Project Logistics 2030 (Part 3 of a 6-part series)

Blockchain technology offers an alternative to centralized coordination of the supply chain and adds a layer of trust to the financial, physical and information flows in the supply chain.

By Sven Hermann, Joerg Breker and Aljosja Beije
(See Part 2)

In essence, management of the supply chain can be done either through centralization, a dominant member with full control over the flows, or though a system of partnerships requiring well developed coordination and collaboration. While many case studies exists of the former, successful cases of the latter are few and far between. This is because management of partnerships raises complex questions about autonomy, trust and ‘gain-and-pain’ sharing, commonly not encountered in a supply-chain with a dominant member. Upto now, we haven’t been able to answer these questions in a satisfactory way, as the default answer of a Trusted Third Party (TTP) leads to loss of autonomy, adds considerable transaction costs and reduces flexibility. However, with the advent of blockchain, there’s now an enabling technology for peer-to-peer, multi-party collaboration and coordination without the need for a TTP or dominant member. This is in particular relevant for project logistics, which is characterized by multi-party coordination in a complex, unique and asset-intensive industry.
 
In this article we will describe a number of blockchain use-cases that provide real value to the future of project logistics industry. In particular, we will look at the use of so-called smart-contracts to automate supply-chain processes, the case for the “digital notary”, data sovereignity and an example of using blockchain for additive manufacturing.
 
Smart contracts to automate processes

TTPs turn a transaction between two parties into a complex multi-party transaction. A good example is the use of the letter of credit (LC). Not only do the buyer and seller need to synchronize their systems, but also the seller’s and buyer’s respective banks, surveyors etc. This further reduces the execution speed of transactions, already held back by a myriad of “paper-to machine-to paper” processes and results in increased transaction costs. To enable real-time settelement of information and financial flows, parties must agree how this is done; this is where smart contracts comes into play. A smart contract is a computerized transaction protocol that executes the terms of the contract. Various blockchain based platforms such as Marco Polo and Komgo already provide highly automated LC services based on this concept. The DELIVER platform is another example of smart contract based workflow automation. In a pilot conducted by the DELIVER platform, total processing time of a shipment was reduced by 75%.
 
The case for the digital notary

In today’s world compliance involves TTP, such as banks, notaries, laywers and governments, lots of paperwork, disparate data sources and lengthy reconciliation processes often long after the event has taken place. But what if we can codify all this and create a digital notary? Just like a human notary, a digital notary needs to validate data. Consequently, a digital notary should have access to reliable and up-to-date data from reputable sources, so called oracles, in order to ensure correct execution of the smart contracts. Furthermore, the digital notary relies on oracles and smart contracts to provide various proofs; these proofs range from checking the integrity of assets (i.e. digital documents), proving the origin of a certain document, to more complicated proofs such as identity and ownership. A good example of such a digital notary is TradeTrust, that provides proof-of-ownership over various platforms that exist within international trade, for the negotiable electronic bill-of-lading.
   
Data sovereignity

Centralized platforms have a tendency to absorb data and limit the amount of control the original data producer has over it. In some cases this has resulted in platforms being accused of using the platform data to discover bestselling items that they may want to compete against. The dominant position of these platforms has also attracted growing scrutiny from competitors, we argue it may be anti-competitive. Blockchain platforms allow for data sovereignity on the part of the data producer, will still being able to provide a single source-of-truth. This is accomplished through the use of distributed databases that are linked together through a shared registry of assets.    
 
Using blockchain and additive manufacturing
 
Additive manufacturing, i.e. industrial 3D printing, gives us the opportunity to rethink the way we develop and produce goods, as well as it will fundamentally change the design of global supply chains.
 
Especiually single items or small series of spare parts could be designed in Germany but manufactured based on the following requirements in close proximity to the customer:
 
1. All agreements must be documented in a tamper-proof manner and be accessible to the contractual partners.
2. Comprehensive construction and process data must be able to be exchanged safely and economically.
3. Creators must retain sovereignty over design, construction and process data.
4. All relevant activities and decision-making bases as well as data for quality assurance must be traceable without any doubt.
5. It should be possible to automate all processes as much as possible.
 
IBM and Thyssenkrupp have combined for that the blockchain framework Hyperledger Fabric and the standard for sovereign data exchange International Data Space (IDS) to create an additive manufacturing platform.
 
This use-case is an exciting combination of two potentially disruptive technologies in projects logistics and gives us a rudimentary idea what could be possible in this decade. Maybe spare sparts are just the start of the opportunity to make thinks differently. And if blockchain in logistics will achieve its full potential then we will see how it drives especially efficiency to a new level in breakbulk business within the next years.
 
In two weeks the 4^th part of our series will show how 5G and IoT may change project logistics as we know it dramatically in the upcoming decade.

More from Sven Hermann: 
Video replay from The Breakbulk Technology Landscape: Gaining a Competitive Advantage 
Adopting Technology by Storm
How to Create a Business Strategy that Works in Five Years
ProLog Innovation Survey Says Digitalisation Critical to ‘New Normal’ Success 
Cautious Innovators, the Need to Capitalize on Tech Opportunities 
Baby Steps with Digital Innovation

About the Authors

Aljosja Beije MSs. is co-founder of Blocklab, a software company, headquartered in Rotterdam, the Netherlands, which develops blockchain based software solutions for supply chain management and the energy industry. He’s co-author of the book “Blockchain and the supply chain: Concepts, Strategies and Practical Implementations.”.
 
Dr. Joerg Breker is senior executive expert logistics for thyssenkrupp Industrial Solutions.
 
Prof. Dr. Sven Hermann is managing director of ProLog Innovation and professor for logistics and supply chain management at NBS Northern Business School.