Good logistics are based on optimized transportation costs, reduced delivery time and secured data exchange. Often the safety of goods is not guaranteed, as there is currently no effective way to manage logistical operations for big companies.
Implementation of blockchain technology offers a number of advantages for logistics, such as: According to preliminary estimates, just implementing the first stage of a blockchain into the mass market could save global trade around 50 billion dollars a year.
90% of the world’s volume of foreign trade is delivered in cargo transporters. On average, 30 logistical-chain links are needed for delivery, including cargo shippers, receivers and carriers, customs, revenue and controlling bodies. In their turn these have more than 200 informational interactions.
More than 20 accompanying documents are needed for each cargo unit for international consignments. The same number of codes and numbers are assigned to the cargo within various systems used by all the parties in the logistical chain.
About a dozen way-bills, agreements and customs documents need to be signed for just one delivery. Many problems and delays would be cut if all these documents were unified in one computer register, with all terms and conditions controlled by mathematical algorithms.
A blockchain can unite all of these in a single system without wasting time and money, since there is no need to assign numerous codes and numbers to the cargo. A unified blockchain code would perform all of the operations needed for customs clearance, cargo carriage and cargo execution in different countries.
One of the major challenges in logistics is finding out at which stage a failure, resulting in damage or loss of cargo, occurred.
A cargo transporter spends about 15 % of all delivery time in ports waiting for the customs formalities and declarations to be settled, not on the way to the customer. Bureaucratic red-tape prolongs delivery time and as a result, about 3-4% of cargo has problems with documentation. This is the key reason for cargo delays, sometimes resulting in the return of goods.
Implementation of a unified distributed data register for delivery of goods and cargo will immediately improve data exchange with call centers and with managing directors.
Blockchain helps prevent fraud and mistakes that can occur in delivery, using its key advantage of simultaneously updating information to all the participants in a logistical chain.
IoT sensors not only track the cargo via GPS, but also control the temperature and humidity inside the cargo transporter. These factors are vital in the delivery of food products.
A report from Cisco and DHL indicates that the money flow generated by IoT technologies in logistics and supply chains will total $1,9 billion.
Managers will be able to see at which delivery stage a failure has occurred, and exactly where the cargo was lost or damaged. This will be possible because the whole information chain will consist of separate blocks. The information will be available in each of these blocks.
Every day 140 million dollars are queried in the cargo carriage sector of the USA.
A decentralized control for fulfilling liabilities is the key objective of smart contract technology in logistics and other fields.
The very essence of a smart contract is the mutual understanding of the agreement made between the two parties (customer and contractor). This is extremely important in logistics as the liabilities can be violated over long periods with long-lasting paperwork and red tape.
One of the objectives for smart contracts technology in cargo carriage and logistics is optimization and money-saving without the need for intermediaries.
Obviously a public register will considerably reduce the time needed for legal arguments between all the participants of the supply chain. The number of arguments will also decrease.
Three key factors for smart contracts in logistics:
According to research, there will need to be a 7-10% upgrade of all hard and software. Smart contracts do not require very powerful computers but do need maximum possible computerization. Every manager, driver, shipping agent and freight handler will need to be equipped with a smart phone or a tablet in order for the technology to operate as effectively as possible.
Blockchain for international deliveries
International carriage of cargo transporters is an essential part of world trade. Annual turnover is trillions of dollars. Optimizing participants’ costs by 1-3% will save them hundreds of millions of dollars.
Advantages of using smart contracts in logistics
|Traditional method of cargo delivery||Applying a blockchain based technology of smart contracts|
|Transparency: all of the parties in a supply chain update the info online within one single system||No||Yes|
|Economic efficiency: no physical documents or document exchanges. No risk of duplication or loss.||No||Yes|
|Safety guarantee: individual insurance policies that cover all risks||No||Yes|
|Convenience: all parties use the same database with online updates||No||Yes|
|Safety: the validated and invariable data reduces risk of fraud.||No||Yes|
What problems can be solved by the CREDITS platform
Some features of the CREDITS platform, using a blockchain and smart contracts, can supplement the advantages above:
It is important to understand that a Blockchain is just a technology for safe data transmission, void of time and geographical limitations. It does not mean that trucks will start running faster and that the equipment in control centers will start working more efficiently. The main objective is optimizing the information related to the goods and delivery, which will reduce time and costs and improve the control of deliveries all over the world.