Trading and investments literally run the world, with the US freight and logistics industry contributing about $1.5 trillion every year. Of course, this was in 2015 and by now, the world’s economies have increased and the figure has probably increased.
Unfortunately, this industry seems not prepared to grow, thanks to the crumbling infrastructure brought about by runaway fraud and systematic ineptitudes. Intermediaries in this industry are solely oriented in stealing the fees and increasing the shipping costs. The whole industry is very opaque and complex that it is practically impossible to introduce checks and balances.
In fact, FBI approximates that about $30 billion every year ends up in the pockets of these thieves. Consequently, the theft cost consumers as much as 20% of their products, with the distributed nature of ownership of the products making it hard to increase the little accountability that’s in place.
But this industry is poised for a mega shakeup in form of blockchain technology and this will deliver economical and more efficient way of managing logistics. Both the already established companies and innovative startups are channeling huge amounts of resources and time in it.
It is just recently that UPS announced they were joining the Blockchain in Transport Alliance – an alliance for the development of this technology in the freight industry. Through this alliance, there will be massive development in the shipping industry, buoyed by a secure blockchain system.
What makes this technology appealing is its ability to create immutable and decentralized ledgers. No information can be corrupted and the ledger is accessible to multiple parties. This enhances security and transparency of the data stored since everything is stored on the blockchain. The industry has long been battling the inefficiencies, loss of transparency and security and the real solution is the blockchain technology.
If well implemented, the blockchain system will grant the customers the opportunity to be part of a freer and more transparent global trade. It may also eliminate the need for brokers, thus lower intermediary fees.
Ethereum blockchain that forms the core of this is there to boost transparency and efficiency using smart contracts ideology. The self-executing contracts that only become viable once some predefined conditions are met will be useful in the shipping escrow, thus eliminating or limiting the need for middlemen. It will also enhance tracking and transparency, allowing shippers to get more visibility of the supply sequence and conduct vital information – loads, geo-way points and compliance information.
The whole system isn’t elaborate and no party will dispute the legitimacy of any transaction or fraudulently influence the records. It is more of a win-win for both parties.
It is the promising nature of blockchain technology that top-dollar firms and consortia are investing in it. One perfect example is ShipChain, a startup that hopes to leverage this technology to the logistics industry. however, the use of this technology is still in its infancy and shipment from East Africa en-route to Europe may need as many as 30 different approvals and more than 200 interactions before it docks.
The interactions involve shippers and carriers as well as retailers, regulators, wholesalers and customers. As at now, Maersk line is teaming up with IBM to use blockchain and track cargo and reduce paperwork that accompanies every shipment. But the future that involves blockchain could be the real deal and could eliminate or revamp tracking using the current techniques. If all goes well, then this is indeed the future!