Logistics is a top candidate for blockchain technologies

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.

1. Simplifying document flow

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.

2. Controlling all the links in a logistical chain

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.

3. Auditing with the help of smart contracts

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:

  • The parties of the contract confirm their agreement of specified terms and conditions by electronic signatures
  • Only a specified object can stand for subject-matter of the contract (a service for cargo delivery in particular)
  • Terms and conditions of the contract must be expressed as mathematical algorithms that describe all of the conditions of the delivery and carriage service in a programming code.

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:

  • The principle of trust: new technologies will regulate legal interactions between the players using not only papers and agreements, but also the data related to operations and transactions which will be included into the blockchain. This eliminates fraud or renunciation of fulfillment of obligations. The contracts will be validated automatically according to the data available in the network
  • The integration of all available cargo tracking systems will prevent hidden damage, as the parties will get real-time, valid information concerning the cargo travel and its condition, at each stage of the delivery
  • Smart contracts and blockchain remove the risk of the cargo shipper’s (cargo owner’s) inability to pay, as the platform contains information about current licenses of the counterparty. This confirms their reliability and financial solvency
  • Using a single currency for performing operations on the platform excludes risks associated with taxation and currency fluctuations
  • Implementation of a blockchain opens up new opportunities for cargo and vehicle insurance
  • The informational system provides a unified data exchange between the market players. This solves the problem of underutilized ports and storage facilities. Every market player will be able to choose options with optimal conditions and service prices

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.