As one of the most hyped technologies of the past couple of years, the potential of Blockchain to dramatically transform logistics is thought by many to be huge. The Municipality of Rotterdam and Port of Rotterdam have teamed up to found BlockLab, a ‘Field Lab’ exploring applications for the technology.
When such large players as the largest port in Europe begin to experiment with technological advances such as these, there’s a strong argument for sitting up and taking notice. So how could Blockchain affect cycle logistics?
What is Blockchain?
First, back to basics; what is Blockchain, exactly? There’s a video explaining Blockchain in simple terms here. According to the Harvard Business Review, Blockchain:
“is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. The ledger itself can also be programmed to trigger transactions automatically.”
Originally developed as the platform upon which cryptocurrency Bitcoin is built, Blockchain consists of a electronic ledger recording every transaction made using the currency. In other words, Blockchain is Bitcoin’s backbone; it’s why people trust Bitcoin and it’s the reason people can’t spend their Bitcoins more than once.
So far, so abstract, but what makes Blockchain unique is that it’s decentralised – encrypted copies of the ledger are held by multiple members a peer-to-peer (P2P) network. This means that it’s nearly impossible to fraudulently change a past entry in the ledger – to do so, you’d need to change every ledger entry on a majority of the copies held by the P2P network. In contrast, established financial institutions have tended to keep their ledgers in a central location, which has left some of them vulnerable to cyber attack. With Blockchain, the role (and in fact whole concept) of intermediaries in any transaction is bypassed and indeed nullified. Organisations, individuals and machines are able to interact directly with each other, giving rise to potentially huge efficiency savings.
How exactly is this relevant to carrying stuff on bikes?
It’s a fair question – but bear with us. Blockchain isn’t just used as the back-end of Bitcoin. It can also be used in other applications, where multiple people or organisations need access to the same information, for example a supply chain; in which cycle logistics operators are often the first or last link.
BlockLab, the Port of Rotterdam’s Field Lab, have been looking into potential applications across their operations. It’s estimated that 80% of transactions in the port are still paper-based. There are points in the supply chain in which containers full of goods are left standing, sometimes for days on end, waiting for paperwork from shipping companies, customs authorities, warehouses and the like. It’s easy to imagine that any agile electronic system, let alone one based on Blockchain, could improve efficiency.
Let’s explore then, some examples of how Blockchain could transform cycle logistics using the example of last-mile cycle logistics operators (LMOs). In our example, several LMOs are working from a shared municipal consolidation hub and are either competing for, or collaborating to, provide last-mile coverage for the city. The municipality has restricted access to the city centre for non-LMO deliveries and collections, so all packages from non-LMO logistics operators are sent through the consolidation hub.
The architecture of a Blockchain-designed system is designed to inspire trust; entries to the ledger are transparent, unchangeable and traceable. So all stakeholders know who did what and when.
The obvious logistics application here is for track-and-trace, especially when packages are being passed between different operators and through a shared facility, as they are in our example. A Blockchain-based system for our urban consolidation hub would mean that actors from all parts of the supply chain would be kept in the know about where each package was at any one moment. The difference between this and current track-and-trace systems is that the ledger would be hosted not by a dominant single operator, but by all of them, perhaps allowing a shared platform to be developed. LMOs are often forced to operate on multiple platforms in order to please several different larger ‘upstream’ clients. A shared platform could streamline this for them.
Another area in which trust is relevant is with collaboration between cycle logistics operators. For example, we’ve written before about Fietskoeriers.nl, a Dutch collective of 15 cycle-courier companies who together cover the whole country. A Blockchain-based system could conceivably make it easier for others to establish similar collaborative business models.
2. Smart Contracts
Another concept that comes along with Blockchain is that of Smart Contracts. A Smart Contract is an e-contract based on conditions. That’s what the authors of the Harvard Business Review article were referring to when they wrote “The ledger itself can also be programmed to trigger transactions automatically.”
In our example, smart contracts could decide which LMO operating out of the depot delivers which packages. This could be based on price, time taken, or a pre-agreement between LMOs and the municipality. Maybe a particular LMO would offer the best price for delivery of a certain size or weight to a certain address. A different LMO could equally be disqualified because their cargo bikes don’t have the volume required for a large box. Perhaps such payment would only occur if a time-sensitive package was delivered before 10am the following morning. Or a particular LMO always collects and delivers from a particular neighbourhood.
In all these cases, Smart Contracts (originally set up by humans, then run with algorithms) would decide what happened and automatically do the administration involved. Automated, controlled and documented. Address details would be passed to the LMO, package dimensions and contents would be passed between logistics companies, and if conditions of the Smart Contract were met, payments automatically made.
The implications for cycle logistics of the trend towards containerisation are numerous. For example, a system in which cycle-logistics containers are used necessarily means that those containers are likely to be loaded further up the supply chain than individual packages previously were.
This means that, in our example, many of the Smart Contracts for delivery would have been agreed upon before a package even reaches the consolidation centre. A Blockchain-based system could also keep track of the containers themselves and ensure that they flow around the system in a way that maximises efficiency for all involved. All whilst keeping everybody who needs to know, in the know. Such a system could work well whether the containers in question were jointly owned by a consortium, or by a single entity. Indeed, shipping container company Maersk are already experimenting with a Blockchain-based system to keep track of their containers.
What does this mean for cycle logistics?
We’ve written before at RIPPL about how concepts from larger scale logistical operations can be scaled down and applied to cycle logistics. Although Blockchain is at an early stage of development by large players in logistics, it’s clear that there is potential for the technology to impact cycle logistics too. In this digital world what is certain is that, even for cycle logistics, advances in technology are not exclusively physical; there’s a virtual, electronic dimension too, which is ignored at our peril. It’s worth noting, too, that this point is applicable not only to Blockchain, but also to other technologies.
As the hype around Blockchain dies down and gives way to the development of real-world applications, the concepts surrounding the technology will become less abstract and the pros and cons will be shown in ever sharper relief. It’s too early to know what the impact will be. Perhaps as a relatively small part of the logistics sector, the cycle logistics community will be agile enough to embrace technologies such as Blockchain in a way that allows the full potential of pedal power to be realised.
BlockLab: “A lead via Blockchain technology” (pdf)
Harvard Business Review: “The Truth About Blockchain”
The Guardian: “Does blockchain offer hype or hope?”
British International Freight Association: “Blockchain Technology in Logistics”
Forbes: “Blockchain In The Supply Chain: Too Much Hype”
Tech Crunch: “UPS bets on blockchain as the future of the trillion-dollar shipping industry”
Internet of Things Institute: “Blockchain in logistics and transportation: Transformation ahead”
accenture: “DHL and Accenture Unlock the Power of Blockchain in Logistics”
EyeForTransport: “What Is Blockchain And How Is It Going To Benefit The Logistics Industry”
Smart Port: “The Blockchain Potential for Port Logistics” (pdf)
Proceedings of the Hamburg International Conference of Logistics, October 2017: “Blockchain in Logistics and Supply Chain: Trick or Treat?” (pdf)
IBM Benelux: “Reducing Bike Theft with Blockchain” (Youtube video)
Simply Explained: “How does a blockchain work?” (Youtube video)
Manuel Stagars: “The Blockchain and Us” (Youtube video)
Fintech Worldwide: “Blockchain Use Cases Blockchain & Logistics” (Youtube video)