If you follow the headlines to even a limited degree, you have probably heard one of today’s hottest buzzwords, “Blockchain.” The logistics  industry, among others, has had a slew of industry leaders announce some kind of participation in or adoption of blockchain technology in recent months. The industry intends to use blockchain technology to decrease the costs associated with administration and documentation of moving goods around the globe.

Blockchain technology can be a little difficult to understand, especially if you aren’t familiar with networks, databases, and security. Forbes has a great article to help understand blockchain as a concept. In short, the technology allows two parties to securely communicate information using a decentralized database. In the logistics space, for example, shipping and receiving parties can communicate information such as, customs forms or bills of landing. The two parties have unique keys to access the information and would be able to share the unique key with regulatory agencies to cut down inspection time. The actual impact of this technology has yet to be realized, as firms are just now exploring the potential of blockchain.

As with all market disruptors, there will be winners and there will be losers. Assuming blockchain can be implemented at a large-scale and does indeed reduce the cost of shipping goods, many companies in the logistics space will “win.” “Win” meaning that by cutting out unnecessary cost, the market will operate more efficiently and reduce the overall cost of delivered goods. Everyone wins, right? Maybe not. By supplanting and/or reducing the physical labor currently involved in shipping goods, specifically in documentation and administration, human resources will be less and less necessary. Effectively replacing people with technology and displacing part of the labor market. Another concern of large-scale technology adoption is how will smaller firms compete? The cost of technology innovation can be prohibitively high for small firms. These are just examples of potential negative impacts the technological change could impact the industry.

Large-scale industry adoption of blockchain technology is just on the horizon. Firms like Maersk, IBM, and Agility are already implementing blockchain technology with pilot client groups. And, big industry players like BNSF, UPS, and FedEx are joining the Blockchain in Transport Alliance (BiTA), an industry organization aimed at establishing industry standards for the use of blockchain technology. Beyond the example provided above, the industry is looking to implement blockchain technology in a variety of applications from trucking performance and maintenance histories to real-time capacity monitoring to detecting fraud and preventing loss of goods through theft.

Blockchain is an exciting technology with seemingly limitless potential. Since blockchain’s inception about a decade ago, it has primarily been used in creating cryptocurrencies (Bitcoin, Ethereum, etc.), but is now poised to disrupt industries across the globe. With all the optimism around blockchain in the logistics industry, its impacts remain to be seen. Hopefully, after a few years the industry will provide data and statistics around the efficiencies gained and we will see global transportation costs decrease.

Let us know what you think! Happy sourcing!

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Jonathan Groda

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