White paper: Building the Blockchain Logistics Protocol
1.2 Market Demand
OpenPort has identified the following major challenges facing multinational FMCGs as they expand sales in many emerging markets:
- Late, inaccurate, or missing proof of delivery significantly reduces cash flow and increases administrative costs and transport rates through late invoicing, slow payments, and increased disputes.
- The local transport and distribution supplier base is fragmented and difficult to manage.
- 3PL (large logistics provider) distribution networks are limited and sub-contracted by at least one level (adding 5-10% additional cost).
- There exists little or no transparency into sub-contracting by local transporters.
- Sub-optimal asset utilization, low levels of achievement and compliance for sustainability standards.
- Logistics costs as a percentage of sales are very high.
- Lost sales, excess inventory and penalties hurt both top and bottom line.
Transporters, constrained by limits that delayed cash flow places on their fuel, labor and other operating costs, face many issues of their own. Lack of IT infrastructure to service large shippers directly results in layers of subcontracting, and working capital challenges which are often exacerbated by delayed and inconsistent payments as they wait for paper-based proof of delivery (which triggers payment) to be accepted by the shipper.
We believe there is a need to directly connect the movement of goods with payment, providing proof of pick-up and delivery via a secure digital medium for speed and traceability.
A universally applicable aspect of blockchain is that it enables more secure, transparent monitoring of transactions. Supply chains are ultimately a series of transaction events linked to move products from raw material through to retailer.
With blockchain, the transactions between parties in the supply chain can be documented in a permanent and public decentralized record, creating transparency, security and trust.
We are not alone in this belief. IBM has begun work on a blockchain solution for food safety, creating a system of traceability that would allow dangerous food in the supply chain to be tracked down in seconds. A consortium of consumer goods companies and retailers, including Unilever, Nestlé and Walmart, have signed on to pilot the solution (Coindesk, 2017). This level of traceability, according to IBM, will not only save costs due to greater efficiencies but also costs to human life caused by tainted food in the supply chain.
IBM has also teamed with Capgemini to create a prototype for Smart Containers using blockchain technology. The aim is to place sensors in shipping containers to transmit quality data to an integrated IoT platform, visible to all parties and guaranteed reliable (Capgemini, 2017).
The applications for blockchain technology in the supply chain are immense, and we are only beginning to see the ways in which it will shape the supply chains of the future as early prototypes and pilots are being rushed to market by some of the world’s largest companies.