3 Ways Blockchain Will Make Shipping And Logistics More Transparent (and Efficient)

The goal of any shipping and logistics company is to transport items from point A to point B in a safe and punctual manner. But when it comes to actually doing this, the industry is seriously lacking.

Shipments are lost, damaged, or delayed too often because of confusion in the chain of custody. For example, many companies have not yet digitized, so their documents must be faxed or scanned. Due to this antiquated process, there’s a high risk of “pen and paper changes,” when someone alters a document, and no one knows who did it, or why it was changed.

Even tech-savvy shipping companies can run into trouble. If they’re part of a longer chain of delivery, digital businesses still have to make handoffs with other companies that are likely analog.

This causes a lack of trust.

If a shipment is lost, you can potentially lose millions of dollars worth of inventory. Needless to say, that’s a gigantic problem. But blockchain has the potential to making shipping more transparent, reliable, and secure. This is a net good that stands to benefit everyone involved in shipping, from warehouses, drivers, customers, and regulators.

Here are three ways this technology can usher in a new era of transparency for the industry:

1. Blockchain Creates An Immutable Ledger.

Blockchain will allow us to easily track changes along the chain of custody. What was modified, who did it, when and why did they do it?

The key feature behind this ability to increase transparency is hash functions. A hash is like a mathematical fingerprint, no two hashes are the same. If someone makes a change to a document — even just adding a period, for example — the hash will reflect this. Data is stored alongside a record of who made changes and when, which makes it difficult for someone to tamper with it.

Let me give you a real-world example:

When independent truck drivers hitch up with major carriers, they often have to make handoffs between trucks. Part of the problem is that many different companies own many different trucks. So, when a driver needs to transport a pallet from Chicago to Miami, he may be dealing with several shippers and vehicles. The chain of command is long, and there’s plenty of opportunities for things to go wrong. With blockchain and hashes, though, you can see what happens at each junction — if a document changed, what caused it, or which driver was responsible for it.

This brings some much-needed visibility into the process. And it can also work in conjunction with existing technologies to increase transparency.

2. It Offers Synergy With Existing Tracking Systems.

Blockchain is certainly revolutionary, but it shouldn’t exist in a vacuum.

If you merge Internet of Things (IoT) tracking technology with the distributed ledger, you get an even clearer picture of every step of the shipping process. This will help us determine where and when problems occur.

There are so many moving parts, from trucks and warehouses to shippers and drivers. Using blockchain with existing tracking systems will put all the information from the various actors in one visible spot. Let’s say you receive a damaged product. By using IoT with blockchain, you can determine if a certain truck on the route performed hard braking, when that happened in transit, and which driver was responsible for it.

Layering IoT on top of blockchain also comes in handy when transporting perishable goods. Think about food, for example. When refrigerated trucks are moving consumables to other refrigerated trucks and warehouses, you’ll be able to track the temperature while the items are in transit.

Besides limiting spoilage, this information will increase safety and accountability throughout the entire supply chain.

3. It Allows for Secure Oversight and Accountability.

International shipments can be problematic for regulators, who have to contend with missing paperwork, documents that don’t arrive in time, and fraud.

In the U.S. alone, there’s about $30 billion of reported cargo fraud and theft each year. Because many companies don’t report this, the actual number is much higher.

But with blockchain, shippers can provide regulators access to a private key — allowing them to immediately confirm that all the documentation is there and track any edits made. This increases efficiency, for sure, but it also minimizes fraud. Companies who try to dodge customs by under-declaring an item will no longer be able to fool regulators.

This oversight and accountability, then, will have positive effects on the economy. Regulators will be able to more accurately assess duties, tariffs, and fines — and the proper taxes will be collected more easily.

It doesn’t stop here: the benefits go beyond economic.

Using blockchain in the shipping industry will also make us significantly safer. Think about all the dangerous items that could be included in a shipment but not declared. Blockchain technology, combined with sensors that weigh and analyze the contents of cargo, allows the shipping industry to be transparent. We will be able to say with certainty: this is what’s in the cargo and here’s the ledger as proof.

Shipping and logistics is an old industry, but we’re already seeing a lot of interest in adopting blockchain technology to increase transparency. This will benefit everyone and bring positive changes including cutting down on paperwork, improving tracking of shipments, and reducing fraud.