In the age of digitalisation, every industry has been embracing digital integration throughout the system along with adopting more technological innovations. Lately, the digitalisation wave has hit the logistics sector too. With the shift of businesses towards online processes, the need for recording transaction online permanently with enhanced security is also being felt. This is where Blockchain technology comes into the play. But, what is the Blockchain technology all about? Why is it the next big thing? Let’s find out.
Blockchain is basically a digital ledger that records transactions in a series of blocks. It exists permanently in multiple copies spread over multiple computers typically known as nodes. Blockchain technology does not introduce an entirely new paradigm. It is in fact developed based on the old template of a ledger.
“Blockchain is a distributed ledger having a high degree of encryption. Blockchain is always useful and secure in a fragmented environment having multiple stakeholders. It provides a uniform platform with immutable records of all transactions across the value chain,” said Vikash Khatri, Founder, Aviral Consulting.
Traditional ledgers are owned by one entity and controlled by a designated administrator. This administrator can implement changes to the ledger without requiring consensus from all of the ledger’s stakeholders whereas, in Blockchain, the digital ledger cannot be updated by any administrator.
Blockchain possesses some unique characteristics which make it one of the most sought after technologies in this digital era. The main characteristics of Blockchain include data transparency, security, asset management and smart contracts.
Public and Private Blockchain
There are basically two types of Blockchain:
- Public or permissionless
- Private or permissioned
Public Blockchain networks are permissionless, which can be joined by anyone to submit transactions. No one controls the network. However, none of the data/records can be changed due to encryption. On the other hand, private Blockchain networks require permission to view or create the record. It is controlled and only safelisted i.e. checked participants can join the network.
Blockchain in Logistics
Although the logistics sector primarily consists of transporting and warehousing of goods but the sector is not just limited to that. The entire process of storing the goods and transporting those to the destined location is a complex one involving diverse stakeholders, varying interests, and with many third-party intermediaries.
Lalit Das, Founder and CEO, S.S. Supply Chain Solutions said on the applications of Blockchain in logistics, “A Blockchain supply chain can help participants record price, date, location, quality, certification, and other relevant information to more effectively manage the supply chain. The availability of this information within Blockchain can increase traceability of the material supply chain, lower losses from the counterfeit and grey market, improve visibility and compliance over outsourced contract manufacturing, and potentially enhance an organisation’s position as a leader in responsible manufacturing.”
Many parts of the logistics process are bound to manual processes mandated by regulatory authorities. Companies used to rely on manual data entry and paper-based documentation. All these manual works have been making it difficult to track the goods and the status of shipments.
Blockchain technology holds the potential to overcome these drawbacks in the logistics operation making the process more organised. Besides, the required trust between the stakeholders to share information is enhanced by the intrinsic security mechanisms of Blockchain technology.
The most prominent use of Blockchain in the logistics arena is transparency and traceability of the supply chain. With the addition of virtual visibility and predictability in the logistics operations, companies can streamline the process in the logistics sector.
In a supply chain, inventory is stored at many places. Having a better view of the product inventory in the warehouse enables one to make decisions in the right direction. The technology enables one to see what’s happening in a supply chain virtually.
Mr Khatri explained, “In the case of inventory optimisation, multiple stakeholders are involved starting from supplier to end retail point of sales. In such a scenario, Blockchain helps a lot. In various conventional warehouse/inventory management software, features like GIV (Global inventory view) and API with vendors/buyers are available. But these have limitations and security concerns. On the other hand, Blockchain platforms can provide transparency and security both.”
Apart from these, Blockchain helps in cutting costs of logistics by powering leaner, more automated and, most importantly, with error-free processes. The technology helps companies understand how ingredients and finished goods are passed through each subcontractor and reduce profit losses from counterfeit and grey market trading.
Security and the “Trust” Factor
Logistics sector, like every other business, is built on trust: trust between multiple parties. But the traditional way of trust that existed earlier has been transformed with the emergence of robust Blockchain technology.
According to Lalit Das, “The true value lies in creating consensus and trust between strangers. That creates trusted transaction networks between entities that do not know or trust each other.”
The decentralised nature of Blockchain technology – not relying on a central point of control – makes the system fairer and considerably more secure. The Blockchain utilises innovative consensus protocols across a network of nodes to validate transactions and record data in a manner that is incorruptible.
Besides, the two key characteristics – security and transparency – together facilitate trust among the entities involved in the business process. A system needs to be transparent and at the same time, it has to provide security for better functionality.
Blockchain has been able to increase the supply chain transparency which, in turn, has improved the traceability through virtual visibility. The transparency in technology also helps in reducing fraud for high-value goods such as pharmaceutical drugs.
India’s Technology Boost and Scope of Jobs
With the ability to enable secure movement of assets without intermediaries, the revolutionary Blockchain technology has transformed not only the logistics sector but other sectors too.
Lalit Das mentioned, “Globally, Blockchain’s evolution is still in an exciting but nascent stage as it moves from the protocol stage to infrastructure, before mass consumer interfaces and application layers. This could be the perfect juncture for India to rise as a technology powerhouse.”
India needs to pay careful attention and capitalise on the enormous opportunities of this new Internet technology. For an emerging economy like India, to achieve tremendous benefits from the application of Blockchain technology, sectors such as financial services, agriculture, healthcare and real estate will have to utilise all the crucials.
Also, Blockchain is now the fastest-growing skill set demanded on job sites. It has job growth rates at 2,000-6,000% while the salaries for Blockchain developers are 50-100% higher than regular developer jobs. The decentralised nature of projects with distributed teams can translate into lakhs of high-paying jobs from all over the world being available to Indian developers. With its strong IT ecosystem, India can become a leading Blockchain development hub and a major net beneficiary of global capital inflows.