Block by Block: How blockchain will transform trucking
TORONTO, ON — The business of moving freight generates a mountain of paperwork. Contracts establish rates and delivery requirements; bills of lading are signed and filed; invoices are generated to request the cheques that need to be issued and cashed.
Blockchain – essentially a form of digital ledger — promises to reshape how all these transactions take place.
Imagine a day when payments are instantaneously issued the moment shipments are delivered, or demurrage fees that are automatically calculated and charged if equipment is delayed at a loading dock. Small third-party logistics companies or freight brokers could be bypassed altogether, rather than leaving such businesses to scrape revenue off the bottom line.
Morgan Stanley’s analysts expect such online transactions south of the border will be worth about US $500 billion in just two years, affecting everything from freight forwarding to fuel purchases.
IBM and Walmart are creating the Blockchain Food Safety Alliance to track food shipments, ensuring that goods are properly handled on their journey. And Maersk is establishing a blockchain to oversee the moves of millions of shipping containers, after determining that a single shipment from East Africa to Europe can involve no fewer than 30 different entities and more than 200 separate interactions.
What is blockchain?
Most of the news about blockchain has surrounded the trading of so-called cryptocurrencies like Bitcoin, which can be exchanged without involving a traditional bank. But it’s more than that. Blockchain – which IBM describes as the operating system that makes Bitcoin possible — is built around timestamped digital records known as blocks. Users can view or add pages of data, but not actually overwrite or delete any information that’s already there. This makes it possible for people to approve and trace each and every step in a business transaction.
“It’s going to simplify fleet operations,” said Fleet Complete Chief Strategy Officer Sandeep Kar, during a presentation for the Fernandes Hearn law firm in Toronto. Fleet Complete expects the options of automated tolls, instantaneous payments, and smart digital contracts to emerge as early as next year. By 2022 the available options could expand to include the better tracking of cargo security, and transparent pricing. As early as 2025, blockchain could be used to seamlessly track vehicle service and maintenance, fleet capacity, and compliance alike.
Blockchain in Trucking
Hundreds of manufacturers and shippers have already applied to join the Blockchain in Transport Alliance (BiTA), which wants to establish standards and educate those responsible for moving freight.
“It’s the largest single commercial blockchain alliance in the world,” said managing director Craig Fuller, who is also the Chief Executive Officer of TransRisk. And the alliance’s members already include known names like UPS, TMW Systems, Bridgestone, and the massive carrier U.S. Xpress, among others. Together they account for about 85% of all truck-related transactions in the U.S.
“It can potentially eliminate the need for intermediaries, and that’s what makes it really powerful,” he added.
“Blockchain has multiple applications in the logistics industry, especially related to supply chains, insurance, payments, audits, and customs brokerage,” said Linda Weakland, UPS direct – enterprise architecture and innovation, when the business joined the alliance last year. “The technology has the potential to increase transparency and efficiency among shippers, carriers, brokers, consumers, vendors, and other supply chain stakeholders.”
Drawing on “smart contracts” coded by software engineers, blockchain makes it possible to support an array of instant transactions.
Picture a truck that is held at a loading dock for seven hours, Fuller explained. Detention or demurrage fees could be automatically triggered by matching the approved contract terms with the telematics data that confirms where a truck is at a given point in time.
Shippers would no longer sit on payables simply because an invoice is off by a penny a mile, he added. The chain of blocks would determine the price that was agreed upon by everyone involved, approving payments accordingly. “It becomes very expensive for the fleet to sit and let that cash be held,” he said.
The blocks of data could even transform truck sales, Fuller said. Picture a pair of virtually identical trucks that are put up for sale. One is from a massive carrier like JB Hunt, and the other is from a small unknown fleet. A buyer today might agree to pay more for the truck from JB Hunt simply because they are confident in the carrier’s maintenance practices. “In a blockchain world, that doesn’t matter. The brand doesn’t matter,” Fuller said. Everyone involved in the transaction would be able to see all the relevant maintenance records on each truck.
If a shipment of food spoils in transit, reefer records in the blockchain can help determine if trailers maintained the temperatures that were agreed to in the contract. Fuel prices can be automatically calculated based on the current price listed by a third party like the Oil Price Information Service (OPIS). The opportunities seem endless.
“The brokers have the most to lose,” Fuller said, speaking about those who do transactions over the phone and sit on cash for 60 to 90 days. “It levels the playing field between a Werner and U.S. Xpress and Jim Bob because code does not care [who is involved].”
There are still challenges to be overcome, of course. Kar referred to a lack of expertise and trust in the system, and there needs to be more “cryptocurrencies” that trade hands in such transactions before being changed into traditional funds. For that matter, there is no central authority to control the value of these cryptocurrencies. And the process doesn’t require third parties who would otherwise be there to protect against risks.
But the blockchain is being built. Block by block. And it will connect businesses like never before.
How blockchain could be used in trucking:
- Utilizing assets – Systems could forecast freight demand, and determine the best-possible routes for loads.
- Auditing and regulatory demands – Clearly recorded transactions can simplify audits and confirm compliance.
- Monitoring drivers – More real-time insight into driver performance, better sharing information with shippers and regulators, and simplifying insurance claims after collisions.
- Tracking assets – Greater insight into vehicle and asset locations, better load planning, and real-time status information available to shippers, carriers, and customers alike.
Source: Fleet Complete
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