"Uberization" will not change the 3PL industry, but blockchain will

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Commentary

Much has been said about the impact “Uberization” will have on the trucking industry, but at the end of the day, these digital brokers are just brokers with technology. What if the future of freight was not a mobile app freight broker, but rather a blockchain-enabled digital 3PL?

To make it easy to understand how this technology could work, I produced an example:

Tech Freight (our broker) and JB Express (our carrier):

Tech Freight has a load that is going from Chicago to Dallas. It posts a smart contract load offer on a blockchain enabled load board.

Tech Freight has created a very demanding set of requirements for handling this load. In this case, we are dealing with a load of high-value goods. Tech Freight wants instant updates every 15 minutes, from tender to arrival. They are looking for team transit and want to ensure that the carrier has two drivers in the truck- not just one. They require $500k in cargo insurance and $2M in vehicle insurance.

JB Express bids on the load for $2000. Instantly, Tech Freight knows that JB Express is qualified to meet their stringent requirements.

Tech Freight and JB Express know nothing about each other, but in a blockchain world, they know everything they need to know. JB Express’ carrier underwriting file has been written into the blockchain. Tech Freight has everything they need before the load is tendered and they don’t have to worry about JB Express creating fake carrier paperwork, because it has been validated by the blockchain. Tech Freight has a copy of JB’s Insurance info, Safersys record, operating authority, etc. Tech Freight also knows that JB has an ELD device that is able to transmit location Information in real-time and circle of service information.

JB has its own set of requirements. It wants to be paid detention after two hours without having to collect it, fill out forms, or even call in. It wants to be paid a TONU if Tech Freight cancels it and it wants to paid a fuel-advance as soon as the load picks up and paid in full the instant the consignee signs the POD.

JB sees that a shipper has posted a load (at this point, they don’t know it’s Tech Freight- they only know that this shipper has a contract that meets BiTA standards and instantly knows what is required of them- no funny business and Tech Freight can NOT change the terms of the contract after it is accepted). JB bids on the load.

Tech Freight sees JB’s bid and immediately accepts it. Tech Freight also knows that JB will do everything required because it has been written into the contract, or he will pay a penalty. If JB fails to pick-up on time, not only will Tech Freight know that, but they can also penalize JB immediately financially. If Tech Freight fails to load the truck in time or were to cancel the load after tender, JB would be paid detention or a TONU.

As soon as the load is tendered, Tech Freight is notified that JB has accepted it. The load gets assigned to a truck and Tech Freight is notified of what truck number is coming (and because JB is rocking Blockchain- Tech Freight has instant info on the actual driver of the load- not just the company);

As soon as the JB’s truck arrives, Tech Freight is notified that he has arrived. It takes 4 hours to get loaded, so JB instantly receives the detention on the load and the 30% cash-advance, the moment the truck leaves the lot. Throughout the process, JB’s ELD device is sending Tech Freight  updates every 15 minutes. JB’s truck is running late, so Tech Freight is paid a penalty by JB of $100 for failure to arrive on-time.  

JB arrives at shipper a few hours late, but it still takes the consignee six-hours to unload the freight. JB is paid 4 hours of detention at $50/hr. As soon as JB gets the POD, they receive payment in full for the load.

The assumption to someone that has never studied markets is that this would “destroy“ the freight brokerage industry, but that is not the case at-all. The fact remains that the vast majority of carriers lack the ability to develop their own digital technology and require service providers to build these offerings for them. The likely winners in all this are the digital brokers and 3PLs that have a deep tech stack or are able to ingest this technology into their own systems. They will be required to partner with a number of technology providers, using consistent message protocols and standard.

All of these independent disparate companies will be writing universal protocols to a blockchain, where anyone can take advantage of the framework and create their own contracts, using industry-wide accepted standards. 

We are likely to see a future where different digital 3PLs, shippers, and carriers create different standard smart-contracts, each with its own niche in structure. This is great. This means that the competition for the next generation of brokerage will be less dependent on the personalities and drive of humans and more on the digital 3pl’s ability to engineer blockchain contracts and use machine learning to affect outcomes.

The companies that are constructing this future have formed an alliance called the Blockchain in Trucking Alliance (BiTA) and over 300 companies have applied for membership. Any company that is involved in the freight business are encouraged to join and participate. 

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