2018 was the year of blockchain - at least for our company. We are in Silicon Valley at this time and are looking for partners for our cold chain monitoring platform SUPPLIoT.In many conversations, we are asked whether we rely on blockchain. Our cautious answer is "no": we can use it, but only in those sub-areas that make sense - and not prioritised there either, because our platform actually wants to solve other problems. At the same time, numerous logistics platforms that use blockchain technology are sprouting up, and there are new webinars on the topic every week. Newspaper articles report on the "revolution in pallet exchange" and companies that do not use blockchain are "out".
(For us, this was reason enough to carry out a cost/benefit analysis and to look at possible potential both at SUPPLIoT and in our group of companiesFörster Group.)
Google Trends shows the interest in blockchain over time:
"In the meantime, the hype has already died down: the first reports on why enterprise blockchain projects failare appearing, and the once loud voices on the blockchain revolution are becoming quieter. In the following article, we describe our view on the use of blockchain in logistics."
The Blockchain - a crash course
.. g eThe following lines are intended to give a brief introduction to the blockchain. The topic is extremely extensive, and there are many good and detailed articles on it, here.
.The blockchain (or distributed ledger technology) is best known for its most common use - digital currency - e.g. in the form of Bitcoin. "Blockchain" describes the underlying technology for the unchangeable and secure storage of transaction data for money movements
The same data is kept on different systems. If a new data record (a new block) is created, it is chained to the previous data records using cryptography, and this process is checked for validity by other participants. This enables a distributed storage of data in which already written data records cannot be changed (or only with enormous computing effort). The blockchain is visible to all participants, which makes anonymisation or pseudonymisation of the data necessary.
Fields of application in logistics
Along with the monetary economy, logistics is considered one of the prime examples of the possibilities of blockchain. Here are a few possible fields of application:
Container management for overseas freight
Obtaining delivery confirmations as a replacement for the classic proof of delivery (POD)
Document pallet movements
Monitoring cold chains
The cases of application mentioned above have the following in common:
There is a transfer of ownership and/or risk
Several participants are involved
There might be mistrust between the participants
Why blockchain is not the solution
We got the impression that many decision-makers think blockchain is the panacea for slow, manual and error-prone processes. And this, in our opinion, is the problem: the technology is seen as a miracle cure and not as what it is: a method to store data in an immutable way.
In our view, the real problems lie in other areas (as explained below with examples from the use case "pallet exchange"):
Garbage in - Garbage out
A data-holding system can only be as accurate as the data it is filled with. If errors are already made during data entry (as happens, for example, in a stressful situation at the loading bay, even with paper receipts), these are transferred to the system (the blockchain). The technology of the blockchain cannot control the validity of the data entered.
Alternative solutions: Easy-to-read information carrier systems such as RFID
As long as processes are handled on paper, it is irrelevant whether a normal (e.g. relational) database or a blockchain is behind the data collection. The data is not automatically transferred due to the media discontinuity. Many hauliers simply lack the technical possibilities to implement digitalised processes.
For many years, standards have been issued by various bodies to facilitate communication between business partners (e.g. EDIFACT). Our personal experience has shown that interface implementations for company A can seldom be transferred 1:1 to company B. In many cases, customising of the received data is necessary. In many cases, customising of the received data is necessary, which is often difficult and expensive for companies with low IT competence. The blockchain cannot solve this problem, as data must also be imported here according to a defined standard.
Alternative solutions: Efficient and easy-to-use data manipulation tools
Fraud rarely happens "after storage"
Imagine the classic process of pallet exchange: Rarely are pallet notes manipulated after the fact. After all, the other side has its "version of the truth" and will claim a corresponding manipulation (which would naturally lead to a dispute, which in this case could be clearly decided by the blockchain). The main problem, however, lies much more often in direct manipulation during recording: pallets are counted incorrectly or assessed as defective by the transferee, so that a corresponding debt does not arise for the recipient.
Another example is the monitoring of the cold chain. Temperature curves could possibly be changed afterwards, but it cannot be guaranteed that the sensor with which the measurement was taken has not already been manipulated.
Alternative solutions pallet certificate: Documentation via image or video recordings
Alternative solutions for the cold chain: anomaly detection to identify manipulated data, regular audits of the data chain by independent third parties.
Interoperability between island systems
If different logistics providers rely on different systems to manage data (for example, data on pallet exchanges), interoperability must be established between the systems in order to synchronise data. Blockchain does not solve this problem either, as different providers could rely on different blockchain implementations here as well.
A sustainable alternative from our point of view: seeing the blockchain for what it is
The Blockchain offers a number of features that can provide key advantages for conducting business processes, including:
Immutable data: When data is played into the system, it is time-stamped and cannot be changed
Unambiguous assignment: All values can be assigned to a participant. Ambiguities can thus be ruled out.
Intermediate instances are excluded: Various platforms or institutions such as banks / notaries / states are no longer necessary (at least for the process of data storage).
These advantages should be explicitly seen and evaluated. The blockchain as part of a sensibly thought-out overall concept can lead to advantages in certain niches (e.g. as soon as all other hurdles in the pallet exchange have been overcome).
Blockchain is a promising technology for certain sub-sectors that can eliminate inefficient, corrupt or faulty central repositories or administrators (which was also the factor originally mentioned in the Bitcoin-Whitepaper ). However, it should be remembered that intermediate instances can not only be inefficient, corrupt or faulty, but on the contrary can provide important functions, including for example:
advisory and support functions in the implementation process
checking data for validity
Commitment to data security
Therefore, to see the blockchain as the "solution to all logistics problems" is an approach we have seen very often in practice, which we cannot always understand in this way. Rather, it should be seen for what it is: an innovative approach to storing data in a distributed and immutable way.Cover-Photo by Shaojie on Unsplash
Blog-Photo by Pascal Bernardon on Unsplash