Ten years after the invention of Bitcoin and the blockchain technology, we are entering the trough of disillusionment on the Gartner hype cycle for blockchain business. So far, blockchain has not proven its usefulness outside of cryptocurrencies. Will it deliver for the logistics industry?
Due to the market hype around blockchain, where companies get rewards just by putting ‘blockchain’ in their name, applications of this technology need to be scrutinized. Oftentimes, replacing blockchain with traditional databases would simplify systems and governance thereof.
Application domains for blockchain are restricted to business partners with limited amount of trust, with clear incentive to work together and to share transactional data that needs to be immutable.
Blockchain includes a multi-party consensus machine, in order to implement distributed transactional databases with no central control. Bitcoin doesn’t need a central authority or bank, rather are transactions settled between a majority of the parties using the consensus machine. This comes at the prize of added complexity due to de-centralization of control. Even though there is the notion of private or enterprise blockchain, deploying blockchain within an enterprise rarely makes any sense. This is where databases with centralized control are most effective.
The sweet spot for blockchain is “industry wide” systems where the industry players want to collaborate and solve a big problem.
With that in mind, where does blockchain offer value within the logistics industry? The obvious candidate is global supply chain management, where blockchain could simplify procurement, transportation management, track and trace, customs, and trade finance. Partners would manage supply chain transactions with a shared blockchain database, instead of using point-to-point data exchanges based on paper, email or EDI documents.
The above graphic is taken from the IBM Blockchain Blog, describing the advantage of TradeLens, a blockchain platform for global trade jointly developed by IBM and Maersk. Oracle (Oracle Blockchain Platform) and SAP (SAP Cloud Platform Blockchain) have announced similar service platforms. Time will tell if such platforms will find their customers. One big challenge will be to find the right governance model, since these platforms ought to be open and neutral industry platforms. For TradeLens, Maersk claims to have “established an operational subsidiary to manage staff assigned to the collaboration; this subsidiary also ensures TradeLens independence from other Maersk business units.”. Will other carriers trust the independence of TradeLens, and share all their transactional data with this platform?
Blockchain is all about sharing data, governance and processes.
Intralogistics (managing the logistical flow of information and material goods within the walls of a fulfillment or distribution center), on the other hand, will only be marginally involved with blockchain. Those processes take place within a single enterprise and are better handled with a traditional (cloud) database. Depending on the success of the supply chain blockchain platforms, there might arise the need to integrate intralogistics systems with such platforms.
Global trade might get improved workflows with the establishment of blockchain service platforms, if the right governance models can be found and the industry players are willing to share their transaction data. In general, blockchain use cases for logistics need to be scrutinized in light of the ongoing blockchain hype. Most of these use cases should be rather implemented with mature database technology and centralized control. In particular, this holds true for the intralogistics industry.