Blockchain: The Answer to China’s woes?

China is considered to be the world’s largest exporter and second-largest importer. Having 1.4 billion domestic consumers and billions of consumers worldwide, the Chinese logistics industry is certainly in demand but supply chain managers are actually struggling to keep up. Logistics spending is almost twice that of the developed world i.e. about 18% of the Chinese GDP. Here’s how some of China’s woes look like today along with new technological solutions to those problems.

Transportation Fragmentation

On the typical Chinese highway, about 90% of all commercial trucks are owner-operated. Same is the case in the US,where small freight companies struggle to make efficient use of their capacity.As per the source(cryptoslate.com), Chinese trucks are driving empty 40% of the time.

There is restriction on truck traffic in most cities, so the urban “final mile” is particularly a strenuous job as it requires distribution among many small transportation providers. Recently, an expert estimated that a 100 Yuan online purchase takes as much as 15 Yuan in order to effectively move through the last leg of the delivery journey to consumers.

Outdated Technology

Fragmentation not only complicates the supply chain but also causes lags in technology adoption. Due to insufficiency of capital in small firms, it becomes difficult for them to invest in domains like mechanization, sophisticated communication and tracking systems, and other technologies that improve logistics.

Infrastructure Hurdles

Being the most populous nation in the world china’s infrastructure is still way behind as compared to other countries when it comes to logistics. The severe snowstorm that hit China in early 2018 highlighted the limits of the Chinese freight system when the railway systems struggled to handle the increased demand for fuel in urban areas. Ironically, China’s infrastructure is more efficient in exporting products than it is to move them around the country. According to the Economist, the infrastructure that has helped make China a mighty trading power is Yangshan, the world’s busiest container port, and Pudong airport, the world’s third-biggest handler of air cargo. The expressways and railways spread across the country for more than 100,000km (62,000 miles). Even with all these establishments and facilities, the Economist still believe that China is a way behind in the run when it comes to the logistics industry

Cold Chain Management Challenges

China’s growing middle class population has led to a rapid increase in the demand for imported food products.But shipping fresh meat, vegetables, cheese or other edible products that require specific temperature requirements can be a distant dream. Moving frozen or canned goods is easier. Even if fresh food is delivered, the problems within the logistics industry are hard to avoid as delay, miscommunication, and technology issues are a major reason for food getting spoilt and wasted.

According to Future Directions International, almost 2% of food products in the Chinese economy is lost during transport.

Food Safety Failures

Consumers of Chinese food products are more vulnerable to food safety risks.In recent years high-profile food scandals have increased violently; including smuggling ring, peddling decades-old frozen meat, melamine-contaminated baby food, and cadmium in rice. Chinese officials working on food safety found a shocking half million violations in the period of fewer than nine months.There are as many as 5 lac food production and processing companies in China, and more than 70% of them have 10 or fewer employees. China is a large but fragmented food economy which results in low accountability of consumers, retailers, and regulators in the supply chain.

Technological Solutions

One of the world’s largest e-commerce portal- Alibaba, a Chinese multinational, have the solution for this problem, they are utilizing the power of technological innovation in logistics. According to The South China Morning Post report, a Singapore-based logistics firm – GLP is investing aggressively in multi-modal transportation solutions, cold chain logistics, and smart trucking. (Source- cryptoslate.com)

Also, GLP has partnered with Chinese shipping giant – Cosco Shipping to help them to supply chain managers, track freight leaving and entering ports and to reduce miscommunication and delays. GLP is now planning on using data analytics to help its partners and clients foresee supply chain needs.

Although China’s relationship with cryptocurrency is critical, but its tech leaders are enjoying crypto’s endless power .i.e blockchain. China Central Television, China’s primary state-run broadcaster, buttress their inclination towards crypto by stating that blockchain is valued 10 times more than the internet.

A blockchain ledger could be revolutionary in building more efficient contracts and agreements in a highly broken down supply chain and to provide a custody record for food safety officials to check. Fr8 Network, which is a blockchain startup can be used for building shared single-truth records among supply chain participants which could prove to be vital to China’s booming logistics industry.

China has become the economic powerhouse they are today by inducing new technologies to improve productivity, and that vision should extend to the logistics industry in the future also.