Kamogelo Mmutlana, CEO of Barloworld Logistics, assesses how the advent of blockchain technology is likely to transform global supply chains and logistics
As part of its 2017 supplychainforesight study, Barloworld Logistics is actively exploring and identifying key technology trends that are helping to shape global supply chains.
In a statement the company says by understanding major trends – as well as their inherent risks and opportunities – leaders and decision makers within the supply chain sphere can begin to integrate and harness key platforms.
The statement points out that globally, blockchain technology is fast emerging as one of the most significant transformative trends within the logistics industry – one that is likely to redefine and reshape many of the existing systems and processes.
“Though it is a relatively new and somewhat vague concept among South African businesses, blockchain technology is developing fast and is undoubtedly poised to impact key functions within logistics,” says Kamogelo Mmutlana, CEO of Barloworld Logistics.
He says blockchain is essentially a distributed ledger that exists in multiple nodes on a network, rather than in a single, centralised location, which is shared throughout the world by peer-to-peer networks via computers and other devices. The ledger incorporates a consensus mechanism that enables the network to verify transactions between parties.
“This means that the need for a third party – such as a financial institution – to act as an intermediary is no longer required,” explains Mmutlana. “By integrating this technology, the blockchain enables a strong and secure exchange for shared logistics, coordinating a vast array of activities in a highly efficient way.”
According to Mmutlana, activities can include sharing non-utilised space in a shipping container or warehouse to optimising the carrying capacity of truck fleets. Added to this, stakeholders can eliminate supply chain opaqueness by having a record of all logistics transactions in blocks.
“The system can, for example, provide insights around drivers, routes and on-the-move goods and services. Furthermore, blockchain technology can yield important benefits with regard to B2B transactions – such as cross border payroll processing and smart contracts,” he says.
Quoting Don and Alex Tapscott, authors of Blockchain Revolution, Mmutlana maintains that the blockchain system represents an incorruptible digital ledger of economic transactions that can be programmed to record not just financial dealings, but virtually anything of value.
He says a standout example of the technology that is already in use is a platform called Ethereum, a decentralised programme that runs smart contracts steered by applications that “run exactly as programmed, without any possibility of downtime, censorship, fraud or third party interference.”
For logistics stakeholders, he says the Ethereum platform is set to facilitate the negotiation of prices and the monitoring of inventory levels with a view to minimising transaction costs and building more agile supply chains.
“Take the information used during an export or import process, for example. If import terminals receive data from bill of ladings a lot sooner in the process, shipping terminals and freight forwarders can plan and execute more efficiently… without jeopardising sensitive information about the owners and the value of the cargo. Also, costly delays and losses due to missing paperwork will be avoided.”
However, Mmutlana cautions that when it comes to the actual implementation of the technology, stakeholders will need to ensure that the necessary levels of trust and understanding are in place.
“At the outset, trust may very well be low among certain parties, especially those that are accustomed to paper-based solutions,” he says. “Trust would need to be established – especially with operators verifying quantities within a warehouse or on-road fleet management.”
Looking ahead, Mmutlana says a successful solution will have to provide a trustworthy, practical and simple to use alternative to achieve the wholesale buy-in that is required.
“Ultimately, blockchain technology will need to be used in a way that can integrate into all logistics operations – and this integration will need to ensure that the core functionality of the technology can be leveraged by all operational systems for each party – warehouse systems, ERP systems, transport management systems and the like.
“If such integration can be achieved, this technology can be nothing short of massively transformational for local supply chain and logistics stakeholders.”
Meanwhile, a recent study by UK-based Juniper Research found that nearly six in 10 (57%) large corporations in Britain were either actively considering, or were in the process of, deploying blockchain technology.
Almost 400 companies responded to Juniper’s Blockchain Enterprise Survey. Among companies which had reached Proof of Concept stage, 66% expected blockchain to be integrated into their systems by the end of 2018.
The research claimed that companies which would benefit most from blockchain included those with:
- A need for transparency and clarity in transactions;
- A current dependence on paper-based legacy storage systems;
- A high volume of transmitted information.
Juniper pointed out that while awareness of blockchain and its benefits had increased dramatically in the past 12 to18 months, there was a danger that companies might seek to deploy blockchain without having first considered alternative options.
According to research author Dr Windsor Holden: “In many cases, systemic change, rather than technological, might be a better and cheaper solution than blockchain, which could potentially cause significant internal and external disruption.”
Holden said the research found that some companies in the UK may have underestimated the scale of the blockchain challenge. “For issues such as interoperability, the proportion of survey respondents expressing concerns progressively increased as companies proceeded towards full deployment, while concerns also rose sharply regarding client refusal to embrace blockchain,” he said.
