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Blockchain's disconnect between the could-be and the has-been

Blockchain Disconnect.jpg

Though blockchain has been discussed in great detail across the transportation and logistics marketplace, companies have been remarkably subdued when it comes to commercially implementing the technology into their daily operations.

The inconsistencies are quite revealing. Businesses understand the inherent advantage blockchain would bring to key functions, ensuring greater visibility, higher capacity utilization, and possibly helping to drive down costs across the system. But yet, blockchain does not seem to inch past highly advertised pilot programs happening across in the supply chain ecosystem.

FreightWaves spoke with Andy Schmahl, partner and managing director at BCG, to understand the dissonance between blockchain's could-be and the has-been. “The paradox of blockchain’s promise is all about creating trust amongst otherwise untrusting parties. The transportation and logistics industries, in particular, require collaboration and coordination of not just bilateral, but multilateral handoffs,” said Schmahl.

“The challenge though is about getting those parties to interact with each other, find a common platform, adopt common standards, and feel like everyone is being treated in a fair way – which is increasingly hard,” he continued.

Schmahl remarked that it is difficult to create a platform when it revolves around getting stakeholders with conflicting opinions onboard. BCG’s extensive surveys of its clients revealed that businesses were often found to be waiting for a catalyst that could help them address blockchain.

To foster blockchain’s growth on a commercial front, government-driven organizations or industry consortiums like the Blockchain in Transport Alliance (BiTA) have started dialogues with the incumbents, and are finding ways to socialize and become familiar with each other – something which Schmahl believes is a prerequisite for a change in perception. “I think you also need to have some early success stories, but the blockchain pilots until now have proven to be less-than-transformational. This has maybe created a bit of gun-shyness in the industry on whether this could actually help in increasing revenue,” he said.

One of the reasons for a passive approach to blockchain is because companies may not have been ambitious enough with their blockchain aspirations. Mistakes have been made with choosing use cases for pilot programs. Schmahl mentioned that in some cases, trivial and straightforward issues were taken up to be solved through blockchain, which in essence, could have been addressed by existing technologies.

That apart, trust has traditionally been an issue within the industry, with data-sharing being looked upon as market suicide in certain aspects. To rise above this, it is critical to help businesses quantify risk, and enable them to confidentially share data that in no way would jeopardize its market standing.

“Companies need to recognize that a business built over data opacity would not create the best value. Eventually, shippers are going to insist on lower cost moves and demand more information about where their goods are, because they are going to look at optimizing their supply chains,” said Schmahl. “Once the traditional movement of things from one player to another, with idle time in-between for data transfer and verification becomes untenable, blockchains would not just be a novelty but be a central tool to enable cost reduction and increase in transparency across the board.”

Schmahl insisted that it is critical to look beyond surface-level issues and truly analyze how blockchain could create value for businesses. It is essential for even the skeptics to try looking at it again – probably in a different light – just to make sure all the possible use cases are exhausted before they give up on blockchain’s premise.

Nonetheless, the intention here is not to slight the advent of other promising technologies in the segment. The overarching goal has always been about making supply chains more efficient – in terms of costs, visibility and capacity utilization. Any technology that helps foster that must be welcomed, and by the looks of it, blockchain does take center stage right now – at least on paper.