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Why Blockchain for Trucking?

Photo courtesy of Twitter

One of the outcomes of 2020 is it acted as a catalyst for digital transformation.  As consumers shifted to online channels, we experienced five years of eCommerce growth in less than a year.  It’s created a dynamic tipping point for supply chains, which are being transformed in months instead of years.  A January 16th Economist article* wrote there are positive signs indicating a new era of meaningful technological progress is upon us.  “In the third and fourth quarters of 2020, America’s non-residential private sector spent more on computers, software and R & D than on buildings and industrial gear for the first time in over a decade.”  The circumstances of our new normal are demanding same day shipping with lower costs in moving freight.

Transportation companies are embracing digital transformation to help them meet the intensifying demands of customer expectations and an increasingly competitive marketplace.  Shippers are looking for new ways of working that enhance agility, resilience and sustainability, while proactively managing rising costs.  As the CV-19 pandemic disrupted supply chains, many logistics companies adopted enterprise resource planning (ERP) systems and cloud-computing capabilities.  It created an opportunity for these businesses to capture real-time, contextually-relevant information and use it to improve operational efficiency.  In logistics, data sharing across the supply chain can enable higher levels of transparency, traceability and increased automation of commercial processes.  Technological innovations that once seemed revolutionary are now becoming mainstream.  

The Promise of Blockchain

One of the challenges of the transportation industry is a reliance on paper-based, manual processes.  It’s resulted in processing and administration consuming 20% of the trucking’s overall costs.  Blockchain is a peer-to-peer network that connects trading partners directly.  It offers an end-to-end solution for companies to document and record transactions between trusted parties in a secure and permanent way.   Sensitive data can be shared with third-parties using the highest level of encryption and data protection, which improves service efficiency and quality of information available for decision-making.

A blockchain is valuable because it comprises a chronological string of blocks integrating all input flows and capturing them as a record of the digital transaction.  Each block is encrypted and distributed to all participants who maintain their own copies of the blockchain.  When blockchain record keeping is used, assets such as units of inventory, orders, loans and bills of lading are given unique identifiers.  Additionally, participants in the blockchain are given digital signatures, which they use to sign the blocks they add to the Blockchain.  Every step of the transaction is recorded as a transfer of the token from one participant to the other.   Since participants have their own individual copies of the Blockchain, each party can review the status of transaction, identify errors and hold counterparts accountable for their actions.

One of the advantages of blockchain is that you can’t modify the data in one block without modifying the entire network’s information.  The nature of the platform means that transactions can’t be deleted or altered without notifying all participating members.  It creates a higher level of data standardization, transparency and security, where the entire blockchain network contributes to the data validation process.  It’s possible to calculate shipping charges in real time, complete with automated checks and balances that data generated through IoT sensors.  Demurrage fees can be triggered by GPS data from a truck that passes through a geofence.  Final invoices are automatically fed into the enterprise planning system (ERP), which initiates payment processing.  

Smart Contracts Cut Costs

One of the challenges of the transportation industry is the reliance on paper-based, manual processes.  Maybe the single biggest benefit of blockchain is automating tasks that typically require middlemen to validate.  Legal contracts can be embedded with a type of self-executing computer program called a smart contract.  As an integral component of a blockchain-based system, smart contracts can automatically enforce stakeholder agreed rules and process corresponding steps of fulfillment.  Once launched, smart contracts are fully self-executing.  When contract conditions are met, pre-specified and agreed actions occurs automatically.  

With blockchain we can envision a supply chain in which contracts are embedded in digital code, stored in a secure and transparent database where they are protected from deletion, tampering and revision.  In this world, every agreement, every process, every task and every payment would have a digital signature that could be identified, validated, stored and shared.   Smart contracts completely eliminate the need for all of these administrative steps, cutting costs and virtually removing all possibilities of error.  Because physical paperwork is largely unnecessary, blockchain essentially removes the need for third-parties to verify, coordinate and record transactions.   The goal of smart contracts is to speed up delivery of goods to allow for faster collection of money with fewer disputes.

Walmart First

Walmart Canada is supported by 60 carriers that move approximately 500,000 loads per year.  During peak shipping periods it was disputing 70% of related invoices.  Billing issues were so commonplace that weekly meetings were necessary to resolve them.  Blockchain held huge potential to optimize costs and time associated with trade documentation and administrative processing for freight shipments.  Shared blockchain technology makes it possible to synchronize logistics data, track shipments and automate payments without requiring significant changes to trucking firms processes or information technology systems.

In collaboration with DLT Labs, Walmart Canada implemented a Blockchain-based freight and payment network last fall.  They focused on food tracking, traceability and safety temperature sensors to document storage conditions and commit this information to the blockchain record.  Each time a carrier takes a load from Walmart, the Blockchain ledger collects data from three sources: the carrier’s management systems, Walmart’s management system and objective sources such as truck sensors and fuel purchasing systems.  They know the exact history of the shipment as it’s being delivered.  

Blockchain allows Walmart to build trust with its transportation partners, eliminating time-consuming freight bill audits.  Bison Transport was the first to roll out Walmart Canada’s blockchain solution, eliminating long standing billing issues.  It calculates shipping charges in real time.  Disputes with third-party carriers have plunged 97% in a matter of months.  Blockchain delivers a single source of truth reflecting the most up-to-date and accurate information.  It aligns shipping partners in a shared accountability standard.  

Final Thoughts

Blockchain technology can significantly reduce shipping delays and prevent fraud of millions of dollars.  It acts to ensure the integrity of product being transported and creates a secure record attached to the shipping process.  It’s replacing the traditional bill of landing, providing real-time location data and labels an asset with a digital fingerprint every time it is handled.  In our business, we can envision a day that a commercial vehicle’s service record including maintenance and safety record will be available on an open and trusted digital platform.   

When a company wants to purchase a second-hand vehicle, the blockchain will validate and store all the performance history without the need for a middleman.   A record of parts installation and warranty work undertaken will be placed on the secure, permanent digital ledger.  This increased transparency provides a reliable way to determine real value with the factors present necessary for an informed purchasing decision.  

As with any new technology, use cases will continue to evolve with widespread adoption.  Companies using blockchain in their logistics solutions will capture the value inherent in sharing data to foster visibility, traceability and efficiency.  The most important benefit may be fostering a stronger environment of transparency and trust among supply chain partners.  As our new normal continues to evolve, we’ll come to realize the promise of blockchain digital transformation.

*January 16, 2021 – Economist – “Why a Dawn of Technological Optimism is Breaking”  

Photo Credit: iStock

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View Comments (2)

  • "It's good to see journals and articles being published on future skills such as blockchain. Would love to read more on this.

    Hope to revisit soon!"

  • The transportation industry can highly benefit from faster and more efficient freight and delivery by utilizing blockchains for smart contracts and approvals. It also reduces the processing time for the supplies in the checkpoints.