The word blockchain has been thrown around a lot lately, and many in trucking are wondering what all the fuss is about. It’s not something they have seen yet, and it’s not something that anyone can buy – yet. That is quickly changing as evidenced by the interest in the Blockchain in Trucking Alliance (BiTA).
BiTA says that since its launch in September, more than 200 companies have expressed interest in joining the group which seeks to promote standards and education around blockchain in the transportation space. One of those companies that did join is TMW Systems, which itself is building blockchain-enabled software.
Blockchain is a “peer-to-peer electronic system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party,” according to a slide that Timothy Leonard, EVP & CTO of TMW Systems, showed during a media briefing on TMW’s efforts Friday afternoon.
One thing blockchain is not, Leonard says, is Bitcoin, although they are often confused. Blockchain is the technology that cryptocurrencies such as Bitcoin and Ethereum trade upon. Some have compared blockchain to the internet in the way that the World Wide Web allowed information and data to move from one person to the next through the use of websites.
During the presentation, Leonard noted that TMW has been working on blockchain projects for 9 months or so and hopes to have a couple of blockchain-based products on the market sometime in 2018. But while blockchain can be an impressive technology, Leonard believes the real value is in what it brings to businesses.
“A lot of individuals are talking about the technology, which is very good, but what they are leaving out is the business side of it,” he said.
Leonard provide a slide that showed the evolution of information systems in the trucking space. It includes the transition from EDI-based systems to the current standard of API. “One of the things that EDI and API have not done is build that trust [between parties],” he said. “The blockchain has started putting back in what has disappeared in the past 20 years and that is the relationship between carrier and shipper.”
Leonard explained that a blockchain is a ledger system – similar to a database – that connects transactions while providing for a distributed system in which no single authority owns the network or controls the transactions.
For instance, TMW offers its Engage.Bid platform, which allows for shippers to upload an RFP and carriers to bid on that process. That platform builds off its Bid platform launched about 8 months earlier. Leonard sees this system being on a TMW blockchain at some point, perhaps by next year. Even though TMW would host the chain, it would not own the chain, and would only serve to track the contract as it moves through the process. It would not be involved in the process of actually moving the cargo.
In this way, the blockchain provides levels of security and trust. As the blockchain monitors the transactions, it cross checks each transaction against known rules and regulations, such as federal rules governing commerce, and once those requirements are met, the transaction block moves along the chain.
“That process of getting Bid out there allowed us to start working on blockchain,” Leonard said.
Blockchains will also feature smart contracts that execute automatically. This helps speed up the entire process, from the time an order is placed to carrier payment.
TMW is already running tests of its blockchain programs with select carriers. “We believe we’ve cut down to 7 days from 21 days” the time it takes to execute a transaction, Leonard noted. He added that carriers could be paid almost immediately through smart contracts and blockchain.
Currently, TMW is working in three areas when it comes to blockchain: RFP, bids and awards; EDI transactions; and parts warranty and vehicle service records. Areas of future blockchain work will likely include HOS, fuel tax and analytics; temperature monitoring and reviews (through third party integrations); invoice and settlements; proof-of-delivery (including imaging products); and GPS and sensor data from vehicles and the Internet of Things.
Just in the RFP process, Leonard said TMW looked approximately 100 customers and 98% of them were using some form of manual processes. He believes that by putting all of these processes on the blockchain, TMW can get payment time down to 24 to 40 hours.
To illustrate how blockchain works, Leonard provided two examples. The first is a simple location update structure. In this scenario, a dispatcher could make a manual check call to a driver and input that information in a TMS system (blockchains are not dependent on specific TMS systems, Leonard said, so parties do not need the same systems). Also, the truck, using GPS data, could automatically send in its own check call. Either process – or both – enter the blockchain which builds a “block” each time a check call is made. Those blocks are added to the overall chain, which sends the information along to everyone on the chain, including the shipper and broker who now know the location of the vehicle.
In the second, more complicated scenario, a shipper has a load to move. This process would take 8 steps to complete and may involve dozens of parties. The shipper would upload their RFP to the blockchain using their “public key,” which is equivalent to a passcode. Each party in a transaction would need to know the key to view the blockchain. Carriers would receive the block with that RFP and decide whether to make a bid for the contract. All carriers interested create their bids and submit them to the chain. Each carrier would also have their own private key. The shipper is notified that bids have been submitted, it picks one and the carrier accepts the bid.
In a larger blockchain, that record of transactions would continue to include pickup, transit and delivery information for the load as well as anything that occurs en route. Using the smart contract, a carrier is automatically paid once the blockchain verifies all conditions of the delivery have been met.
Leonard noted that incorporating this process with load boards that handle 500,000 transactions a week could save the industry between $60 and $80 million in costs.
“It would allow more freight to move and to move quicker with fewer people,” he said.
Further enhancements could incorporate things like weather data and traffic data or other social data into the blockchain to improve operations.
Leonard added that the benefits of using blockchain in transportation include improved visibility within the supply chain and a reduction of unwanted inventory and costs as a result; faster payment processes; accountability; and record provenance that includes encrypted transactions that are logged and verified.
TMW is working on a contracted truck services platform now that ties into its Bid platform and hopes to have its first blockchain product in the market sometime next year.
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