CAI Transportation Blog

Blockchain, IoT and Big Data: a critical look at logistics technology

logistics-technology

The logistics industry is experiencing an unprecedented time of growth and change. To many senior logistics professionals, Blockchain, big data, and the internet of things may sound more like a sci-fi plot than the actual future of logistics. But with so many companies promoting these technologies as absolute necessities, we wanted to ask some important questions:

  • How useful are the new logistics technologies?
  • What role will these technologies play in the logistics industry?
  • Are there under-reported potential downsides?
  • What factors should logistics professionals be cautious of?

In this article, let's take a critical look at new technologies to help you determine their relevance in the logistics industry.

Blockchain

Everyone is talking about Blockchain, but what is it exactly? A blockchain is is a decentralized ledger system with records distributed across many computers, called “nodes." As updates are made, records are added on to the chain rather than overwriting existing data. The business applications envisioned are, for instance, submitting information to a Blockchain-driven system whenever product changes hands or payments are made. The shared records of a Blockchain allow nodes on the system to compare existing records and vet the accuracy of the new transaction to be added to the chain of data. Once vetted, the new information is written and connected to previous, related information using cryptography. Then this ever-growing digital ledger is completely re-shared across the distributed nodes, maintaining a complete, public, and accurate record. 

Financial services is one of the fastest developing segments for Blockchain. Blockchain is potentially faster and cheaper than traditional money transfers since you don’t need a third party to validate transactions. Blockchain is also potentially more secure, with multiple independent parties (nodes) confirming each ledger addition. If a user tries to write an inconsistent or inaccurate record, it will be cross-referenced with the distributed public records and rejected.

Blockchain seems like an obvious win for the logistics industry. However, there are still some issues for the platform to overcome. First, Blockchain is not regulated by the government, so the standards are still in flux, and many current implementations are not truly public. And in cryptocurrency applications of Blockchain, there have been volatility spikes and some issues with market manipulation. For example, OneCoin was part of a Ponzi scheme, and the coin’s value eventually dropped to zero overnight. Anyone using a currency undergoing violent market drops or which has lost value from malicious activity may find themselves out of luck. Across the Blockchain landscape from standards to security to currencies, with government regulation still emerging and standards still developing, legal protection is not guaranteed.

Speed and scalability are other considerations. Theoretically, Blockchain should be fast because of its decentralized nature and lack of a single bottleneck. In practice, however, the technology is quite slow, as seen on the Bitcoin implementation of Blockchain. Each transaction requires accessing about six blocks to confirm the original ledger. With this block confirmation process, a cryptocurrency like Bitcoin can perform only three to four transactions per second, while Visa can perform upwards of 50,000 transactions per second. In implementations of any type, Blockchain will need faster block confirmation technology to become truly viable for larger commercial applications.

Internet of things (IoT)

Traditional methods of asset tracking are manual, prone to error, and often lack comprehensive visibility. In logistics, internet of things (IoT) technology solves these problems by placing sensors on pallets to collect and send information to dispatchers through a cloud-based fleet management system. This type of tracking reduces costs by automating work tasks and gives managers real-time tracking of important assets. Logistics managers use this data to make smarter decisions and provide better customer support.

With all that said, IoT still has some problems to address. First off, there’s no global standard for monitoring or tagging equipment. Since data isn’t standardized, it’s difficult for different systems to work together, and switching software can be tedious and costly.

IoT is still a relatively new technology. Its complexity makes it difficult for IT teams to implement and maintain IoT systems properly. Poor setup could lead to software failure, which would be disastrous if you relied too heavily on IoT data for decision making.

Lastly, security is a significant concern. Security was not a major consideration when making most IoT software. Many IoT softwares have outdated and unpatched operating software. Moreover, many managers don’t change default passwords. Hackers can exploit these vulnerabilities to steal data or commit DDoS attacks, which could stifle your entire logistics infrastructure.

Big Data Technology

Companies can utilize vast volumes of data to optimize routes, streamline factory functions, and give additional transparency to the entire supply chain process. Sensors and programs track traffic, weather data, vehicle diagnostics, driving patterns, financial business forecasts, advertising response rates, and much more. Managers can use big data to help spot specific problems in the logistics process and address it. This is why many companies claim big data will be a big factor in making shipments cheaper, faster, and easier to manage.

Even though there are benefits, big data has some drawbacks. First, data creates a lot of extra work. Too much information can make data reports complicated and ineffective. To simplify the report, someone on your IT team would have to scrub superfluous data. It takes some IT teams half of their working day just to scrub data. It’s hard to systematize this scrub process because critical data comes from multiple sources such as suppliers, customers, and logistics service providers.

Another concern with big data is safety. With so much digitized information on your shipping process in one central location, it’s a prime target for hackers. Many big data software companies admit safety was not a consideration when designed. This might be what lead to big companies like Home Depot, Target, Neiman Marcus, JP Morgan Chase, and Sony falling victim to big data hacks.

How will you implement these new technologies?

There’s a lot of hype surrounding the emerging logistics technology, but are they ready enough for your business? When it's time to implement these new technologies, make sure to do your homework and proceed with caution. Use websites like Capterra and G2 Crowd to read reviews of all the latest logistics software. Consider factors such as speed, security, cost, and complexity. Work with an experienced and forward-thinking logistics partner you can trust to make the right decisions about technology in the logistics space. Lastly, subscribe to thought leaders to follow their perspective on new technologies.

With this balanced and pragmatic approach, your company can stay tech savvy without the possible pitfalls. New technologies are almost certain to have a big impact in the industry but may be further in the future than the hype would have you believe. If you want some strategies with a more immediate impact on the logistics industry, check out our ebook The Future of Logistics.

In this Logistics guide, we explain how to handle the greatest trends in logistics to cut costs and increase operational efficiency. Download your logistics ebook here.

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