We live in a day and age where time is literally money. This is made apparent though services such as Amazon Prime and Google Express, battling for the upper hand on delivery speed.

These sort of services are only feasible through intricate supply chains and logistics networks. However, as intricacy increases, these networks become more prone to vulnerabilities and security threats. A study by Deloitte in 2016 revealed that supply chain fraud levels remained unchanged for a 3rd consecutive year.

That being said, let’s explore some of these threats and look into why a Blockchain based solution is the best way to mitigate the issues at hand.

Shipments

When people think of shipment theft, the first thought that comes to mind is a burglar breaking into a semi and scurrying off with boxes of electronics or other valuable goods. Trucking and shipping companies recognize this and have consequently implemented various security features within the trucks themselves to prevent such occurrences.

However, a large portion of shipment thefts occur in the loading stage. An unscrupulous worker can potentially steal a box or pallet and claim it was never loaded. An the reality is that something like this can occur on a much larger scale — an supplier can ship only part of a shipment but claim that the full order was shipped. This can be accomplished through the simplest of means such as forging a shipping receipt or creating inconsistent invoices.

A potential Blockchain based solution to address this can be spearheaded through integration with IoT devices. Imagine RFID tags on shipment containers being scanned at each node of a supply chain, and sending that information to the Blockchain network.

This information can then be timestamped and permanently logged on a Blockchain ledger. The immutable and transparent nature of these ledgers can then allow each party in a given supply chain to access shipment information in a trustworthy and reliable fashion.

Regulatory compliance:

Every day, port officials deal with a nightmare. Hundreds of inbound and outbound shipments are the norm, and it’s the responsibility of these officials to verify these shipments. In terms of fraud, another threat looms — Certificates of Origins, HTS Classification codes, and Incoterms can be altered, consequently masking the contents and origins/destinations of these shipments.

This was one of the inspirations behind IBM and Danish shipping company Maersk jointly piloting a digitized, Blockchain backed, shipping demo.

In this test, these companies identified that shipping a single container of flowers (through traditional means) from Kenya to the Port of Rotterdam involved almost 200 different files of paperwork.

Using a Blockchain based tool, IBM and Maersk were able to eliminate this complex workflow using “Smart Contracts”, which are automated pieces of logic that execute a command for a specified condition (think if-then logic). Specifically,

The exporter uploads a packing list that is made visible to all entities involved in the shipment. This action triggers a Smart Contract that automatically requests approval signatures and documents from export authorities. Simultaneously, information on the contents and shipment are communicated to the receiving port, allowing them to prepare for the inbound shipment Throughout the process, the importer, exporter, customs and port officials are able to monitor the status of the shipment and track the relevant documents that have been processed The result is a secure data exchange and a tamper proof repository that reduces fraud and delays, and ultimately saves billions of dollars per year

Smart contracts are the hallmark of cryptocurrencies such as Ethereum and VeChain Thor (VeChain Thor is tailored specifically for supply chain applications), and could soon be implemented to transform the way shipments are handled.

As of January 2018, IBM and Maersk have embarked on a joint venture to launch a Blockchain based shipping company together.

Other Applications

If we revisit the idea of using RFID tags or IoT enabled devices to upload shipment information at every node of the supply chain, we can extend this concept to identify and combat counterfeit.

With such a setup, we can now not only trace any good or commodity back to its origin for counterfeit purposes, but we can also verify any claims of being sustainable, organic, genuine, or authentic.

Another avenue for a Blockchain solution is evident in the scope of credential validation — ensuring that every worker, driver, loader, or official is who he or she claims to be, and is handling the shipments that they are authorized to handle. Credential validation isn’t a problem exclusive to the supply chain industry, but it’s a problem that the industry needs addressed.

A third area that this technology can be implemented in is B2B payments. Traditionally, these payments take place between 2 or more parties (suppliers, vendors, 3PLs, cargo shippers, refineries etc.), and can be timely due to terms and contracts being vetted and verified. With a Smart Contract or Blockchain based solution we can automatically ensure agreement and the fact that terms of have been honored. The result is that these payments can be expedited and the entire workflow can be simplified.

Blockchain technology is promising is many regards, but its application in supply chains can potentially prove to be the most fruitful.