It’s easy to get caught up in the hype over blockchain. When it comes to supply chain, the vast promises of renewed visibility and traceability are abundant. While there is much truth to the hype, it is important to stay practical and understand the logistics applications of blockchain and what they mean for you and your organization.

1. Logistics Applications of Blockchain Maintain Data for All Parties

An essential function of blockchain lies in its decentralized, distributed ledger. Logistics applications of blockchain all derive from maintaining an incorruptible data resource. This allows supply chain leaders to ensure consistency across activities, and if a problem does arise, data retained in the blockchain reveals why, how and what to do about such issues.

For example, initiating a recall is streamlined through blockchain by showing all movements of affected shipments.

2. Payment Management Forms Another Key Freight-Use for Blockchain-Based Systems

Blockchain’s original development as a traceability financial ledger lends itself to supply chain payment processing and management. Supply chain leaders can validate payments for goods through blockchain, thereby reducing fraud. However, payment processing using blockchain can go further than consumer payments.

Business-to-business payments leverage blockchain-based systems to complete payments to other supply chain partners, including carriers and truckers. Eliminating an intermediary for managing pay means truckers rest assured knowing their payment for work performed is processed, minimizing the risk of disputes, says Mark Castellani via Medium.

For example, an e-commerce warehouse using a blockchain-based system like a smart contract could automate payments processing. The system initiates payment when triggers occur, such as releasing of an order to the warehouse floor, packaging the shipment, and scheduling or loading onto a truck for shipping.

The same process applies to payments for truckers and carriers, triggering a payment to the carrier upon pickup. When a load is delivered, the system initiates payment from the carrier to the trucker.

3. Scheduling Through Blockchain Increases Freight Planning and Accuracy in Recordkeeping

Increased visibility of freight scheduling through blockchain is one of the ways blockchain may impact and benefit logistics, especially as it relates to wasted capacity. According to Michelle Fox of CNBC, wasted capacity occurs when drivers or shippers are unaware of available loads in the vicinity. The lack of visibility and traceability leads to drivers spending excess time waiting on loading or driving back with empty trailers. Trucks in the U.S. run empty up to 40% of the time, says Convoy CEO Dan Lewis. However, gaining visibility into scheduled loads through a shared system, leveraging blockchain to document and distribute information, will reduce this wasted space. Furthermore, tapping into that available capacity offers several benefits, including:

  • More paid miles driven for drivers.
  • Freight shipped sooner for shippers and carriers.
  • Lower freight rates charged by carriers.
  • Eco-conscious reputation building.
  • Increased accountability for problems, including dwell time and freight claims.

Furthermore, the logistics applications of blockchain range from the point of origin through delivery. Tracking data while in transit reduces damage and ensures drivers maintain compliance. It also affects reverse logistics.

4. Reverse Logistics Management Is a Practical Use of Blockchain

Returns are not a new problem in supply chain management, but they are increasing in costs. According to Daphne Howland of Retail Dive, the value of retail returns rose 53% in 2017, costing companies more than $400 billion annually. The rising costs are the result of higher prices to send products back to their origin, and in omnichannel, this could mean shipping down the road or around the globe.

Some retailers, like CVS, Advance Auto Parts and Home Depot, have created new criteria for authorizing returns. While this is financially beneficial for them, it risks alienating consumers. Instead of trying to avoid returns entirely, companies should be looking to streamline the process to reduce its costs.

Blockchain-based platforms give retailers a way to understand a product’s life cycle. Applying such information helps identify why products are being returned, triggering a change in marketing or sales processes. For example, adding an extra layer of detail to product packaging or online descriptions could potentially reduce the rate of returns.

Returns will always be a part of freight and logistics management; knowing more about them is key to keeping them and their added costs under control.

5. APIs Connect Blockchain-Based Systems With Existing Systems

Today’s companies have systems to track freight management in detail. They know the transit time, shipment’s rating, dispatch details, tracking information and so on. APIs connect these existing systems, and they may connect such systems to an overarching blockchain, memorializing data for all parties. Blockchain used in this fashion bridges system and data silos.

It is impractical to assume shippers and carriers will abandon existing systems for blockchain-based platforms. Instead, APIs allow parties to leverage new and existing technologies, including the Internet of Things, to collect data. The integration also applies to analytics, ensuring actionable data is shared and accurate.

Take Advantage of Blockchain in Your Freight and Logistics Process

Blockchain is here, and while we can go on about its future applications, its real-world applications of today are more critical. It is available to help gain end-to-end visibility within existing systems, which you should be taking advantage of now. Understanding its practical applications will help you tap into its value. Find out more about how to apply blockchain in your supply chain by requesting a demo from us today.