How Blockchain Technology Is Overcoming Last Mile Delivery Challenges

The rise of e-commerce and the consequent growth of the logistics industry has resulted in challenges for the last mile delivery service model. The demand of the industry proves to be a challenge for the last leg of delivery. Incomplete deliveries and errors result in dissatisfied customers. On the other hand, there may be substantial financial losses due to the costs of transportation and delivery.

Logistics service partners and startups are discovering new ways to tackle the last mile delivery challenges. Emerging technology has been proven to be useful at this stage. Using automation and smart sensors, logistics providers are finding cost-effective ways to ensure efficient delivery. Further, the innovation of blockchain technology has also helped delivery services cope with the challenges of last mile delivery.

Blockchain technology can be understood as a shared distributed ledger that can record transactions in a secure way. The information stored in this database cannot be altered as each block of information contains a timestamp and a link to a previous block. Blockchain technology has been disruptive to the financial technology industry. Its benefits are now being welcomed by the logistics services.

What Is the Last Mile Delivery Problem?

Last mile delivery refers to the movement of goods from the distribution center to the final destination (business or consumer). It is the last aspect of the supply chain and causes significantly more difficulties than any other part of the supply chain.

For instance, deliveries to remote locations or long routes with few drop-offs can cost the company a significant amount of money. In 2016, the cost of last mile delivery was estimated to be $60.7 billion.

The problem increases when there is a lack of transportation infrastructure to support quick and cheap last mile delivery. Most customers expect quick deliveries (same-day or two-day deliveries), however, they are not willing to pay a high premium charge for the same. This means companies must discover solutions to offer faster deliveries at a reasonable price.

Finally, real-time visibility is one of the biggest challenges of the delivery service. Customers are now demanding complete visibility over the delivery of their product. They are especially keen on keeping track of the last mile delivery. This keeps them informed about the arrival of the shipment and avoids any potential second-attempt deliveries due to the absence of a customer.

Blockchain Technology Solution

Logistics partners are now adopting blockchain technology as a solution to their last mile delivery challenges. The optimization of information transactions and flow of physical goods is the primary goal of a logistics provider. Blockchain technology enables error-free and frictionless logistics. As a result, it also minimizes costs and emphasizes visibility. The industry has the potential to benefit from blockchain technology in many ways. It opens up a wide range of possibilities that can replace the traditional logistics services and business models.

1. Improving Transparency

One of the main benefits of blockchain technology is the amount of transparency provided to the customer, as well as, the company. Customers today, are more conscious about where their products come from, how they are managed and finally, the last mile delivery. By using blockchain technology logistics providers and companies can give customers the data they require.

Companies can also benefit from this transparency as it strengths clear communication with the customer. The history of transactions are also locked in place and can be beneficial when considering the distribution of finances in the supply chain. Proof of delivery is another challenge that can be overcome with blockchain technology.

2. Greater Security

As mentioned earlier, blockchain technology is one of the most secure ways to record information. The financial industry uses this to permanently store information regarding transactions. Meanwhile, the logistics industry can also benefit from its high-security measures.

Products that tend to be repackaged and aggregated for logistics are most prone to ambiguity and counterfeit practices. However, complete transparency ensures that the customer and company are aware of the movement of the package and can track any damage or loss. Further, any breach will be recorded and can be instantly tracked as information is cryptographically signed.

In times of hacking and data manipulation, this is a crucial benefit for logistics companies. Not only does it protect the company’s interests, but also puts the customer’s mind at ease. Such a solution will only increase the customer’s faith in a particular company/ logistics service.

3. Smart Contracts

Smart contracts are a component of blockchain technology. They replace manual legal contracts and are able to better enforce the rules and processes that have been agreed upon. A smart contract is completely autonomous and requires compliance for the agreed-upon actions and processes to occur.

In the logistics industry, this involves using digitized documents and real-time shipment information to inform the compliance of the smart contract. The smart contract is written as code into blockchain and distributed across the network. Since it is fully automated at this point, the fulfillment of conditions is verified based on the data collected. If the conditions are met, commercial contract obligations (such as delivery from the distribution hub to the customer) are performed.

This ensures that actions are verified autonomously based on data. It increases the efficiency of delivery along with the transparency of operations.

4. Digital Asset Tracking

Since blockchain technology is transparent, the tracking of parcels is also a huge benefit for the last mile delivery service. Digital tags are used to gather information regarding the precise location of the package. This ensures stolen and lost goods are traced immediately. When this is combined with smart technology like sensors, the tracking abilities can be enhanced. Not only will sensors provide information regarding external factors (such as temperature variation) but can also provide evidence of tampering.

The Final Note

One of the challenges of the logistics industry is effectively tackling the last mile delivery problem. Many companies are turning towards technology to complete this task. Blockchain technology provides an immense potential to optimize last mile delivery services. Many logistics providers are already using some (if not most) aspects of blockchain technology to improve their supply chain. The future of logistics services anticipates an increased use of blockchain technology as well as its intersection with other smart technology innovations.