#blockchain #Supply Chain #logistics #mutualization

How does blockchain enables companies to mutualize their supply chains?

Published on May 06, 2019

While supply chain networks are increasingly atomized with fragmented flows, a multiplicity of actors and an ever-increasing demand for results (quality and deadlines), costs need to be better controlled.

However, driven by the desire that the customer have the fewest unpleasant surprises during the unboxing phase, e-merchants now almost systematically use oversized packaging. An excess of caution that represents a significant economic cost. This could nevertheless be diluted by focusing on the supply chain mutualization.

While the approach is highly attractive to supply chain managers (70%), it is still difficult to convince managers (30%), as shown by the latest DS Smith Packaging study. Indeed, apprehension about the loss of exclusive control over the management of one's assets or the risk of disclosure of confidential data is natural. And it is precisely on this point that the blockchain can provide an adapted and secure response.

Supply chain networks overwhelmed by packaging

Through its study "Supply chain 4.0 will be flexible", JLL highlights the growing intensity of logistics in the economy: freight transport is growing by 2.1% per year in France while the number of logistics warehouses increases by 2.5% per year.

Due to logistical constraints, as well as standardisation rules, packaging is often oversized. The void is then filled with air cushions, paper or polystyrene. This use of oversized packaging generates underfilling of carrier fleets.

Facing this situation, DS Smith Packaging looked at the void importance in logistics. It appears that e-commerce is the sector that wastes the most available space in its packages. Thus, if the average empty rate of maritime containers falls to 24%, the average empty rate of packages from the e-commerce circuit would represent 43%. This figure fluctuates according to the type of product, reaching up to 60% of the volume of glass packaging.

DS Smith Packaging looked at the European scale where 4.2 billion e-commerce packages are recorded, nearly 2 billion packages transport emptiness. Worldwide, the waste resulting from oversized packaging has an economic cost of 46 billion dollars. In addition, it represents an environmental abyss. Thus, in maritime transport, the annual carbon dioxide emissions linked to the transport of vacuum in containers from manufacturing sites to ports represent 122 million tons, the equivalent in terms of CO2 emissions of a country like Belgium.

Freight transport thus has real potential for productivity and optimisation.

Supply chain's pooling: an economic and an environmental asset

Faced with the logistical challenges to be met, the time has come for an extended or collaborative supply chain, which implies the implementation of supply chain collaboration strategies involving the company and its partners in the search for the same efficiency.

Sharing resources between several companies, also known as "supply chain pooling", remains an effective way to obtain the same service at a more competitive price. It concerns the pooling of transport, logistics and freight resources.

It may concern the sharing of warehouses, as is the case with FM Logistics, which deploys "multi-client" warehouses storing products from companies working in the food, distribution, mass consumption products and perfumes and cosmetics sectors. Such a practice then makes it possible to increase storage space tenfold and achieve economies of scale.

It may also concern truck sharing, also known as "co-transportation". Here, the grouping of goods serves to optimize the carrier's movements. It introduces a win-win relationship between the carrier and the logistics manager. This transport and logistics pooling makes it possible to increase the frequency of pick-up or delivery to improve the quality of the service provided to the customer.

This pooling helps saving several tens of thousands of euros.

However, this approach is difficult to convince business leaders. The main obstacles are the fear of losing exclusive control over the management of their goods, with the risk that they will be lost by the partner company or even stolen. The other deterrent remains the risk of disclosure of confidential data. Companies opting to share their supply chain are not ready to give their partners full access to their customer data or inventories. To work out, each actor should retain his or her right of access to his or her own data without being deprived of it and without entrusting it to a trusted third party. However, this is precisely what the blockchain allows.

Blockchain: a preferential implementation tool for the supply chain's pooling

Bringing together fragmented logistics networks and optimising the resources available is therefore a major challenge for the supply chain sector.

Blockchain offers a solution of choice in the face of the opacity of extended logistics networks.
By empowering all supply chain actors through its digital liability tracker, the startup Ownest offers global visibility of goods transfers on the second and third supply chain layer.

By recording the history of the journey of a commodity it involves, blockchain makes it possible to significantly reduce fraud and errors, as well as transit and shipping delays. In addition, by the digital nature of its information processing, it reduces administrative costs. In addition, the process is still largely based on manual paper verification. If a document is missing at any stage of the process, an entire container could be immobilized for an indefinite period of time, resulting in unnecessary additional costs.

Thus, Blockchain Partner came to the conclusion that the use of blockchain in international maritime transport would make it possible to save around 20% of its total cost. Ownest also explains that the pooling of supply chain allows logisticians to achieve economies of scale. The open (and public) blockchains on which their traceability solution is based offer the advantage of having a privatization aspect of the data while securing it.

It has become clear that the further up the supply chain goes, the more subcontractors there are, the less traceability is guaranteed and the more complicated it is to collect reliable information. The blockchain is able to respond to this problem and to the increasing intensity of logistics networks. Indeed, by organizing a consensus that guarantees the authenticity of the data, blockchain generates a real traceability on all supply chains.

It thus offers a concrete visualization of goods dispatches and allows carriers to have a panoramic view of their inventory.

Thanks to decentralized technology and the security protocol of open blockchains, neither company A nor company B can falsify or modify data
: we then enter into a virtuous logic restoring trust between actors with divergent interests.