5 Reasons Blockchain Will Transform the Parcel Shipping IndustryPosted on December 27, 2017
Blockchain technology seems destined to become the next big thing in supply chain management. According to a November 2017 research report from Morgan Stanley, the industry will see blockchain-based smart contracts in use starting in 2018, with “sophisticated applications available by 2020.” The report also notes the market revenue potential for blockchain to be approximately $500B. Those involved in the parcel industry are paying attention because it’s a technology that could streamline complex parts of the last-mile parcel delivery process.
What is Blockchain?
A blockchain is a digital ledger that keeps track of information about a transaction involving multiple parties. The ledger is decentralized and immutable. No one participant can see all information in the chain, nor can they change or delete data in the ledger. Blockchains create a permanent and secure audit trail of all events, making it safer for participants to use the Internet to conduct business.
Bitcoin is built using blockchain technology. Its digital ledger ensures that anyone handling a Bitcoin has not altered, replicated, or undermined its value. Equity markets have stock exchanges that monitor and record trades. Bitcoin uses a digital ledger.
Blockchain’s Relevance to Logistics
A blockchain ledger can record and convey data about events that occur during the supply chain process. Key data like pricing, expected ship date, delivery date, tracking status, acceptance, and other touch points can be recorded and passed among supply chain partners. The blockchain becomes the single, trusted “source of truth” for a transaction, potentially eliminating duplicate documents and intermediaries.
It is easy to envision practical uses and benefits of this technology, especially with eCommerce driving the velocity and complexity of order to delivery processes. Techy bluster and hype aside, here are 5 real ways blockchain will impact the parcel industry for the better:
1. Streamlined Data Flows: As a shipment makes its way through a supply chain, it leaves a multitude of electronic and hard copy documents in its wake, each serving its own legal, financial, and regulatory purpose. Blockchain technology holds the promise of conveying data in a completely standardized and secure manner. Data will be available from the chain in the context of each trading partner participant. No more rekeying, filing, or conflicting integration standards.
2. Parcel Carrier Compliance: The freight industry was once highly regulated and developed standards for rating, EDI, and documentation. The parcel carrier industry is notorious for its lack of standards. This has made it difficult for new carriers to enter the market because it required proprietary integration with systems to automate ratings, manifesting, and tracking.With eCommerce driving the demand for new delivery methods, including crowd-sourced same-day couriers, drones, and pickup location services, the market is ripe for a new technology standard to reduce the complexity while increasing the integrity of parcel shipping transactions.
3. Improved Visibility: Providing a means for linking customer, order, carrier, payment, and settlement information in real time, blockchain holds the promise of offering participants, including end consumers, with real-time views of shipment status, delays, and expected time of delivery. Transparency is the key. No more phone calls, emails, or reliance on any one trading partner systems as the source of truth. No one party can lay claim to “owning” the data as many carriers do today.
4. Smart Contracts: In much the same way Adobe has created e-signature documents that record endorsements among contracting partners, blockchain technology can facilitate “smart contracts,” a simple way of logging, verifying, and enforcing the negotiation and performance of a contract without the intervention of third parties. This could mean huge disruptions and disintermediation for those in the freight forwarding, auditing, banking, and brokerage industries. Maersk and IBM recently announced a partnership to create a blockchain ledger to automate bills of lading processes.
5. Reduced Fraud: The shipping industry has its share of problems with security from both a physical and digital perspective. Possession of a package, at each step, is tracked on the blockchain. Coupled with auto-ID verification technology, there will be no question about chain of custody. Blockchains are primarily about trust. That is why it is now starting to be used by organic food distributors to combat counterfeit replacements.
Who is jumping in?
Major players within the parcel industry are starting to take blockchain technology seriously. UPS, FedEx, freight carriers, and 3PLs have become charter members of the Blockchain in Transport Alliance (BITA). This will be important for the technology to achieve critical mass within the parcel industry. They all see the enormous potential and don’t want to be late to the party. FedEx CIO Rob Carter observed, “We believe that, going forward, the overall prominence of goods as they move around the world and the enhancement blockchain offers to global settlement and payment systems offer a significant opportunity for us.”
Blockchain is here to stay because it holds the promise of eliminating breakdowns that have always plagued transportation and logistics. With the growth of eCommerce and last-mile delivery inextricably linked, look for the demand for blockchain technology to be more pronounced within the parcel industry.