Logistics is often considered the lifeblood of the modern world, with an estimated 90% of world trade carried out by the international shipping industry each year.
However, the logistics behind global trade is highly complex, as it involves many parties, often with conflicting interests and priorities and the use of different systems to track shipments. Therefore, achieving new efficiencies in trade logistics is likely to have a significant impact on the global economy. According to one estimate from the World Economic Forum, reducing supply chain barriers to trade could increase global gross domestic product (GDP) by nearly 5% and global trade by 15%.
Last year, the logistics industry was valued at $8.1 trillion.
That value is projected to double by 2023. Although the payouts can be lucrative, shipping companies and retailers are losing out on a significant percentage of potential profits due to inefficient practices, unnecessary middlemen costs, theft, and cyberattacks. Presently, cargo theft is a major concern for the logistics industry, as the industry lost over $39 million due to cargo theft in 2017 alone.
Blockchain technology is emerging from its first deployments in the cryptocurrency world, and is likely to have a significant impact across almost all industries, including logistics.
Like a pebble dropped into a lake, the ripples from blockchain technology are beginning to expand outward in all directions. In the logistics industry, blockchain promises to make business processes more efficient, and facilitate innovative new services and business models.
Blockchain technology can help alleviate many of the frictions in global trade logistics including procurement, transportation management, track and trace, customs collaboration, and trade finance. Blockchain technology offers unprecedented levels of operational transparency and traceability to logistics companies. A decentralized public ledger system that documents all changes to a record in real-time, blockchain technology will help make logistics companies more efficient through a public ledger system that records the movement of each shipping container. With this new technology, companies can implement faster routes and eliminate unnecessary steps in the delivery process.
Distributed and decentralized ledgers reduce bottlenecks and clerical errors, too.
Using smart contracts, retailers no longer need brokerages, lawyers, or other third parties to complete tasks. Smart contracts enable retailers and logistics companies to enter binding agreements that will immediately dissolve if all agreed-upon stipulations aren’t met. These ledger-based contracts increase transparency and profits, while decreasing delivery time and costly errors.