How Blockchain Can Transform the Supply Chain
As members of IFA know, the supply chain is becoming ever so complicated with problems like delays in the payment between manufacturers and suppliers as well as between customers and retailers. The contractual agreements as well as contract logistics often require using the services of banks and lawyers which add to the delays and the costs.
There is also the problem with the traceability of the goods back to the suppliers which makes it difficult to deal with defects and returns.
The lack of direct communication between the suppliers, retailers and the customers can lead to frictions and can involve multiple complicated steps and procedures.
Blockchain could be the answer which the companies form the European network for transportation have been looking for to resolve these ongoing issues.
What is blockchain
This is a recent technology which drives cryptocurrencies but also can be used for managing all kinds of agreements, exchanges and the tracking of shipments.
The blockchain is actually a distributed, electronic ledger which records all transactions in certain series of blocks.
These are stored in multiple computers referred to as nodes. It is a secure system because tampering with the records is virtually impossible.
Also, it is a decentralized system, which doesn’t rely on a single institution for safekeeping. All nodes connected in the blockchain are updated when new transactions are added to the ledgers.
How can blockchain resolve the problems of the logistics companies
This is good news for the international freight forwarders association and to all participants in the supply chain, because it can provide the integrity and reliability which is missing from most transactions between customers, retailers and the list of logistics companies today.
A blockchain system used by the European logistics companies can store and validate all payments, transport details, tracking and delivery.
All parties in the blockchain will be informed of the origin and location of each product in real time. This means that any kind of good or cargo handles by storage and distribution services and the transport provided by the forwarders throughout Europe can easily be tracked down at any given moment.
No single party can tamper with the entries in the blockchain ledger, so there can be no doubt about the validity of a payment, an agreement, the storage condition, delivery time and so on.
What specific advantages are there from using blockchain for the supply chain processes
One of the applications which make blockchain so successful is the use of smart contracts. These are programs which use blockchain for the execution of an agreement. Again, these contracts are stored in the blockchain, so there can be no disagreements or fraud.
In case the companies from the international freight forwarders association decide to use smart contracts, the system can be programmed so that as soon as a receipt of payment from the customer is confirmed, the distribution or delivery is triggered automatically.
By implementing blockchain for the management of the logistics and supply chain by the forwarders throughout Europe, the need for intermediaries or the delays due to relying on third parties will be eliminated.
Plus, the problem with the delays due to the payment delays, or the lack of proper traceability can easily be resolved without the need for hiring new employees and paying any additional costs.
No doubt, blockchain can be used by the international freight forwarders quite successfully to resolve the common problems, to cut the costs of the services as well as to exclude the misunderstandings between the parties involved due to the intermediaries involved.