DHL has released a trend report in cooperation with Accenture on applying blockchains for logistics. The report argues the technology has the potential to transform the logistics industry.
It includes initial findings on a working prototype developed by DHL and Accenture, which tracks pharmaceuticals from the point of origin to the consumer, preventing tampering and errors.
Matthias Heutger, Senior Vice President DHL Customer Solutions & Innovation said: “The experiments with blockchain in finance are well known, but we believe logistics is an area where the new technology will have a truly profound impact. Implementing productive solutions however, will require further technological development and, critically, collaboration between all stakeholders.”
Logistics and global supply chains
Global supply chains are notoriously complex, with:
- a diverse set of stakeholders
- varying interests
- many third-party intermediaries.
DHL and Accenture argue each is a challenge that blockchain is well suited to address. The report also examines:
- understanding blockchains
- examples of blockchain use across industries
- blockchain in logistics.
Blockchain in logistics
As described by the report: “Blockchain is a new type of database system that maintains, records and authenticates data and transactions”.
In supply chains, products are assigned unique identifiers which enable the capture of the entire history, from production to the end customer. Throughout, supply chain stakeholders are able to validate information in real time. If anyone tries to tamper with, alter or erase a record, everyone will know.
According to Keith Turner, CIO Chief Development Office, DHL Supply Chain: “We see especially exciting potential for blockchain in pharmaceuticals, which is why we focused our proof of concept with Accenture on the life sciences and healthcare industry. By utilising the inherent irrefutability within blockchain technologies, we can make great strides in highlighting tampering, reducing the risk of counterfeits and actually saving lives.”
As many as one million lives are lost each year due to counterfeit medications, according to Interpol. Some estimate some 30% of pharmaceutical products sold in emerging markets are counterfeit.
To address this, DHL and Accenture created a blockchain-based serialisation prototype with nodes in six geographies to track pharmaceuticals across the supply chain. The distributed ledger tracking these medicines enables the stakeholders – including manufacturers, warehouses, distributors, pharmacies, hospitals and doctors to see what was happening where. In addition, lab-simulations showed how blockchain could handle:
- more than seven billion unique serial numbers
- 1,500 transactions per second.
“We’ve worked closely with DHL to understand and document the broad impact blockchain will have on supply chains of the future,” adds Andreas Baier, Accenture lead for the travel and transportation industry and DHL client team leader. “Using a common, indelible and secure ledger, the industry can achieve much higher safety standards – from the factory to the patient – at much lower cost. This is one of several opportunities blockchain affords to restructure business processes while reducing cost and complexity.”
Applying blockchain technology to supply chains
Blockchain technology shows great promise for dramatically improving the efficiency and reliability of supply chains in all industries. DHL and Accenture’s pharmaceutical prototype is just one of the use cases highlighted in their trend report. Blockchain could also be used for asset management, to improve transparency and traceability, and to automate commercial processes with “smart contracts,” which facilitate and verify the performance of contracts without third parties.
The potential for blockchain in logistics is significant. However, moving from concepts and pilot applications to deploying viable solutions will require the technology to be further developed, organisational transformation and a willingness to collaborate between all stakeholders. Success depends on all parties working together to transform legacy processes and to jointly adopt new ways of creating logistics value.
What does it mean
IDC forecasts global spending on blockchain solutions will reach US$2.1 billion in 2018, more than double the US$945 million spent in 2017. In 2021 IDC expects annual spending to reach US$9.7 billion.
Much of this spending will occur trying to simplify today’s complex supply chains. Yet DHL/Accenture are not the first to spot the opportunity (see BlockEx/OpenText and Maersk, for two other examples).
Blockchains for logistics will attract attention. The real ‘action’, however, will be in implementations that will be invisible to all but the authorised stakeholders. Furthermore, there will be fierce competition between different groupings:
- the finance sector (like Batavia) wanting to include trade finance
- logistics specialists (like DHL)
- manufacturers (like BASF) wishing to control their supply chains.
Many enterprises may find that, for many years, they will have to support or apply multiple blockchain for logistics or supply chains – because they have many customers or suppliers. It ain’t going to be pretty.