From hefty delays to below-par tracking, and from IT or operational failures to theft, the risk to cost, profit margins and reputation can be unabating for logistics businesses. Add to this the shifting demands from always-on consumers, who crave efficient, cost-effective, secure and instant systems, and the challenges become even steeper for companies operating in this ecosystem. IoT innovations are starting to transform the landscape to meet these demands, but there are limitations. Can converging IoT and blockchain be the answer? President and COO of Atlas City, Chris Justice shares his thinking.
According to a report by Cisco, some $2 trillion have been generated from IoT deployments in the logistics and supply chain space, with more growth inked for the coming years. A significant driving factor behind this take-up of IoT by companies is the global shift in consumer behavior: Our ever-connected world has fuelled our expectations for instant deliveries, efficient and seamless services, and safe transactions. As consumers, we demand reliability and transparency, our need for trust is innate and our fickle and brand-promiscuous habits are becoming more difficult to please.
The “Amazon way” has quickly learned to satiate our 24/7, door-to-door shopping needs and has fast become the norm for many brands, large and small. But in the background, the logistics infrastructure is creaking under the pressure.
To survive, logistics businesses are having to adopt new tools and methods. And this is right across the board, from the non-perishable product market segments to the highly perishable. Consider the number of online grocery delivery or cooked food delivery options we have available in the palm of our hand: Competition in the space is at its highest.
Because of this competition — which is driven by these new behaviors — IoT innovation in the logistics sector is gaining momentum. From asset management to fleet tracking and inventory management, there’s a host of IoT innovations that are already transforming the logistics space and helping businesses reach a whole new level of capability.
But there are limitations to what IoT can do on its own. And what’s more, while IoT is solving problems, it’s also bringing a new set of challenges to the logistics table.
Managing the explosion of data
By 2030, Cisco predicts that 500 billion devices will be connected to the internet. Much of this growth comes from our desire for immediacy, our need to get everything on-demand, to track the providence of goods and trace assets. It’s what is “required” by IoT, but it’s not practical. Not on a centralized cloud database.
The explosion of data we’ve experienced in the last 10 years is old news, and indeed, data generated from humans will continue to snowball. But the next explosion of data we expect from machines and the IoT space — from drones and autonomous vehicles to automated systems that are driving production decision — will dwarf anything we have experienced to date.
The big challenge here will be how to manage that data. And for the logistics landscape, managing it in a centralized cloud-based database framework is just not going to work — not until you have a distributed technology computing framework in place.
We need to move more intelligence out to the edge of the compute rather than back to the center — such as a centralized cloud system. We need to take the IoT data, link it to a distributed ledger node that will run logic at the edge — much nearer to the devices — to turn the data into actionable information or insight so that you have more autonomous decision-making. The right kind of blockchain and distributed ledger technology will play an instrumental role in this because it’s immediate.
If the anticipated boom in growth happens, it will become too difficult and too slow to get actionable insight from centralized cloud-based databases — they’ll also be costly to run. To make any sense or use of all the new data coming from these 500 billion devices, something in the middle will be needed to connect all those IoT devices, to feed the machine learning and algorithms.
It’s important to remember here that the very definition of IoT is expanding — for instance, some now include autonomous vehicles within the definition. Is a car a device itself? It has lots of IoT devices in it that have to be connected to the car, which has to be connected to other systems. And to make all of these systems work, you need to be able to run distributed applications. There has to be logic. A communication channel. And decentralized decision-making.
This is where blockchain distributed ledger technology comes in: At its core, it’s largely based around having decentralized decision-making or the validation of decisions and transactions without a central control authority. By converging IoT with blockchain, it’s possible to make all these “requirements” of IoT more practical in the logistics space because you’re enabling applications to make decisions closer to the IoT devices rather than from a centralized global cloud framework. It’s about putting intelligence into the whole phenomenon of IoT. It’s about enabling IoT devices of the future to actually talk to one another and make decisions themselves — based on rules and applications, of course.
The right kind of blockchain distributed computing technology will be able to put business logic and decision-making at the edge, it is able to authenticate participants, manage authorizations, and efficiently and cost-effectively share data among related and unrelated participants and store that data for purposes such as providing an immutable audit trail.
It’s one thing to theorize about the power of IoT and blockchain together, but what are the tangible benefits for real-world enterprises?
Efficiency and improved customer experiences that drive loyalty and supercharge bottom lines are key benefits that a logistics business can feel when the two converge. But what’s most important here is real-time action. This is what will drive efficiency and enable all of these automated systems of the future to become reality.
Imagine two self-driving cars. An obstacle is in their way. They communicate with each other in real time and are aligned so that they can take an action to avoid the obstacle. This is more than just efficiency. What’s happening here is the intelligence is being put back at the edge, among the IoT devices, so that real-time decisions can be made, autonomously but within the set of rules provided.
Importantly, distributed ledger technology will give the logistics industry the ability to authenticate, authorize and validate. All of the information is picked up through IoT and written to a distributed ledger to create this audit trail, meaning it can be tracked from source to destination.
There are still outstanding challenges to solve, but the good news is that there’s lots of work already going on in relation to authentication and ensuring sensors cannot be tampered with throughout the whole chain.
The power of the two combined will also enable logistics businesses to deliver new kinds of services that weren’t possible before: With the right authentication at the source, a grocery store will know not only exactly where the fruit or produce originated and whether it is organic or Fair Trade, but also how long the remaining shelf life is, thereby reducing the enormous costs of spoilage. With integrated shipping information, originations, contents and bills of lading, insurance and payments, goods will flow through ports and customs authorities more quickly, saving billions of dollars in the process, keeping costs and prices down for consumers, and even enabling consumers to order directly from suppliers, reducing costs and improving choice even further. This is already happening with some small goods ordered from places like China. When logistics, IoT and blockchain are truly integrated, this will explode to include all kinds of bespoke goods and services.
Bright future ahead
While some might be feeling the pinch of pressure from increased competition and changing consumer demands, the overall outlook for logistics businesses is golden — especially if the forecast from Maersk that a 10% saving on the $1.8 trillion logistics industry due to automation efficiencies is realized.
It’s an exciting time for this sector, with new consumer behaviors bringing a host of new technical challenges to both the global and local supply chains. The overriding learning, however, is that whether you’re talking about global or local supply chains, they will all have to be more integrated than ever before — and have the ability to take real-time action — if they are to successfully meet these changing needs. Those that can achieve this will build consumer confidence and retain market share.
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