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How Blockchain is Redefining Logistics and Distribution

Blockchain technology is being harnessed by many industries but is having a particularly strong impact on supply chain management.

Concepts such as smart contracts and tokenisation have revolutionised logistics and distribution components, making supply chains more robust, secure, and reliable.

From end to end, blockchain technology brings greater transparency and efficiency to the transportation and distribution of goods. Specifically, it can support more reliable tracking services and support cross-border payment methods with far more robust security.

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Here are some specific ways in which the blockchain is redefining the supply chain industry:

Enhanced transparency

In logistics and distribution, knowing the exact location of your supplies and products is crucial to success. The more exact you can be with your products’ whereabouts, the greater the service you can deliver to your customers. Blockchain technology is key to delivering this exactness.

Whenever a product is picked off the shelf, taken out of the warehouse, or reaches a specific point in the motorway, a smart contract is executed. Internet of Things (IoT) and GPS trackers are constantly recording data as a product moves along the supply chain. This data is then sent to the blockchain and recorded as a smart contract, allowing all involved to keep informed of its whereabouts.

Distributed ledger technology (DLT) is another type of blockchain technology that keeps everyone involved in the shipment in the loop. As soon as something happens on the supply chain, the DLT records it. Each transaction or movement of goods is recorded instantly, for everyone to see.

Each entry into the DLT is recorded on the blockchain’s immutable ledger and then secured using cryptographic techniques, making it impossible to alter what has been inputted. This provides everyone with an accurate chain of events and utmost transparency.

This high level of transparency is first and foremost good for the supplier, as it allows them to oversee the progression of the shipment and get alerted to issues in real time.

It also benefits the customer, as they can discover the exact whereabouts of the product they ordered. This boosts both customer experience as well as overall trust in the company.

Enhanced traceability

Supply chains are sprawling, and the management of them can be confusing and difficult. This becomes problematic when a product must be recalled immediately.

Pre-blockchain, this involved a scramble to locate the whereabouts of all the products sent out. Returning the products to the factory was also a difficult task to navigate. Now, with the likes of smart contracts and DLT, the tracing and recall process is streamlined.

If a problem with a specific line of products is identified, the blockchain can be referred to immediately locate all products within that line, regardless of what stage each is on the supply chain.

Each product can then be quickly recalled. The blockchain can then be referred to to monitor the safe return of all the affected products.

Between 2020 and 2023 there was a 153% increase in recalled medicine products, with a total recall count of 172. All of which could have been better managed with blockchain technology.

Automated payments

Old supply chain management systems normally involve several components, which often render logistics and distribution incomprehensible and confusing.

The blockchain is capable of streamlining several processes into one, which reduces the amount of components needed in the supply chain setup.

For example, payments can be executed entirely within a smart contract. When a manufacturer orders a product from a supplier, a smart contract is set up between the two parties. This contract is encoded with several terms and conditions that must be made in order for the contract to be satisfied.

These terms can include such conditions as quantity of products ordered, delivery deadlines, and quality standards. As soon as the product has been delivered and all the terms have been met, the payment process is triggered. A payment is then transferred from the manufacturer’s bank to the supplier’s, and the transaction is complete.

There’s no need for intermediaries, as the blockchain can support these fully automated, peer-to-peer transactions.

The transaction is also recorded entirely on the blockchain. The supplier doesn’t need to invoice the manufacturer, as the smart contract has already recorded the terms and fulfillment of the exchange.

Reduces counterfeit products

Smart contracts can also validate the authenticity of products as they pass through the supply chain. Given that blockchains record every step that a product makes while travelling along the supply chain, individuals can verify whether or not the product came from a legitimate source or not.

Both manufacturers and customers can benefit from this, as it means that they can ensure that their products and supplies are coming from where they claim to be coming from. Blockchains can also be set up to reject products that are delivered from specified sources.

Overall, this completely removes the risk of receiving a counterfeit product. This is particularly important in the food and pharmaceutical industry, where counterfeit products have caused issues since the start of the e-commerce age.

UK-based legal advisor Walker Morris estimates that 27 out of every 100 products sold are fake. They also believe that over half of those buying the products were unaware that the product they were buying was fake at the point of sale.

By operating your supply chain on the blockchain, you can prove to your customers that you don’t sell counterfeit goods and that all your products are ethically sourced.

Final thoughts

Blockchain technology can make logistics and distribution better organised for the supplier, manufacturer, and customer. It can provide real-time updates on the whereabouts of your stock, products, and other assets. Not only does this give you better control over your supply chain, but it also helps you deliver better customer service.

Read more:
How Blockchain is Redefining Logistics and Distribution

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