Blockchain and the Internet of Things in the Supply Chain
Aug 16, 2019
Applications for the Transportation, Logistics, and Distribution Industry
By Ban Ang and Peter McAliney
The U.S. supply chain plays an important role in supporting many facets of the global economy. While there is no one unequivocal definition for the supply chain, it can include logistics, transportation, customer service, inventory management and the flow of information and order processing, as well as other activities such as warehousing, material handling, purchasing, packaging, information and maintenance, among others.
Sounds pretty mundane—perhaps even boring—and not one of the first areas one would think of as it relates to innovation, let alone blockchain.
By its very nature, the supply chain is characterized by many (many!) “things” and the inter-relationships among these things, whether they be substantive—raw materials, work-in-process products or finished goods—or process oriented. Managing this multi-faceted, interrelated network requires the employment of millions of people. In the United States alone, the supply chain contains 37% of jobs in the economy, with total employment of 44 million people.1 Given the increasingly global nature of supply chains, these numbers are magnified significantly when looking at supply chain employment worldwide.
The good news is that there are existing technologies—such as radio-frequency identification (RFID)—that can be leveraged with emerging technologies—such as IOT (the internet of things) and blockchain, which provides a fertile ground for innovation that can be brought to this complex, multi-layered network of “things” called the supply chain. IOT and RFID smart devices (devices capable of capturing data), supported through a blockchain infrastructure, bring the promise of connecting literally billions of these “things” that are part of the supply chain. This combination of technologies has the potential to make the supply chain more productive, as the data being collected in real time can support improved business decision making.
One defined industry segment within the supply chain is the transportation, logistics and distribution (TLD) industry. By definition, TLD is the planning, management and movement of materials, goods and people by air, rail, road, pipeline and water; and related support services such as logistics, transportation infrastructure, supporting equipment and facility maintenance. There are a number of areas where this combination of IOT, RFID and blockchain can enhance operational efficiencies and improve the bottom line.
Some of the areas for operational improvement and management using these combined technologies include:
- Packaging, receiving
- Yard management
- Fleet management
Packaging, receiving, and conveyor scanning and management: Packing of parts for delivery using rapid laser scanners has vastly improved the accuracy of parts packaged to the customers. RFID chips coupled with intelligence in the sorting machines in the conveyor system increase both efficiency and accuracy.
Data collected in the packaging process are used to direct the contents to the right customers at the correct ETA and schedule. Customers can get the information directly from the blockchain on delivery times and volumes, and this helps them plan their warehouse schedule accordingly. This will help improve the customer experience, and makes for returning customers for the TLD companies involved.
Yard management: The yard and the warehouse are the center of many activities for any TLD operation. Efficient and maximum utilization of loading bays, parking spots and traffic flow are critical to avoid delays and congestion and to provide for fast dispatch of vehicles. IOT devices in the yard, parking bays, loading docks and other physical plant facilities, when linked to blockchain to share information with fleet management software, will vastly improve utilization of real estate. It will also improve scheduling times for vehicle entries and exits.
The transparency of information a blockchain exposes may seem like a major concern. However, the technology in a private blockchain can restrict access to the information to certain parties on a need-to-know basis. So, for example, scheduled times for arrival and departure can be shared to haulers and freight companies, but how the process is managed is kept private.
Fleet management: Proper management of the fleet used in TLD will vastly improve the bottom line. The transportation rigs and associated costs represent a large portion of the business expenditure. IOT devices can help gather the data needed to manage the fleet operation.
IOT devices capture locations and speed of moving assets on their route. These data can be sent to the blockchain in real time, which will enable the fleet management software to react as needed. The data supplied can be coupled with traffic conditions to provide more efficient routing. Weather and traffic data can be added to the blockchain and can help plan alternative routes. Current blockchain technology includes computer codes that will execute, or be triggered, based on certain conditions. Examples of these blockchains—for example Ethereum and Hyperledger—implement what are called “smart contracts,” which are computer codes that operate when certain conditions are met.
Other data IOT devices can provide are rig-hours along with driver working and rest time. These are vital data that are needed for safety and statutory reporting purposes. The immutability of blockchain data improves confidence in the data collected.
In closing, innovative application of IOT and RFID devices, supported by a blockchain infrastructure, makes for a powerful synergy that can create numerous opportunities in the supply chain to increase productivity in the day-to-day operations, planning and scheduling, and management for companies in the TLD industry. The TLD industry, with its wide geographic reach both domestically and internationally, would be an ideal candidate to harness this data-sharing network. The technology of IOT and RFID (which gathers data quickly) and blockchain (which can store data securely, transparently and globally) provide participants in the TLD industry a tool for better decision making using just-in-time information. The data also can result in improved service quality and reduced costs. Given the heightened need for transparency with such a complex network, customer and partner relations can be improved as a result of the ability to view orders and shipments in a timelier manner. TLD management, too, can use the data for safety and operational planning, and can reduce operation costs.
What aspects of your business could benefit most from thinking about a blockchain-enabled IOT pilot project?
What lessons from the TLD industry can you apply to your industry?
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1. Mercedes Delgado and Karen Mills, “The Supply Chain Economy and the Future of Good Jobs in America,” Harvard Business Review (March 2018). Retrieved from https://hbr.org/2018/03/the-supply-chain-economy-and-the-future-of-good-jobs-in-america
About the Authors
Ban Ang is a director at Montclair State University. Ang spent a decade in the oil and gas industry with a subsidiary of Exxon-Mobil in Malaysia. Leveraging his analytical expertise, his focus shifted to financial services when he came to the United States, where he worked with a number of Wall Street investment banks and hedge funds. He developed both front-end and back-end systems supporting different financial products, such as commercial paper, derivatives, bonds and stocks. Additionally, he worked on systems assessing asset risk exposures and asset pricing, supporting and reporting to the CIO and CRO. After leaving Wall Street, Ang continued his technology role in the education industry. At Montclair State University, he was chartered to investigate the role of blockchain applications both in education and for use by students to obtain employment in an emerging blockchain-enabled economy.
Peter McAliney, PhD, leads the Universities and Colleges Community of Interest for the Government Blockchain Association. Most recently, McAliney led the effort to introduce a blockchain curriculum into Montclair State University’s portfolio. In his early career, he focused on the application of technology to financial services, utilities, supply chain, manufacturing, media and healthcare. The insights he developed working with the human side of technology and aligning business processes to support a rapidly changing competitive environment, along with his research on social networking theory and distributed work, led to management consulting roles advising senior leadership responsible for provisioning a 21st century workforce. McAliney works with the private sector, professional organizations and his colleagues to look at the organizational implications of new technologies and to develop programs that will equip an increasingly diverse workforce with those associated skills.