• Tuesday, February 27, 2024
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BusinessDay

Platforms and Blockchain Will Transform Logistics

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With increasing digitization, platform-based business models will connect new players, wash away inefficient old ones and harness the cloud. At least three factors are driving the industry move to platforms: New infrastructure and technology, richer and more visible logistics data and relentless pressure to reduce costs.

Consider how global shipping giant Makers and IBM have partnered to launch Trade Lens, a blockchain-based platform for managing global shipments involving multiple stakeholders. Events across the shipping life cycle — credit checks, contract signing, arrival at port and payment — can be recorded publicly. On TradeLens, event data and document information are written on the blockchain, which creates a single source of truth that all can see.

Enterprise cloud technologies are also increasing coordination across the supply chain. As more companies move their digital processes and workflows to the cloud, they can share data with one another more easily through application programming interfaces, or APIs, software that allows two applications to talk to each other. Using APIs, supply-chain events can be aggregated on central platforms that receive data from participating firms’ distributed systems in real-time. Supply chain efficiency can be continually optimized.

As more fleets, ports, warehouses, and containers become instrumented, the value of these platforms increases via network effects. Value grows in multiple ways. First, greater availability and coordination of fleets, warehouses and containers leads to faster end-to-end shipment and better route optimization. Second, as different types of fleets and warehouses come on board, the scope of use cases that logistics platforms can handle also increases. As an expanding set of warehouses with different specifications join a platform, the platform becomes more valuable to more parties.

As the platform mediates more shipments, it learns which shipping life-cycle events and which actors create more delivery volatility and then uses this learning to hedge and buffer future operations. Finally, creating a platform-based market for idle assets such as transportation and storage capacity allows them to be time-sliced and rented at increasingly fine-grained and coordinated intervals.

Finally, decentralized last-mile delivery services are a growing industry that will interface with central logistics platforms and can be expected to do so even more as they become autonomous.

(Sangeet Paul Choudary is an entrepreneur-in-residence at INSEAD. Marshall W. Van Alstyne is a professor at Boston University School of Business. Geoffrey G. Parker is a professor at Dartmouth College.)