The principle of trust has been the driving force of commercial transactions that has spawned entire industries. However, Blockchain is completely revolutionizing the business of trust through its revolutionary distributed ledger technology. This technology records transactions between different parties in an immutable and secure way which does away the need for traditional intermediaries. This is because all information can be recorded, verified and coordinated from a shared database. Through moving to a distributed and decentralized system the blockchain makes data that was previously kept in silos easily available to parties that need it. This has had a huge impact on global supply chain logistics as it has improved efficiency, transparency and security of data shared between industry partners.

Blockchain Customs processes Customs agencies Customs documents

The Challenges in Global Supply Chain Logistics

Logistics has always worked on the basis of collaboration between different parties in an effort to ease the flow of physical goods. The flow of goods is eased by the flow of data on financial transactions and information about the cargo being shipped. However, the supply chain and logistics system are inefficient due to the competitive and fragmented nature of the industry. For instance, with more than 500,000 trucking companies in the United States alone, processes become unstandardized, data silos abound, transparency goes down and technology adoption varies among the different stakeholders. Customs agencies also do not help matters with paper-based and manual data entry processes that make verification and tracking status of shipments difficult.

Blockchain Customs processes Customs agencies Customs documents

How Blockchain Improves Efficiency in the Logistics Process

Blockchain helps to reduce the inefficiencies in supply chain logistics by providing transparency and access from a single shared database. The blockchain provides trust among industry stakeholders who can share documentation and information about shipments given the secure nature of blockchain technology. Moreover, blockchain is cost effective as it powers error-free, automated and leaner processes while adding predictability and visibility to logistics. With greater predictability comes acceleration in the movement of cargo across the supply chain. Lastly, it provides proof of the movement of cargo by tracking shipments across the Blockchain. This not only helps deploy responsible and sustainable supply chains at scale but also makes it possible to counter product counterfeiting. The following are the prominent uses of Blockchain in global supply chain logistics.

Blockchain Customs processes Customs agencies Customs documents

Faster and Leaner Logistics in Global Trade

Logistics is what drives the modern world as more than 90% of global trade is involved in international shipping at some point. However, with so many stakeholders with conflicting priorities and interests, tracking shipments is a very complex affair. For instance, a single shipment of refrigerated vegetables from Kenya to the Netherlands can involve nearly 30 people and organizations, with more than 200 communications and interactions. As such, improving efficiencies in global supply chain logistics would significantly boost international trade. In fact, the World Economic Forum estimates that the eradication of such efficiencies would boost global trade by up to 15% and GDP by up to 5%.

Blockchain Customs processes Customs agencies Customs documents

Blockchain can become the answer to reducing these inefficiencies as it reduces friction in trade finance, customs collaboration, trace & trace, transportation management, procurement and many other aspects of global trade logistics.

The global shipping industry has to contend with multiple customs processes and more than 50,000 ocean carriers which make ocean freight an industry ripe for the implementation of blockchain for efficiency gains. Blockchain through its shared database can ease administrative processing and trade documentation. Industry partners and regulators can access and verify shipments from a single database thus saving time and optimizing costs.

One example of this is the TradeLens Blockchain platform that was developed jointly by IBM and Maersk. The platform provides a digital system for end to end shipment tracking and digital workflows. Through the platform, industry partners can monitor the progress of goods across the supply chain. Stakeholders can also view all documentation including bills of lading, and customs documents. The platform provides a tamper-proof repository and ensures secure data exchange among all stakeholders and industry partners. The system reduces fraud and delays and could potentially save billions of dollars annually.

Improving Traceability and Transparency in Supply Chains

There are several projects that have been implemented to enhance supply chain transparency and traceability. The projects collect data on cargo origin, manufacturer and routing. The immutable data is stored in the blockchain where it cannot be changed and is easily shared, making it easy to trace and track like never before. This is useful in proving the legitimacy of sensitive or expensive goods such as pharmaceuticals, luxury items or horticulture. The information shared on the Blockchain at every stage can be used to verify the authenticity of luxury goods or find out if pharmaceuticals were manufactured using the set-out guidelines.

Blockchain Customs processes Customs agencies Customs documents

In the future, it may become a requirement that track & trace applications use more intelligent and secure digital forms of identification. For instance, there may be a move away from passive identification using bar codes to better interactivity such as using the Internet of Things (IoT) devices. These can collect information at preset intervals and transmit and record them on the shared platform to ensure that the product is not tampered with.

Blockchain Customs processes Customs agencies Customs documents

Smart Contracts for Automating Commercial Processes in Logistics

According to industry estimates, up to 10% of invoices in the shipping industry have inaccurate data. This often leads to inefficiencies and sometimes disputes. It is such a common problem that Accenture believes that shipping costs could come down by up to 5% if overpayments and invoice accuracy could be reduced.

Blockchain Customs processes Customs agencies Customs documents

One of the biggest advantages of the Blockchain is smart contracts. They improve efficiency along the settlement process and the supply chain thus helping reduce inaccuracies and conflict. Through a shared Blockchain platform, real-time shipment data and digitized documents are entered into the blockchain platform right from the start. Since they are digitized they can automate commercial processes as contracts will be executed as soon as the set conditions have been met.

A good example of this is ShipChain a pioneering company that has developed a Blockchain platform that traces a product right from the manufacturer’s plant right until it arrives at the consumer’s address. The system will have an open API architecture so that existing freight management software can be integrated into the platform. It will record all important information in the supply chain and execute a

Blockchain Customs processes Customs agencies Customs documents

smart contract once all terms are met. For instance, once the driver sends information confirming delivery, the smart contract will be executed.

In the future, this could be expanded to include transmission of the status of the goods and verification of delivery. The platform will then release payments to the seller of the cargo thus enhancing integrity and efficiency. Further innovations could include automation of freight forwarding, fleet management, delivery schedules, and customs compliance among many others.

Blockchain Customs processes Customs agencies Customs documents

Conclusion

Blockchain is one of the most important innovations that are sure to improve the efficiency of the global supply chain system. It helps industry partners work collaboratively with each other through a single platform where documentation and data can be accessed, shared and verified. It improves efficiency by reducing fragmented silos and low transparency so that delays and high costs of verification are reduced or completely eliminated. Moreover, the Blockchain is a highly secure technology that will ensure that any data shared is only accessible to persons that have permission to access it. As such, Blockchain provides error-free, automated and leaner processes that can be tracked & traced along the supply chain thus improving the speed of cargo movement and the fulfillment of contracts in a timely manner.

Blockchain Customs processes Customs agencies Customs documents
Blockchain Customs processes Customs agencies Customs documents