While e-commerce consumption and online shopping activities are blooming worldwide, a key challenge that remains is how to achieve “great delivery”. One might ask what “great” means in this context? Put simply, it is about maximum accuracy, prediction, transparency, personalization, flexibility and cost-efficiency. Blockchain is an emerging technology that can bring granular, global and simple delivery tracking. Accordingly, this could bring us one step closer to achieving great delivery.
The ideal (or great) delivery is full of contradictions. Today, there is considerable discrepancy between what we expect as consumers in terms of delivery performance and what the traditional logistics industry provides. As a consumer, I want my logistics supplier to handle same-day delivery, narrow time windows, accurate time forecasting, timely notification, changes of destination address on the fly, transparent tracing and much more. And, of course, I don’t want to pay a premium for any of this.
From the logistics provider’s perspective, all of the consumers’ demands are, of course, achievable, although they drive up costs. This is a major headache for many traditional logistics companies and postal organizations as they are not structured to handle e-commerce deliveries in a cost-efficient manner.
The increased requirements imposed by retailers are an additional challenge. They act as the dispatchers in this process. The challenges they face involve dealing with the commoditization arising when offering goods and services on the Internet. With all of the information available to everyone on the Internet, all products are equal and are differentiated only by price. One of the few areas where retailers can set themselves apart is by offering great delivery. Consequently, they require more complex and customized solutions from logistics companies. Again, these aspects drive up costs for the logistics industry.
Global tracking to provide smooth collaboration
Blockchain is an emerging technology that makes it possible to transfer data between different parties via the Internet, with a high level of security and without the involvement of a third party. It was originally invented as one of the foundations for virtual currency Bitcoin. Traditional transfers of money from A to B use banks as intermediaries. The bank withdraws money from A’s account to deposit them into B’s account. Simultaneously, they record that A’s balance is reduced and B’s increased to document the transaction. When using Bitcoin and blockchain to do the transaction, no intermediate hand is needed. In the case at hand, no bank is needed to transfer the money from A to B.
Now, imagine that we are transporting packages instead of money. Along its route, a package may be transported by many different logistics providers. This means it is handed over several times along the way. At each handover, documents must be cleared and the package needs to be checked out and re-registered in the current partner’s IT-system. All accounting books must be updated. What blockchain can provide is open and global tracking. It opens new opportunities for smooth collaboration. The result is lower cost, higher security, faster deliveries and homogenous customer experiences.
Blockchain – how does it work
So, by what magic is global tracking with Blockchain possible? Blockchain is based on a few key principles. Let’s look at them step by step. The first involves efficient data sharing. Instead of keeping information and records in each of the logistic parties’ IT-systems, blockchain uses the concept of an open ledger. Think about it as a billboard or blackboard that is visible to everybody. Each new transaction is noted in the public ledger and anyone (in the network) can see this transaction. We call each such transaction a “block”.
To make sure that no one tampers with the transactions, we use a validation algorithm. This algorithm is created by linking several of the blocks together. Thus, we create a chain of many blocks. Now, we cannot simply change one transaction without breaking the chain. OK, so is there a risk that a fake copy of the ledger will be made or that the server with the open ledger is attacked? Blockchain solves this by distributing the open ledger, with the blockchain, to thousands of computers. If one computer in the network is infected with a fake ledger, the rest of the network will notice.
Where are we today on blockchain in the delivery industry?
Today, blockchain is already used in finance, with the Bitcoin application and many other activities. Trials also in progress to introduce the technology in the logistics industry. Here are some articles outlining that progress.