13

The Impact on Logistics

A few years ago, I was at a class on global business strategies at Saïd Business School, University of Oxford. The person addressing the class used to be the head of Volvo in China. He had taken over Volvo's China business when it was making only a few million and turned it into a multi-billion-dollar empire.

He was explaining the strategies that Volvo adopted to maintain its competitive advantage in the Chinese market. While we were discussing their China story, the discussion touched upon India. The Volvo executive said, "India is at least a decade behind China."

I just couldn't accept that comment. I asked him why he would say that when India had the GDP numbers, population, surging middle class, and a higher level of English proficiency. He mentioned that it was due to the broken supply chain and logistics infrastructure in the country. Each state in India has different tax rules and regulations, and when a firm was operating across multiple states, dealing with the supply chain efficiently is a major overhead.

This is not a challenge within India alone. This is a challenge across the world, where the logistics involved in running a global business can often be a drag for the business. One of the main reasons why Nokia couldn't respond fast enough to the rise of Apple in 2007-2008 was because of its supply chain, which wasn't nimble enough.

While supply chains are a key issue in several industries, the efficient use of road, train, and air transport can be a major factor too. All major economies in the world that are climbing up the GDP ladder have had to keep a sound manufacturing sector. Logistics is a fundamental element of a country's manufacturing capabilities.

In a sector that relies heavily on distribution, a small percentage improvement in the efficiencies of logistics could result in massive cost savings. These efficiencies, when scaled across a country, can lead to increased GDP.

During my discussion with Dave Snelling from Fujitsu, he mentioned that logistics was perhaps the hardest problem for classical computers to solve. This was not just because of the complexity of the problem space, but also because of the constraints that needed to be addressed in arriving at a solution. According to him, this was an industry where quantum computers could make a serious impact.

Apart from logistics, communication across the network in a safe and secure way is critical as well. Distribution networks that rely on efficient transport and the exchange of goods also rely on the safe, secure, and quick exchange of information. Quantum teleportation is an important use case that could compliment the logistics sector. This is especially true in military logistics, where information exchange often needs to go hand in hand with logistics.

Moving onto Blockchain, trade finance and supply chain management seem to be areas where the technology would be most useful. There are several initiatives across the world that are focusing on proving the use of Blockchain within logistics and trade finance.

In this chapter, I will be touching upon the challenges in logistics, transportation, and supply chain management, and how quantum computing and blockchain could be used to address some of the bottlenecks in the industry.

Let's begin by talking about one of the fundamentals of good infrastructure and effective logistics: an effective traffic management system.

Traffic management systems

Logistics and transport industries are fundamental to keep the engines on in an industrialized economy. We are in an age where cars are being connected to a network. The network server always has the intelligence of where every single car on that network is at any point in time. Self-driving cars are still a few years away from being mainstream, but connected cars are definitely here.

This is also true about other modes of transport. Public transport is also gradually starting to be driven digitally. China recently announced a driverless train traveling at 350 km per hour from Beijing to Zhangjiakou.

As a result of the digitization of this sector, we have the luxury of data, and the intelligence it can offer. This intelligence can be used to make the transport system more efficient. A simple example is how Tesla manages its network of cars. Tesla cars are essentially computers on wheels. They are connected to a server that knows where each car on the network is located at any point in time.

If I were a Tesla driver looking for a supercharger during my drive, I could look at the Tesla car dashboard while driving and it would tell me the nearest supercharger. More importantly, it would also tell me how free or busy the charging station is. It is able to do that because the server has information on where every car is, and if there are five cars charging at a station with six charging points, it can tell me that there is only one charging point free.

This is a simple implementation of intelligent traffic management. In November 2018, Volkswagen made an announcement that they were working on a quantum computing solution to project traffic volumes and transport demand. The solution will work like an air traffic control system. The system will know the location of cars through constant interaction and will be able to provide optimized routes for cars connected to the system.

We live in a world where the carbon footprint of transport is the second highest, only exceeded by industrial carbon outputs. A solution such as this will not only save time and costs but will also help us cut down carbon emissions at scale. However, these solutions can only help if a larger number of automobile makers come together.

Volkswagen is not alone in their quantum quest. Toyota, BMW, Ford, and a few others are also looking into traffic management systems. In my interview with Dave Snelling, he mentioned how Fujitsu's Digital Annealer is already helping BMW with their manufacturing processes.

In order to build a usable traffic management system, we will need all automobile providers to be equipped with sensors that continuously interact with the servers. We will also need these automobile providers to build standards around these data interactions. Let's examine why that is important.

Assume person A drives a Ford, and person B drives a Toyota. Both are on the road and start transmitting data to the server and receiving traffic information from the server. Now, this data can only be about Ford cars on the road for A, and Toyota cars on the road for B. That may not be very helpful unless 90% of the cars on the road are of the same make. Reference: https://www.frontiersin.org/articles/10.3389/fict.2017.00029/full

It is important to have all automobile makers come together and agree on data exchange standards and handshake mechanisms. Once that is enabled in our example, A driving the Ford will have information on B and vice versa. This will be because Ford and Toyota have now agreed to exchange information and their handshake mechanism is standardized.

Imagine this exchange of information happening across all automobile providers over the next 10 to 20 years. We will have a connected traffic management system in every car. The servers will receive millions of data points every second from vehicles on the road. They will need to have the ability to process that data in real time and return meaningful traffic insights and instructions to car drivers.

The solution of using connected cars is futuristic. However, traffic management systems can be developed using today's infrastructure and data sources. Another option to source traffic information is by using data from smartphones and cell towers. Automobile firms can collaborate with telecommunication providers and source geospatial data about people on the road. This may not be as accurate as data from connected cars, however, a traffic management system based on geo-spatial data sourced from telecom providers is possible today.

That is precisely the approach that the Volkswagen traffic management system has adopted. Traffic management is a combinatorial optimization problem and the D-Wave machines are good at solving them. In the Volkswagen experiment, D-Wave machines were used to identify optimized solutions for traffic management in a city with 4,000-5,000 taxis.

D-Wave's quantum processing units (QPU) are good at solving quantum unconstrained binary optimization (QUBO) problems by using two key inputs. One is a vector of binary variables in the form of qubit states. The second input is an N x N matrix that describes the relationships between these qubits. The idea is to find optimal routes for each taxi to ensure congestion is minimal.

For every taxi, we know the source, the destination, and the current routes of the taxi. We then identify a set of alternative routes for each of the taxis. These routes should be maximally dissimilar to the current route the taxi is taking. Therefore, for every taxi, A, "there will always need to be a route, B, that is true in the final solution." A variable per taxi per route T_ab is true in the minimum of the QUBO.

This data for all the taxis is coded into the D-Wave and the system goes through the adiabatic annealing process. This process identifies the solution that delivers the lowest number of congested routes. The low-energy state of the system that corresponds to the process should identify the low-congestion routes and the alternative routes that the cars would take in that scenario.

The system can be tested for efficacy by randomly assigning routes to certain taxis, which will result in the reassignment of new routes to the other taxis to arrive at a low-congestion state for the entire system. In the Volkswagen experiment, solutions were arrived at within 1-5 seconds of setting up the system. The same results could be obtained from existing industry software in 30 minutes.

The US Patent US20190164418A1 was granted in 2019 for Volkswagen's "System and method for predicting and maximizing traffic flow." In November 2019, Volkswagen's system was installed on buses in Lisbon to ensure their routes are optimized and enable smoother traffic flow through the city.

This quantum computing solution may not have provided a massive difference in solving these problems yet, but it opens up options for more real-time solutions to harder problems. In a world that is fast heading toward a climate emergency, any solution that will help save energy, emit less carbon dioxide, and lower per-capita carbon footprints is a step in the right direction. Let's now look at how the airline industry could benefit from quantum computing.

The Airbus quantum computing challenge

The first-ever commercial passenger flight took off on January 1, 1914, from St. Petersburg to Tampa. It's now more than a century since that happened, but innovation in aviation and airlines has largely plateaued, if not stagnated. Apart from the more recent initiatives from Elon Musk, Sir Richard Branson, and Jeff Bezos, that are focused on interstellar travel, we have hardly seen any major upgrades to air travel.

The airline industry has been mostly a loss-making endeavor, and just getting the business model right is hard enough for airline companies. Any research and development initiatives are few and far between in this industry.

This status quo might be changing, as Airbus is pioneering innovation efforts for the aviation industry. Their focus on quantum computing initiatives is especially interesting. They have set up a quantum computing application center in Newport, Wales. They have partnered with the Welsh government to set up Airbus Endeavor. The focus of this program is technology research and development for a digital and low-carbon economy.

Airbus' quantum computing efforts are not just focused on achieving logistical superiority through better air traffic management. They are also working on fluid dynamics, finite-element simulations, aerodynamics, and flight mechanics. Using quantum computing to model flight physics can lead to several benefits.

For example, currently, modeling the flow of air over the wings of a plane in flight can take 7 years. Source: http://quantumbusiness.org/quantum-computing-future-flight-aviation/

The innovation at Airbus is aimed at modeling every single atom of air that interacts with the flight wing within weeks. This can help them understand how their flight design will affect fuel consumption, reduce drag, and make flying more sustainable. Their study also involves using advanced materials in flights and how it would affect the efficiency of the aircraft.

Increasing the speed at which this modeling can be done (from several years to a few weeks), will most certainly speed up the design and manufacture of better aircraft in the future. Airbus has clearly understood the impact that the technology could have on its fortunes and has invested in a quantum computing firm called QC Ware.

QC Ware is building quantum computing capabilities across use cases ranging from chemical modelling, fluid mechanics, Monte Carlo simulations, machine learning, and optimization. As a result, it is able to help Airbus with their specific needs.

Airbus also recently launched a competition called the Airbus Quantum Computing Challenge (AQCC). The competition was announced by Airbus CTO Grazia Vittadini at the DLD conference in Munich. This comes as a refreshing development to both the airline and the quantum computing industries.

AQCC is asking for the quantum computing ecosystem to work with Airbus to solve some of the hard problems that the industry is facing. The areas of focus for the competition are as follows:

• Aircraft climb optimization, which can help flights to achieve a low cost index
• Aircraft design optimization through Computational Fluid Dynamics (CFD)
• Quantum neural networks to solve partial differential equations
• Wingbox design and weight optimization to lower costs and environmental impact
• Aircraft payload optimization, to reduce fuel usage and costs

This is an interesting method to crowdsource solutions to some of the industry's major challenges and opportunities. Airbus has also said that the ownership of the solutions will remain with the teams submitting these solutions to the competition.

It is quite evident from Airbus' attempts that quantum computing is viewed as a technology that could solve problems that classical computers have struggled to achieve within feasible timeframes.

It is also clear that these are early days for the technology in the airline industry. But the industry is loss-making across the world and needs innovation to help it with operational efficiencies and cost reductions.

Airbus' defence business line is looking at data security and quantum resistant cryptography. Let's now look at quantum teleportation and data transfer in a quantum computing ecosystem.

Quantum networks

Logistics are dependent on the timely and secure transfer of data and information. In a military scenario, information about fighter jets needs to be transmitted in real time. In an autonomous car network, the location of cars needs to be transmitted and traffic control instructions need to be transmitted back to the cars. Another use case is in air traffic control, where information about flight locations and speeds are transmitted to optimize the traffic. In all these scenarios, we need the data to be safely transmitted between the sender and the receiver.

We live in an age where data security techniques are well behind where they need to be. For instance, the last decade has seen over a billion people in Asia join the internet. In India alone, 300 million people got mobile internet between 2015 and 2019. But most of these people do not have any awareness of connecting to the World Wide Web and performing financial transactions.

Data privacy and security have become increasingly significant to social media users and customers of large brands. The hashtag #FacebookIsDead has been trending for a long time because of their data privacy policies. Many are starting to feel that big technology companies like Amazon, Google, and Facebook have monopolized the use of the internet and have a clear monopoly over user data too.

While data privacy is one issue that needs addressing, data security is another major challenge that we need to resolve. The world is becoming increasingly connected through Internet of Things (IoT) devices. Data is shared across these devices, between consumers and businesses, like never before. Autonomous cars could be a normal thing in a few years' time, and with all this progress in technology, there needs to be a massive focus on cybersecurity.

Cybersecurity spending across the world is projected to hit $133 billion by 2022 according to Gartner. In the first half of 2019 alone, data breaches exposed 4.1 billion data records of people. We need to do better than that if we plan to live a safe and secure life when machines get more connected.

As the world gets filled with data, how can we ensure that we communicate in a secure fashion? Could we have a more secure and private internet? Can quantum computing help? There are a few answers to these questions. In a quantum network, information is transmitted as quantum information, using a qubit property called entanglement.

This property was described as "spooky action at a distance" by Einstein, which we highlighted in our first chapter. Two entangled particles can be described by the same quantum state, and therefore, observing the state of one of them will affect the state of the other particle. As "spooky" as it may sound, these entangled particles behave like a single quantum object and can be defined by one wave function.

In order to transmit quantum information between particles, they need to be entangled. Hence, the process starts with creating entangled particles and transmitting the particles safely to a distant location. Once this is successfully completed, we have a transmission channel for quantum information.

When one of the two entangled particles is assigned a state, it automatically affects the state of the other particle, which could be several miles away. When we perform an operation on one of the particles, that is instantly reflected on the other. This process is called quantum teleportation.

There are several pilots being run across the world to create a quantum internet that works on the principle of quantum teleportation. The European initiative is conducted by Europe's Quantum Internet Alliance (QIA), which is working on creating a quantum network. A quantum network is where entangled quantum particles are transmitted between a network of nodes. Quantum information is transferred across these nodes through these entangled quantum particles.

China has made tremendous progress with its efforts to connect different transmission systems using photons. The University of Science and Technology of China have managed to distribute entangled particles to two earth stations, one based in South China and the other in the Tibetan Plateau. The efforts were led by Jian-Wei Pan in 2017, who used a satellite infrastructure for the experiment.

This solution may not be viable in everyday applications yet, due to the costs involved. There are experiments that use drones as part of the transmission network to make the process more commercially viable.

Therefore, in theory, once two entangled particles are set up, quantum information can be transmitted, with no possibility of anyone hacking into it. But, one of the key challenges in implementing quantum teleportation is creating the transmission channel using entangled particles. The current state of quantum networks in many ways mirrors the state of the early internet. However, things are developing quite quickly, with initiatives across the globe pushing research forward.

Europe's QIA, led by Ben Lanyon, is working on creating a transmission channel 100 kilometers long, with a station at the 50-kilometer mid-point. At each end of the channel, an entangled ion and a photon are created. The photons are then transmitted to the station in the middle through optical fiber, while also preserving entanglement with their corresponding ions.

The next step is to measure these photons, such that they are no longer entangled with their respective ions, and in doing so, the ions get entangled. This process is called entanglement swapping. This then allows a network of entangled particles to be spread far and wide, through which quantum information can be transmitted.

Although these experiments use one type of matter (in the preceeding case, calcium was used) to create the ions and photons, that doesn't have to be the case when quantum networks scale. Depending on the purpose of the qubit, a different type of material can be used to create entangled particles. For instance, calcium and strontium ions can be used to create Ca+/Sr+ crystals. Strontium ions are used to house qubits for computations and calcium ions are used to keep the strontium ions cool.

We may also need to create quantum memories (basically, storing data) in the network if we must store the qubits. Doing this, however, would require mutual standards that are agreed across the network.

It is early days for the industry as quantum network experiments are largely local. However, once quantum networks start to become more common across different regions, there will be a drive for standardization as we witnessed with the evolution of the internet. So, that's how a quantum network can be used to transmit quantum data. But how secure is the transmission of quantum information?

Data security

Entangled quantum particles are created and, if one of them is transmitted to a distant node, the setup can be used for secure quantum information exchange. As the state of one of the qubits changes, it automatically affects the state of its entangled pair. This process of using entanglement to transmit information in a quantum network is called quantum teleportation.

A key aspect to note with quantum teleportation is that states are never copied from one qubit to another. This is also why error handling in quantum computers is such a challenging task. The aspect of not being able to copy states of quantum particles is called no-cloning and is a fundamental axiom of quantum mechanics. Reference: https://www.nature.com/news/quantum-teleportation-is-even-weirder-than-you-think-1.22321#ref-link-6

The no-cloning property of quantum particles makes quantum cryptography robust. The state of quantum particles is disturbed when observed, and so it is theoretically not possible to eavesdrop on the transmission channel without raising the alarm. Therefore, establishing a transmission channel between entangled particles is an important step for quantum teleportation.

Another method for safely transmitting and using quantum information is called Quantum Key Distribution (QKD). In this method, the quantum key is shared between the sender and the receiver as quantum data. If the key is intercepted, it will disturb the information and it might have to be resent. If the key is not intercepted, it can be used to encode messages that are shared through a classical mode of data transfer. Bb84 is a QKD protocol that was developed in 1984 by Charles Bennett and Gilles Bassard that works on the same quantum property.

QKD relies on two key aspects of the communication. It needs:

• Quantum theory to be correct
• Devices used in the communication to be reliable

Until about 2010, QKD was considered to be impenetrable and completely reliable. However, in the 10 years since, scientists have been working on demonstrating that the devices that generate photons can be blinded by a strong light pulse. In doing so, the detectors can be remotely controlled by a hacker. This has led to research around "device-independent cryptography." Source: https://www.sciencedaily.com/releases/2013/05/130528122435.htm

We have so far discussed quantum computing use cases across transportation and flight physics. Those are areas where quantum technology can help solve problems that are hard for classical computers to cope with. However, the creation of a quantum network will not just be a safe and secure way to transmit confidential information in a military scenario, but could also become the internet of the future.

As a result, I felt that not only was it important to talk about the safe transfer of goods using an efficient logistics network, but it was equally important to touch upon the transmission of data in a network.

We've covered the use of quantum computing's role in assisting us with logistical problems, and how quantum networks could revolutionize communications and the internet. Let's now take a look at how Blockchain is being explored in the field of logistics and transport, all across the world. We'll see that the technologies of quantum computing and Blockchain have the potential to be highly complementary to one another when it comes to increasing the efficiency with which we track and transport our goods throughout the world.

Blockchain in logistics

Business across the world typically is done on trust. Historically, in many parts of the world, businesses often didn't have extensive documentation or contractual agreements in place. Most transactions were conducted based on trusted relationships. However, as businesses started to operate on a global scale, there had to be more processes and controls in place to protect all parties involved.

As businesses started to grow beyond borders, with several counterparties involved in a transaction, getting documentation completed often resulted in delays. The bureaucracy added costs and time to the transaction. When a multinational business relied on a supply chain that involved multiple hops across the world, it added inefficiencies to its manufacturing processes, for example. According to the World Economic Forum, reducing supply chain barriers could increase the world's GDP by 5% and global trade by 15%.

In the case of agriculture or food businesses, food products take several hops before hitting the shelves of the supermarkets. This not only results in operational overheads and delays but also, in the case of fresh food, in the loss of quality by the time it hits the shops. In many cases, there is extensive food wastage.

According to the Food and Agriculture Organization (FAO) of the United Nations, about one-third of food is wasted or lost, amounting to a loss of $680 billion in developed countries and $310 billion in developing parts of the world. There is so much inefficiency in the food supply chain that needs to be fixed.

With a warming world, we are going to see more fluctuations in food production due to either too much rain or drought conditions. This is disrupting trade routes across the world – one of the examples that we could look at is the shift in the balance of trade within Scandinavia.

In 2018, dry weather and a water shortage led to a fall in the production of crops in the region. As a result, some Scandinavian countries like Sweden became a net importer of crops like corn and wheat. Until then, they had been net exporters of the crop. The country's wheat production fell to a 25-year low. The total harvest of cereal crops in Sweden fell 43% from 3.2 million tonnes in 2017. However, the demand for these crops has always been high in European countries. Source: https://www.ja.se/artikel/58675/swedish-cereal-production-on-lowest-level-since-1959.html

Let's quickly examine the challenges of such shifts in trade and the implications for logistics. As a result of this sudden imbalance, Sweden had to import these crops. The shortage of crop harvesting was about 1.4 million tones.

So how do you suddenly create the logistics for importing volumes of that magnitude? How do you make sure the logistics are efficient and nimble?

Sweden had challenges in allocating port capacity for the crop imports and in the logistics to integrate the crop imports into their distribution channels. That is the infrastructure that is needed in the future if countries have to adapt to changes in weather patterns. However, that is only part of the puzzle; even if the infrastructure is in place in anticipation, the supply chain and logistics will need to be operationally efficient to reduce the cost burden.

Sweden is a small nation whose consumer base is relatively easily managed. However, imagine if this happens to bigger countries. Even if they are industrialized, they would struggle to cope with the changes in global trade landscapes driven by climate change. This could trigger inflation due to rises in crop prices across the world. This was observed on a smaller scale in Europe last year, due to a fall in cereal crop production.

The key takeaway is that we will need to start becoming extremely efficient with our logistics. Technology can help us get there.

Blockchain technology is perhaps most useful in logistics and supply chain management. The initial enthusiasm for the technology happened within financial services, and several stakeholders viewed it as a store of value. However, without a clear global regulatory framework, that is hard to achieve and scale. While the technology is going through its "AI-winter" moment within financial services, perhaps what will transpire is the emergence of more mature Blockchain applications within logistics.

Tracking goods

Blockchain technology offers the ability to track goods in near real time. In a value chain with multiple players and several different handshakes required to move the goods to the next step, this ability adds efficiency to the process. The handshake mechanism offered by the technology can cut operational costs for all parties in the supply chain.

IBM and Maersk started their journey together in June 2016, in setting up a Blockchain platform called TradeLens. TradeLens offers supply chain transparency and helps the logistics industry to resolve issues due to data silos. TradeLens today has over half of the data on ocean container cargo.

As this network of logistics providers scales across continents, TradeLens can act as the global trade platform with open standards. This will make the shipping industry across the world more efficient by bringing in transparency about the movement of goods across borders.

Accenture has built a Blockchain platform for logistics that acts as an immutable record of supply chain transactions. The bill of lading (a detailed list of a ship's cargo, which acts as a receipt upon delivery) can be replaced and the network can act as the single source of truth for trade documentation. Transparency and the efficient completion of paperwork is the key takeaway here as well. There are other players like ShipChain, Microsoft, and Oracle Corporation who are working on transparency within logistics.

The food supply chain

Let's briefly discuss the need for Blockchain technology in a supply chain context. Blockchain can be used in scenarios where there is a need for a network of participants to authorize a transaction. These participants store a copy of the transaction as they act as nodes on the network.

In a supply chain scenario, this framework can be extremely useful as the stakeholders involved will register their transactions on the Blockchain. For instance, in a food supply chain where a farmer, a logistics provider, a broker, and a supermarket are involved, each of them will be a node. As the farmer hands over the crops to the logistics provider, there is a handshake mechanism that authorizes the exchange of the crop. The handshake can also include the process of checking the quality of the crop.

In due course, such an infrastructure will create a rich and transparent data ecosystem for stakeholders to make data-driven decisions. However, in a distributed database, where there is centralized control of this data, it may not be as effective. Having said that, public Blockchain applications have had their fair share of technical limitations, as discussed in previous chapters.

I have seen a few companies in the supply chain space use permissioned Blockchain. It is still early days to say one is a better route compared to another. However, we have seen enough evidence that public Blockchain ecosystems are yet to gain mainstream trust, therefore permissioned Blockchain could be a bridge. With that, let's now look at Blockchain applications in the food supply chain.

The food supply chain is a special case within logistics because it deals with perishable goods. Inventory management in this case is a lot more sensitive, as goods have a limited lifetime. As a result, we need to have an infrastructure that can manage inventory at a more granular level. Blockchain technology can help inventory management at a micro level.

Firms like Walmart, Unilever, and Provenance are using Blockchain to manage the food supply chain. In the case of the food industry, Blockchain can be used to track the history of transactions involving the food, all the way back to its source.

When inventory management happens, if food stock goes bad, it can be selectively destroyed. When the history of the food item is known, it can be tracked to the source to ensure essential controls are in place to ensure better quality in the future.

Food supply chains are also special because most of them involve smallholding farmers, who are currently being squeezed for margins by the logistics providers or other middlemen in the value chain. There are over 570 million smallholding farmers in the world who take up 75% of the world's agricultural land. The ideal scenario for these farmers would be to use technology and track the ownership of the food products and create selective transparency along the way about the pricing of the food item.

In today's world, farmers often don't have the data to assess the supply and demand for their crops. This cripples their ability to suitably price their crops and puts them at the mercy of the middlemen in the supply chain. However, this can change with the transparency created through Blockchain. The data on pricing can be provided to the farmer to ensure they are not being exploited.

Ownership is another aspect of the food supply chain that needs to be fixed. This can be categorized as blue-sky thinking, but in the food value chain, it is essentially a farmer selling his goods to the end customer. The supply chains of the future should respect and reflect that in the commercial constructs as well. The logistics providers, inventory providers, food quality auditors, and even the supermarkets, are just providing a service to the farmer to carry out that sale efficiently.

Therefore, if I am buying a box of oranges from Tesco, I am purchasing it from a farmer in Kenya. As a result, the money I pay to buy those oranges should mostly reach the farmer's pocket. There could be a pre-agreed commission distributed to the logistics provider for offering their service, and the supermarket for offering shelf space.

There are two fundamental differences between the way this model would work and the current model. One, the ownership of the food product is with the farmer until the consumer buys it off them. Two, payment for the food is almost instantaneous through the value chain. Both of these are technically possible using Blockchain technology and its smart contracts feature.

The benefit to the consumer is that they know the quality they are getting as soon as they know the provenance of the food product. Remember, this is how farmers used to sell their crops in the good old days in a farmer's market; the reputation of their produce would be a key aspect of their success or failure.

The new global food supply chain should be no different. Trust and brand should be as applicable to the Kenyan farmer selling their oranges in London as it is to the independent local seller in a small-town marketplace.

However, this model will need to be imposed on the food supply chain by the governments of countries. As there are several middlemen who will lose out, this is not easy to do for a private sector firm. A public-private sector partnership could deliver this model over a period of time. AgriLedger, a Blockchain-based company, is working with the World Bank and the government of Haiti to solve this exact problem.

The ownership model may be hard to change as the aforementioned middlemen will be unhappy with that. It will, therefore, be a slow transition to extend a new ownership model. Also, keeping the farmer as the owner of the food item until it reaches the customer, is more of a business model, process, and an operations question rather than a technological one.

But the immediate payment to the farmer should be possible straight away with the implementation of a Blockchain solution. In existing food supply chains, the farmer gets paid months after delivering the crops to the middlemen. Often, they can't afford the delay, and take cash from the middleman at a massive discount. This is because farmers cannot afford to run out of working capital. With immediate payments enabled, farmers should get their money within days, if not hours, of delivering the crop. This can only make it a healthier ecosystem, not just for the farmer, but for all of us.

Several other firms are looking at improving the food supply chain, but they are approaching the problem from a consumer's perspective. Walmart's Blockchain initiative provides consumers with information on the history of their food, from source to shopping basket. That is indeed a step forward, but the food supply chain needs a complete revamp and "from the ground up" thinking, not just transparency for the consumer.

Sustainable supply chains

In December 2019, I attended a conference on sustainable finance in London, hosted by Finextra. One of the topics that was in focus on the day was sustainable supply chains. Although it was a brief 20-minute speech, it got me thinking about both the necessity to make supply chains sustainable, and the outcomes it would have on our environment.

Let's take a food supply chain as an example. There are several key criteria we will need to look at to make sure that it is sustainable:

• Was the crop produced in a sustainable fashion? This raises more granular questions such as:
  • Was there any deforestation involved in procuring agricultural land for the crop?
  • Was the crop produced with sustainable irrigation techniques?
  • Were fertilizers used in producing the crop?
  • If fertilizers were used, what was the carbon footprint in producing them?
  • Were children employed to produce the crop?
• Was the crop transported in a sustainable fashion?
  • Was the crop packaged in a sustainable fashion? Were plastics used?
  • What was the carbon footprint of the logistics used to get the crop to the supermarket?

Some of these sustainable criteria for the food supply chain are already being audited, reported, and managed efficiently; however, they are all documented on paper. We will need a supply chain marketplace that sources data about all these aspects and uses them to create a sustainability score for every food item sold in a supermarket.

Therefore, when a customer looks at pack A and pack B of apples, they will have the ability to rank them not just on price, but also on the quality of the supply chain. Blockchain can help with filling a lot of the gaps in creating such a marketplace for retail customers to benefit from.

This can also be used for consumer goods. Unilever has been piloting Blockchain to add transparency and efficiencies to its supply chain. They are focusing on the account payables for their American supply chain, which is currently quite manual and inefficient.

A solution for that from Provenance, another Blockchain company, has been piloted to tag and track tuna from Indonesia. They have gone one step further to also capture and verify the sustainability claims of the supply chain stakeholders. This effort needs to be scaled across other food items, and even outside of food supply chains.

All of this information can then be provided to the consumer through a QR code, which, when scanned, will provide an end-to-end view of the supply chain and the sustainability score.

These methods have all been trialed by Unilever, Walmart, and Provenance, but the limitations of Blockchain technology are perhaps the reason why these solutions haven't scaled. As Blockchain emerges out of its winter hibernation, we should see more practical applications at scale.

Transport

The trucking industry is an example of where Blockchain can add value within transportation. Over $140 billion is tied up in disputes within the transportation industry. Payments take on average 42 days after an invoice is received. This is all due to the inefficiencies of the paperwork involved in the truck industry.

Moreover, about 90% of truck companies across the world own less than six trucks. This means the allocation of goods and trucks is another major overhead and results in half-filled trucks and operational cost leaks. When the truck industry is managed on a Blockchain, most of the contractual obligations can be laid out on a smart contract, and the payments can be triggered as soon as the criteria are satisfied.

A handshake mechanism to identify the end of a journey of the truck can be agreed, and when the smart contract receives that, it can trigger the payment. This will also help with the working capital requirements of these small truck owners. The Blockchain in Transport Alliance (BiTA) is an initiative that has members who cover over 85% of truck-related transactions in the world.

With the world moving toward same-day delivery models, it is imperative that the truck industry becomes extremely efficient. IoT sensors can be used in trucks to measure the volumes of freight and make the most of truck capacities. IoT can also help when the goods being transported are sensitive to temperatures.

A combination of IoT sensors and Blockchain technology can keep track of temperatures when pharmaceutical goods are being transported. If the sensors detect a change in temperature, Blockchain can trigger an alert, or charge any agreed punitive damages arising from that change in temperature. This will also reduce dispute scenarios as it will all be backed up by immutable data on the Blockchain network.

The performance of a fleet of vehicles can also be registered on a Blockchain. There are companies like CarFax, who act as intermediaries holding this data. However, when a buyer wants to know an immutable record of a vehicle's performance information, they should be presented with a verified set of data that will decide the price of the vehicle.

Much like several other industries we have touched upon, Blockchain has a $500 billion opportunity within the transportation vertical, according to Morgan Stanley. The challenge, however, is in the technology itself – both logistics and transportation can generate a lot of data.

If we used IoT to support logistics monitoring and measurement, that would add to the data volumes too. There haven't been promising implementations of Blockchain at scale that can handle such data volumes in real time. Until the throughput problem is solved, these use cases may stay in the pilot stages.

Vehicle manufacturing

Another key use case for Blockchain is acting as a register of vehicle parts. The entire manufacturing process can be registered on Blockchain, including the source of raw materials, suppliers, procurement, and manufacturing steps. The manufacturing steps involved could be monitored with machine-level data tracking using IoT devices. According to a Gartner report, the manufacturing industry could see a cost-saving of $176 billion by 2025 using Blockchain technology.

All this data should be able to provide a traceability mechanism for the production line of vehicles. Sensors can keep track of the quality of the vehicle parts once they hit the road. The performance of the vehicles can be measured and managed, as discussed in previous sections, using IoT devices too. Therefore, when there is a faulty part reported, the Blockchain system will know how and where to source it immediately.

As a new part is provided as a replacement, a handshake mechanism using tags can ensure that the replacement part was sourced from the right vendor. In doing so, the health sheet of the vehicle is built from a very early stage and through its lifetime. The average cost of a product recall in manufacturing is $8 million. This cost can be massively reduced using Blockchain for the end-to-end traceability of parts.

A study by Capgemini interviewed 447 manufacturing firms using Blockchain and identified that over 60% of them had already changed the way they were interacting with their suppliers. Despite all the benefits, there are initial barriers that the technology needs to overcome to see mainstream adoption.

The Return on Investment (ROI) for the technology and operational overhauls needed is unclear and often can be a major roadblock in big organizations. Identifying sponsors within an organization without a clear ROI narrative can be challenging. The other key challenge for adoption as per the Capgemini report is the interoperability (or the lack of it) of Blockchain with legacy systems and processes within these big manufacturing firms.

Apart from the technology limitations that we see with Blockchain, organizational challenges still remain. Mainstream adoption can only happen once these two roadblocks have been cleared.

We have now covered the transportation and logistics use cases of both quantum computing and Blockchain. As you can see, these two technologies have the potential to lead us into a far more efficient, transparent, safer, and better-connected world.

Conclusion

In this chapter, we have covered the use cases that quantum computing and Blockchain could deliver within logistics. This is an industry where there are several inefficiencies due to a lack of digitization. As a result, it could be a green field for technology to create value in.

In the case of quantum computing, the major use cases we touched upon are efficient traffic management systems. We discussed the use of quantum computing when connected cars become more common. With today's infrastructure, traffic management can be achieved using telecoms data/geospatial data.

We also touched upon Airbus' attempts to add efficiencies to the aerospace industry. Flight physics can be modelled more accurately using quantum computing than with classical machines. As a result, aerodynamics around the wings of the aircraft can be modeled and fuel efficiencies can be achieved by optimizing flight take-off and landing. In a world being badly hit by climate change, every single bit of saving on carbon emissions can help us.

Moving onto Blockchain, we saw how it could be used within supply chain management and traceability. The food supply chain use case is especially interesting as it can be both beneficial to the consumer and the farmer in many ways. We saw innovation that caters to both ends of the supply chain.

Finally, we also touched upon how Blockchain can help with transportation, manufacturing, and the truck industry.

The applications of these two technologies are huge, and the potential value addition can't be exaggerated either. However, both these technologies have some major challenges to overcome before they see mainstream adoption. They should be able to co-exist in a business environment, as the use cases are rather complementary. In the next chapter, we will look at how quantum computing and NISQ can be used in the field of chemistry.