Blockchain has the potential to offer a whole range of benefits across the supply chain. Here LMH demystifies the concept by talking with logistics and blockchain specialists at one of Australia’s leading banks.
Blockchain technology has the potential to revolutionise any market it touches. In the world of logistics, where real-time data and transparency are vital factors in an efficient and successful supply chain, the opportunities blockchain promises could be significant.
A few months ago, Commonwealth Bank of Australia (CBA) built a blockchain to ship 17 tonnes of almonds from rural Victoria to Hamburg. In a collaborative project involving a series of logistics providers, trucking companies, rail freight providers and major shipping firms – the experiment was a major success and the results are now being used to shape the future of blockchain in the logistics sector.
Logistics & Materials Handling met with CBA’s Sophie Gilder, Head of Blockchain, and Chris Scougall, Managing Director of Industrials and Logistics to find out the details of the project and how the technology will go on to change the processes used to ship goods.
From origin to destination
The almond shipment was tracked end-to-end from the packer in Sunraysia, Victoria to Hamburg, Germany and involved five key Australian and international supply chain leaders. CBA facilitated the experiment and the platform was underpinned by ledger technology, smart contracts and the internet of things (IoT).
“Naturally, we looked to work with someone who was a primary producer, in this case that was Olam Orchards Australia. We then looked at someone on the rail side, that was Patrick Terminals, then on the stevedore side we had Port of Melbourne and worked with Orient Overseas Container Line (OOCL) as the international container line,” Chris says.
The program took a long time to develop and Sophie’s team were working intensively for months before the shipment actually took place. This isn’t the first time that CBA has been involved with a blockchain project, and the bank sees blockchain as a significant opportunity.
“We started exploring the concept in 2015, and we joined a global consortium called R3. In 2016 I joined the innovation lab at CBA and we established a centre of excellence for blockchain. We think this technology will have a far-reaching impact for our customers, for the structure of various industries, for the way that we do business and also for financial services,” Sophie says.
How does it work?
Blockchain is commonly talked about with regards to logistics and the supply chain, but how does it really work in practical terms?
“If we break it down into component parts it’s easier to understand,” Sophie says. The component that the users see is essentially a dashboard, it gives them a window that shows the underlying information of the shipment. In addition to that, we have a blockchain, which is a distributed ledger sitting behind the user interface, she says. This database is unique in that it can record information from a variety of sources, including the IoT devices inside the shipment. It is synchronised across a network so that every user has an up to date clone of the database, regardless of their location.
“This is revolutionary in that instead of the data being recorded in one single location, the data is shared. Users can see in real-time how far through the operational process is,” Sophie explains.
The IoT devices placed in the shipment provided a bridge between the digital and physical realm for the team. “By the time the nuts arrived in Hamburg, you had an entire chronology from origin through to destination of the hands through which the product has passed, the times and dates that they happened and also the condition of the goods at any time as the IoT devices were not just capturing location but temperature and moisture,” Sophie says.
For Chris, this has significant benefits for all parties involved. “For Olam, the producer, they are able to make sure the product was delivered in prime condition. For the buyer, they know that the product had been stored properly throughout the entire trip from Australia,” he says.
The IoT devices placed in the shipment were developed by LX, an IoT product development specialist. The devices measure about the same size as a human hand and have a built-in battery.
“These devices can do two things which are essential for logistics in Australia and the world at large. It can capture information and save that information to send when connected. This has significant benefits for countries like Australia where there are many areas that do not have connectivity – you can still capture it and as soon as the device reaches a signal the data is communicated,” Sophie says.
Transparency and efficiency
There are many overarching benefits to be realised from using blockchain technology. “The comments we have from all participants involved two words; transparency and efficiency,” Chris says. Each operator or supplier was able to see that the product was in prime condition.
“Whether it was Olam or any other transport operator, they could be absolutely transparent about where the product is at any one time and also the condition it’s in,” Chris says.
According to Sophie, transparency is something that participants along the supply chain don’t have today. “The way we cope now and come to terms with different aspects of communicating with each other is that we make phone calls, we send emails, faxes, collect receipts – we have a vast array of different forms of information. A lot of these forms are physical and need to be transported, sent or couriered between the different parties and you just hope that nothing gets lost or that any errors are made,” she says.
Where blockchain gives a significant advantage is all of this information is captured with a date and time stamp and a digital signature about who undertook which action. “You have a complete set of information about who has done what, you don’t waste time looking through filing cabinets or desperately trying to find that receipt that you need,” Sophie says.
Trust and security are major advantages and Sophie explains that a high priority for any logistics business is authenticity. “At the moment, we rely on paper and wet signatures, which is pretty much what we were doing in medieval times.”
Paper is not fraud proof, and Sophie says that when using blockchain documents you are given a unique digital footprint called a hash. This hash works like a fingerprint in that you know that it is genuine due to its makeup. For Sophie, this is very powerful and enhances the level of trust between different parties in trade.
Although blockchain is very much in its early form, experiments like this one are paving the way for how the technology can be used across a variety of sectors. Sophie’s department at CBA are working on a series of projects and trial, exploring the possibilities.
“We want a good understanding of blockchain so we have undertaken a series of proof of concepts – over 20 of them. They are not just in the financial services realm, they are in many different industries. We want to understand our clients problems and how we might be able to deploy emerging tech to address them,” Sophie says.
The types of devices and processes used in the almond shipment are not common in regular shipping processes, but Sophie believes they are at a tipping point in terms of affordability and battery life. “Until now there has been issues with them not being cheap enough to deploy across entire fleets and logistics assets. Another issue is that they are not sufficiently rugged. They need to be tougher so that they can be dropped or if someone is packing a container they are not at risk of being damaged. All of these need to be considered in the next step in development” she said.
Sophie expects that these devices and this technology will be used more in the future as it offers unique benefits over any other technology currently available. “It’s hard to do these type of things with any other method. While we are still working through the practicalities, the benefits of different parties being able to share information for logistics will be huge.”
Collaboration key to success
Both Chris and Sophie attribute much of the success of this particular project to the collaboration between all parties involved.
“It’s not technology that is the gating requirement, it’s most likely to be governance structures and how you get different entities to agree with each other,” Sophie says.
She says it will take longer to achieve consensus between legal entities and people than it does to build the technology and the key to the success of this project was the consensus and shared vision of all involved.
“All parties wanted to learn, they had the understanding that this could change the way they operate their business and interact with their customers. Everybody approached the project with an open mind and always offered honest feedback. This enabled us to create something that had benefits for all involved,” Chris says.
“The more you do and the more you share the learnings from projects like this the more you can progress with the adoption. We see these practical experiments as a way of sharing the learnings and educating people on the possibilities of blockchain.”