Blockchain – How Can We Use it in Transportation?

The last two articles have looked at how a Blockchain works.  For any of you that missed those articles, a high level summary is that a Blockchain acts as a shared ledger system that tracks and monitors all transactions.  Every transaction is interconnected to both the previous and the subsequent transactions using mathematical formulas.  Because of this interconnection, any changes or revisions to the ledger are obvious as certain checksums will no longer match the original transaction.  This results in all parties to the ledger having a high degree of trust in the data because of these checks and balances.

Now for the money question – what does this mean to the transportation industry?

In short, accountability and transparency are two of the largest items, and they both contribute to enhancing the level of trust between all parties to the transaction.

Fraud Prevention

Fraud detection is a very basic thing that a Blockchain can prevent.  Every transaction takes place is visible to all parties to the Blockchain and nothing can be removed.  As a result there is a high degree of accountability provided.  Any changes or revisions will be part of the record.  This transparency in turn removes the opportunity for fraud.  As an example, unauthorized double brokering (or if the contract forbids it, any brokering) could be eliminated.  There would be a clear line of events showing the tendering of the load to a carrier or logistics company.  If that company decides to broker the load out, the carrier it goes to becomes part of the record and it will be visible to all parties.  If that carrier then decides to double-broker the load, it will become obvious to everyone fairly quickly.  So, that company that took your load and then turned around and gave it to someone else, just got caught.  You as the original carrier/broker may decide to allow this, but you get the choice, you keep control and the entire process plays out in a transparent way.  Now the shipper knows what carrier will be coming to load their product and who will be making the final deliver to the customer.   Additionally any carrier selection requirements (insurance, safety record, etc.) can be cross checked to ensure that any carriers used by the broker meet the same qualification standards as the party that the load was originally tendered to.

Supply Chain Transparency

A further use will be maintaining compliance with the myriad of new rules and regulations such as FSMA (Food Safety Modernization Act).  The entire chain going from production on the farm, to the processing plant, to the truck, and finally to the distribution center could all be tracked.  Any tracking or monitoring data could be tied into the Blockchain (for example, if you have a reefer with a mobile tracking system that can track the temperature of the load).  Additionally the condition of the load can be tracked at each hand-off.  What this gives is clear line of evidence at to where any issues may have occurred.  Consider what would happen if you were hauling a load of fresh meat and the final receiver rejects the load.  If the data your company provided to the Blockchain shows the condition that the product was loaded onto your trailer and that your temperatures did not deviate from the shipper’s instructions, then everyone will have the evidence that shows that the trucker did their job properly and thus should not be the target of a claim.

For standard dry freight, there is now a clear trail of the condition of the merchandise as it goes from shipper to cross-dock and so forth.  For people doing LTL (especially if you do any interlining) this will be of great importance when it comes to OS&D.  However, it will mean that your dock staff need to take even greater care in doing piece counts and inspecting the condition of everything that enters and leaves your dock.  In fact photographing the condition of the goods may become an additional step in providing evidence.  You may even consider going to the step of having your drivers photograph the condition of the goods at pick-up. This will all get entered into the Blockchain and all parties will get to see where any claims were caused and deal with the correct party.  Some skids of product could be handed off to multiple carriers on their way across the country – possibly more if the originate in Canada or Mexico.  This eliminates unnecessary “he said, she said” disputes made by an end receiver.  A quick scan through the ledger will show the condition as it passed through each carrier and/or terminal.  Additionally this will require us as an industry to put further pressure on shippers to allow our drivers onto docks into order to inspect both the condition of the freight and how it is secured.  However, if a shipper refuses to allow this to happen and seals the trailer themselves, that part of the transaction will be recorded and becomes part of the chain.

The big picture view is that while there will be additional accountability on our industry, but it will be a shared accountability.  If a carrier is already doing things right, this Blockchain WILL improve their profitability.

Blockchain – What is It and What Does It Mean to Me?

There has been a lot of buzz lately about “Blockchains”.  You may have heard about them in association with Bitcoin or referring to them as “the new internet” or a “disruptive technology”.  Over the next few weeks we will take a look at what they are and where they may fit into your company’s future.

For those of you not completely familiar with it, Bitcoin is a virtual or cryptocurrency that has no intrinsic value and unlike the Dollar or Euro, there is no government or commodity that acts as redemption base for it.  It has no physical form and exists only in the decentralized Bitcoin network.  The obvious question is “how does it have any value?” The answer is that there is a sector of the population that has gained a level of trust in how Bitcoin is administered and the level of risk it carries in terms of holding its value.  A second question is “how do I ensure that this cryptocurrency has not been double spent?”   With paper currency it’s simple – you either have a dollar in your wallet or you don’t.  With a payment card, you either have the money in your account (or available credit) to be able to cover the transaction or you don’t.  However, each of these methods has a cost and some level of inefficiency to them.  If I pay in cash there is the risk that someone may mug me before I get to the store or that I might lose my wallet.  With a payment card there is the risk that someone may have skimmed my information and is making unauthorized transactions out of my account.  These are some of the problems that a Blockchain is designed to minimize.

Don and Alex Tapscott, authors of Blockchain Revolution (2016), have referred to a Blockchain as “an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”   Let’s just take a minute to let that sink in.  This is saying that a Blockchain could be used anywhere that a current database is used, especially anything of value that needs to display a level of trust and value.  But as one of my former professors used to say – “so what” – we all have invested large amounts of capital into various database applications that run our operations, accounting, payroll, etc and for the most part they are working just fine, thank you.  Why would I want to change?  To figure that out, let’s take a look at how a Blockchain works.

Consider a spreadsheet with all of your transactions on it.  Now picture that spreadsheet duplicated across all of the computers on your network in a way that each spreadsheet is continually updated each time a transaction is made.  At a very basic level, this is what a Blockchain looks like.

Information in a Blockchain exists as a shared and continually reconciled database.  The Blockchain is not stored on any one computer, allowing for instant mitigation against a single piece of hardware failing.  Because it is not stored in a single location, the transactions are public and instantly verifiable.  Because it is not centralized, there is nothing for a hacker to corrupt.  Further, by being hosted by multiple computers the data is easily accessed by all users.

Going back to the spreadsheet example, today most databases are like an Excel spreadsheet in that you can’t have two users making changes to it at the same time.  One person “locks” the spreadsheet, makes their changes and then sends it to the other party and has them make revisions.  The first party has to wait until they receive it back so that they can make any further revisions.  That is how standard database technologies work – the record has a lock put on it and no other user can make changes to that record until the lock is removed.  A Blockchain is more like Google Docs (or Google Sheets) in that both parties have access to the same document at the same time and that single version of the document is always visible to both of them.

Think of all of the applications where this sort of sharing could create huge efficiencies.  In our industry, just think of how many times your employees have to wait for a customer to send them revised orders when a stop location or a quantity is changed or if you got waiting time charges out of them.  How much more efficient would it be to just have one “living” document so that changes can be seen instantaneously?  You don’t need a Blockchain to get that sort of sharing, but they do provide a number of advantages towards facilitating it.

A Blockchain has a built in robustness due to the storing of blocks of information that are identical across the network.  As a result, a blockchain can’t be controlled by a single entity and it has no single point of failure.  TEDx speaker Ian Khan has said that “as revolutionary as it sounds, Blockchain truly is a mechanism to bring everyone to the highest degree of accountability.  No more missed transactions, human or machine errors, or even an exchange that was not done with the consent of the parties involved.  Above anything else, the most critical areas where Blockchains help is to guarantee the validity of a transaction by recording it not only on a main register but a connected distributed system of registers, all of which are connected through a secure validation mechanism.”

Blockchain networks live in a state of consensus as it automatically checks in with itself every 10 minutes and reconciles every transaction that happens within that interval.  Each of these groups of transactions is called a block.  Two important things come out of this.  First the data is transparent because it is imbedded within the entire network.  Second it eliminates corruption as altering any unit of information on the chain would require a huge amount of resources to override the entire network.  Every transaction gets a timestamp record that is “hashed” into a chain of proof of work that can’t be changed without redoing the proof of work.  This “hash” is a link to a previous block.  To alter a block means you have to alter all of the subsequent blocks because of the ties between them.  It would also require the collusion of the majority of the network.  This results in a transaction ledger that is effectively permanent.

There are two different types of Blockchain that can exist.  First is a public or permissionless one similar to what Bitcoin uses.  Alternatively you can have a permissioned (or private) Blockchain.  A private Blockchain does have a few limitations such as reduced transparency due to the validators being vetted by the network owner. They also have a reduced network effect because they are by definition of a finite size as the network owner only allows the users that they want to access the network.   A potential risk of a private Blockchain is that it reduces the number of machines that a hacker would need to take control of to achieve a network majority for any changes.

Each computer on the network becomes a node and automatically gets a copy of the blockchain.  This allows the node to validate and relay transactions.  This feature is what makes it a decentralized technology.  As a result, transactions are done on a user to user (or peer to peer) basis.  This allows for mass collaboration – in effect think of a Google Doc that has thousands or millions of people using it simultaneously.    How one can leverage that ability is what we will look at next week.

Blockchain: A Cure (in part) for Detention Woes?

Detention continues to be a major issue plaguing the trucking industry. Although some fleets report no problem securing accessorial revenue to offset their detention time, many (especially smaller fleets) have communicated challenges asking for (and collecting) detention revenue. For the smaller fleets, many feel they are at the mercy of the large shippers or 3PL’s. Sure, you can ask, but it’s going to delay the final payment of the freight bill (and that still won’t guarantee the detention revenue is fully collected).

Part of the issue, as I interpret it, is that many companies (on both sides) are operating with an incomplete set of data. The solution to this issue (in part) could be the introduction of Blockchain technologies into the supply chain. Blockchain is the technology which allows Bitcoin to exist, a ‘virtual ledger’ that clearly defines ownership and prevents fraud, while also eliminating the need for a trusted middleman (e.g. Bank, Trust Company, Custodian).
Blockchain is now being used to add transparency and insight into the global supply chain. As a perfect example of how Blockchain works, and the practical application in transportation, here is a short video by IBM:

At it’s core, Blockchain is a distributed ‘ledger’ in which history cannot be modified, but allows for chains of information to be added, included ownership. Parts, or all the information can be shared between many parties, without the need for a third-party intermediary.

Although this technology (as described in the video), will provide significant added value to the supply chain, the one specific item it will eliminate is the conflict between the trucking company and the shipper about detention revenue/time owed. If the contract clearly defines when, and how much detention revenue will be applied (communicated via the described Smart Contract), it eliminates the gray area that is currently driving down the margins of many trucking operators, who deserve this compensation in return for lost productivity.

Going forward, we will be providing focused updates on Blockchain, and its future in trucking, including areas which may potentially increase the potential liability for carriers.

RADAR, LIDAR and beyond……

To start the New Year, we wanted to take a look at some new and upcoming technologies that will eventually benefit all of us. We have all seen reports of driverless transports as a way of the future but how does that technology affect us today? The reality is that autonomous vehicles will eventually arrive but it will be at least 10 years before they are truly driverless. A recent incidents with Tesla’s auto drive system as well as the Google car being involved in a crash have put a bit of a reality check on some of the autonomous vehicle boosters. We see this as part of the future but it’s also not going to be a quick as some would like. (more…)