially, what this means is that you can do everything correctly and still get penalized for someone else’s mistakes; talk about a lose-lose situation.
When it comes down to it, risk management is about more than just preventing fraud, it’s also about meeting a customer’s expectations for delivery. Let’s face it, unhappy customers + wasted resources + money spent on trying to retroactively solve the issue = bad for business. Additionally, in certain time-sensitive industries like those carrying food and pharmaceuticals, the proper paperwork can be the difference between delivering safe and usable products vs. delivering potentially spoiled ones.
Better Traceability Reduces Risks
Visibility shortages were one of the biggest concerns in Deloitte’s 2013 Global Supply Chain Risk Survey for good reason. The worse the visibility, the greater the chances for fraud in the supply chain. Since fraud hinges on poor visibility, increasing visibility in the supply chain through blockchain mitigates risks. Here are some of the ways that blockchain reduces the risk:
- It is an open-source technology, reducing risks deriving from compatibility problems.
- It is low-cost, requiring minimal resources to validate transactions and eliminating the need for reconciliation work.
- Blockchain makes all transactions visible to authorized participants, giving private platforms a “public” sense of ownership.
- Accounts are immediately identifiable, allowing authorized personnel to Track and Trace a product or shipment at any point.
- It is resilient, using decentralization to reduce failure-risk.
- Transactions processed in the blockchain cannot be changed retroactively.
The Future of Blockchain in Supply Chain Management is Limitless
Blockchain offers a solution to ensure that visibility is retained in the supply chain, which is pivotal in today’s day and age. Now, you can immediately enter and track all shipments from a single platform using blockchain to ensure proper documentation and handling processes are met. Future applications of blockchain may even encompass whole supply chains, from procurement, all the way to a product’s end-of-life-cycle.
Blockchain’s value in mitigating risks also applies to reverse logistics. As noted in Supply Chain 24/7, online orders are subject to a 30-percent return rate, which is a pretty significant percentage. The introduction of blockchain in reverse logistics can help reduce instances of over and under-ordering, track and verify returns against original transactions, and minimize costs.
Get Ready to Leverage Blockchain to Reduce Risks Now
With the world looking toward new technologies and processes for better supply chain management, the emergence of blockchain will be monumental in revolutionizing the freight and logistics industry. It will restore trust in supply chain leaders, bridge the disconnect between cultures, unify tracking processes, and much more. To stay ahead of the game, connect with us online, and let us help you plan for success.