How Blockchain is revolutionizing 3PL
For those who have been following technological disruptions within businesses there are a number of models to look at. Uber, Airbnb, Facebook, etc. have all played a significant role in reshaping the transport, hospitality, and media and advertising industries respectively.
However, another technology, which has been around for several years, has already made inroads into almost all industries. Blockchain, based on decentralised technology, is a “transparent distributed digital ledger (a replica, of a list of transactions in the network, present on a number of computers across the network but not a central server).”
Though this can be most closely related to the banking, finance, and related services, Blockchain technology has impacted many other industries including the third-party logistics (3PL), supply chain, warehousing and distribution sectors.
As Danillo Figueiredo, VP of International Logistics, AB InBev, has stated “Blockchain is one of the most promising technologies in logistics. It has the potential to digitalize many of today’s paper-based processes and overcome the multitude of different interfaces… Blockchain technology will be transformational to our business and the world. It reduces mistakes, digitizes information and improves the supply chain process so we can focus on our core business of brewing the best beers for consumers.”
With this is mind AB InBev has joined together with Accenture, APL, Kuehne + Nagel, and a European customs organisation to successfully test a Blockchain solution that can “eliminate the need for printed shipping documents and save the freight and logistics industry hundreds of millions of dollars annually.” Thus, the group has already tested a solution where documents are “no longer exchanged physically or digitally but instead, the relevant data is shared and distributed using Blockchain technology under single ownership principles determined by the type of information.”
Given Blockchain technology’s advantage as an alleviator of human error, high speed, and a new way of transacting digitally, many industry players as exploring opportunities in this regard. Though still to be examined more closely there are a number of different types of Blockchain networks: public and private. Public networks are open and allow anyone to participate. Private networks are for a closed group and can be extended to new players by invitation. Based on the requirement, one can choose between public, private or public-private networks.
For many players within 3PL, Blockchain technology has the potential to revolutionise certain systems and procedure, reduce costs, and increase efficiency. In many cases, though yet to catch on to the trend, is has been said that Blockchain technology is a prime candidate for inclusion within the supply chain sector. Of course, this only works across the chain if the network of companies including suppliers, warehouses, manufacturers, etc. are all completely involved. However, given the increased interest this is poised to be a breakthrough for the industry.
Regardless, adopting Blockchain technology is no easy feat. It takes time, costs, and changing an already ingrained work culture. In fact, according to findings of the 22nd Annual Third-Party Logistics Study for 2018, though results showed that while “30% of 3PLs and 16% of shippers see Blockchain as a potential application, they have yet to engage with the technology.”
Part of the hesitation stems from a lack of clearly understanding of the technology as well as embracing its benefits. As Neil Collins, regional managing partner for Korn Ferry’s North American industrial markets unit has said, “The supply chain/logistics leader must now be agile, a strategist, a visionary and a collaborator. The entire supply chain organisation must now compete with technology, and the winners will be those that elevate their people using technology, rather than replacing them with it.” Thus, the leadership must intervene from the top in order to embrace the inclusion of Blockchain.
This, at present, is a big ask and the supply chain industry still needs to place itself within its own context though there are already players working towards this goal. Large companies like IBM, Walmart, and Alibaba have several pilot Blockchain projects in the pipeline. Two of Europe’s largest ports – Rotterdam and Antwerp – have already begun work on Blockchain projects to “streamline interaction with port customers.” However, Blockchain requires the collaboration of all parties to function effectively i.e. to form the link. Here, the technology has to stem from software developers or vendors to be able to successfully “integrate applications used by the largest supply chains companies, in turn creating an incentive for other partners in the ecosystem to come aboard.”
However, once on board, the advantages are clear. Given that the supply chain works in sync with Blockchain technology in a linear or “down-the-line” manner, the transparency of each node and its visibility can benefit the entire chain. As every item can be viewed and traceable within the Blockchain, players merely need to add their own information within each record. This could help reduce fraud, repetitive data duplication, and excess paperwork.
As companies being to see the benefits of Blockchain technology there is a greater likelihood of it entering the 3PL mainstream. However, companies must understand where it can best fit within their own requirements. Finding the appropriate Blockchain partners, calculating costs such as overheads, technological and infrastructure, and ensuring a sound fit within a specific business needs to be carefully examined and addressed. It is a long-term investment and requires a great deal planning, a change in mindset and approach, and a detailed exploration of its ramifications.
Currently, many industries like those mentioned earlier are forming groups and partnerships to ‘test the waters’ with regard to Blockchain usage and adoption. This appears to be a sound point of entry for 3PL players as it provides time to understand and evaluate its merits prior to integration.
Though Blockchain has the potential to be the next big 3PL disruptor its own nature and functioning have ensured that many players are still viewing it with caution and soft hands. Regardless, the undoubted benefits are clearly visible and over the next few years more and more players will look to adopt the technology.