Is blockchain logistics’ ‘next frontier’?

Date: Friday, May 25, 2018
Source: American Shipper

If there’s one thing we’ve all been hearing a lot about lately — some might argue too much — it’s blockchain. The hype behind the concept of an encrypted, open source, digital ledger has swept across a variety of industries, and shipping and international trade have been no exceptions.
   Just this week, parcel and express carrier FedEx Corp. announced it has begun testing the technology as a means of tracking oversized and high-value freight.
   According to a report from Bloomberg news, FedEx Chief Executive Officer Fred Smith said at Coindesk’s Consensus 2018 conference in Manhattan his company is “quite confident that [blockchain] has big, big implications in supply chain, transportation and logistics. It’s the next frontier that’s going to completely change worldwide supply chains.”
   FedEx already has been working with the Blockchain in Transportation Alliance (BiTA), an organization dedicated to the development of blockchain for the freight transportation industry. In addition to FedEx, BiTA sports an impressive list of members that includes notable freight transportation and technology firms such as UPS, SAP, SalesForce, C.H. Robinson, Echo Global Logistics, JD Logistics, Schneider, BNSF Railway, Descartes, project44 and Fourkites.
   According to Smith, those firms that choose not to embrace new technologies like blockchain will face “probably, at some point, extinction.”
   But as with any new technology, the appetite in the market is mixed. Some can’t get their hands on it fast enough, others are skeptical of any new-fangled gizmos, while still others actively resist change.
   Judging by the sheer number of companies now peddling the next big blockchain-backed solution for shipping, as well as the amount of coverage given to those companies by the media (American Shipper included), it’s more than clear that the concept has generated a tremendous amount of excitement.
   Some of this hype is well-founded. Blockchain technology has the potential to fundamentally change the way global trade operates, perhaps more so than any new technology since the advent of the internet itself.
   In fact, the two actually share some other important characteristics in their early-stage development as well.
   For starters, blockchain is still so new that it is impossible to predict how it will be deployed in the future.
   The first applications for the internet were relatively simple forms of communication, namely email and chat rooms, and databasing. Who could have predicted that such a simple concept like connecting physically separate computer systems via an “information superhighway” would evolve into the internet of today?
   Who would have thought that a couple of kids in Palo Alto would invent Napster and fundamentally change the music industry and the way we view peer-to-peer data sharing, that a Harvard student would create Facebook and completely change the ways in which human beings interact with one another or that a small online bookstore would one day transform consumer behavior as we know it?
   Likewise with blockchain, we likely have not yet seen its ultimate use come into existence, let alone come to market, and we may not see this for another five to 10 years.
   The second important similarity between blockchain in its present state and the early evolution of the internet is that blockchain is not a singular network, at least not yet.
   And this is where a lot of the confusion surrounding blockchain comes from. It’s why you so often hear people refer to putting a process on “the” blockchain.
   Although a singular concept, blockchain’s iterations are countless. So when people talk about creating efficiencies by moving transactions to “the” blockchain, what they really mean is to “a” blockchain.
   Now, why is this important? Blockchain is an open-source technology, meaning anyone has access to it, but individual chains, known as “communities,” are completely segregated. Indeed, this is one of the key elements of these communities: All data is shared solely on the basis of permissions from the rest of the group. In other words, while “the” blockchain is free to all, “a” blockchain is highly exclusive.
   Similarly, in the early days of “the” Internet (back when it was spelled with a capital “I”), there wasn’t really one internet; there were hundreds of individual peer-to-peer networks — i.e. communities. And the real magic didn’t start happening until people figured out a way to connect all those disparate networks and leverage their collective value.
   With any new technology, the first use case is rarely the one ultimately adopted by the market (see: Friendster, MySpace), but with blockchain in particular, international shipping and trade likely won’t see its true, lasting value until stakeholders start connecting their individual communities to share data and create something greater than the sum of its parts.
   In the meantime, there is still an enormous amount of value to be leveraged from technologies that are already much further along in their development. From a cost perspective, cargo owners would be wise to prioritize investments in transportation management and global trade management systems, predictive analytics and artificial intelligence, and even the internet of things as these currently have a much higher expected return.
   To be clear, none of this is meant to suggest shippers should ignore blockchain or any other exciting new technology simply because it has yet to reach its full potential. Blockchain is coming to shipping. It’s not a matter of “if,” but “when.” Enterprises of all shapes and sizes should educate themselves as much as possible on how blockchain might be applied within their supply chain operations and prepare for that eventuality.
   And shippers have a real opportunity to take part in the conversation and steer the evolution of blockchain technology to best suit their specific needs and solve their specific problems. But for now, BCOs, especially smaller companies with limited technology spend, are probably better off leaving the development of industry-wide blockchain applications to the transportation providers, VCs and startups that have the cash to spend on R&D and the intestinal fortitude to stomach any potential losses.

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