Karl McDermott
Global Head of Business Development
View from the Top

Trillions in Savings Lurking Behind Disruptive Tech

Tue, 12/24/2019 - 05:00

Q: As a developer of a supply chain platform based on blockchain tech, how would you describe the disruptive nature of this technology?

A: Blockchain has the same transformative power the internet had in the early 1990s. Just like our lives changed thanks to the internet, processes will be revolutionized through automation and blockchain implementations. This technology offers a unique way of connecting and storing data, so people can trust it is not hackable and it can be used to connect businesses. It is important to note, however, that the idea of a universal registry of information for business is actually referred to as distributed ledger technology (DLT). Blockchain refers more to crypto science and dealing with investments, while DLT seeks to apply a similar methodology to improve corporate processes.

As an example, DHL is contracted to ship auto parts from Germany to Veracruz, then to Puebla where they are integrated into a chassis and finally sent to the US. IBM researchers have found 40 different touchpoints where data had to be received and analyzed. Each of these points represents a cost-savings opportunity that adds up to a potential US$2 trillion to optimize the entire supply chain through blockchain. This technology also presents a business opportunity for smaller companies. At the moment, only big corporations participate in global trade. If greater visibility and reliability are integrated into the process, then smaller Tier 2 and Tier 3 providers can also participate in global supply chains.

Q: How would you rate Mexico’s position as a logistics hub?

A: From a global perspective, the way Mexico interacts in a global supply chain is not so different from what happens in other countries like Russia, Canada, the US or Argentina. The biggest area of opportunity to improve logistics processes in Mexico is to focus on activities where there is human intervention. Since there is a huge talent pool in the country, at times there are too many hands on the same bowl. Technology allows the improvement of processes, not by displacing people but by empowering them to create an added value.

We are working on automating cross-border processes. When USMCA is implemented, automotive companies will have to present a certificate of origin that states 75 percent of the car was built in North America. That process can be automated to increase efficiency at border crossings. There are also release procedures with customs and border protection that can be digitalized to expedite movements. Our goal is to have all the information gathered in a single
platform and use an API to send it to border protection, thus avoiding having cars waiting at the border for the right documentation.

Q: What can Morpheus.Network offer to help solve the security issues plaguing the country?

A: Security is an issue that has to be tackled in most developed countries, both in terms of security of the product and protecting the value chain from dubious imports. Regarding physical security, companies must know the location of their shipments at all times and they must be aware of the last incidents that affected cargo and itineraries. Although GPS technology has been in the country for years, it can only show the trucks’ location but not what is happening with it when it stays in one place for two hours. By providing a richer dataset through more sensors and actuators, companies can know they are managing their operations more precisely.

Installing a panic button, for example, has helped clients register the truck’s last known location after a robbery to immediately alert the authorities and recover the merchandise before it was too late. The second security issue plaguing the industry is related to activities in the black and grey markets. The higher the value of a product, the higher the risk of having to deal with forging activities. By using blockchain and a radio frequency ID tag (RFID), companies can track each component from the place it was manufactured to its current location. If suddenly there are several products with the same RFID or that lack information within the blockchain registry, retailers and even end consumers will know these are probably stolen or illegally-traded goods.