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FEMA relief is the perfect use case for blockchain

If there was ever a use case for blockchain, it is in disaster relief with FEMA. Hurricane relief logistics is among the most challenging projects any logistician will face.  The confusion, lack of organization, inexperienced logisticians running ground logistics, and coordination (or lack of) between government agencies and private contractors creates a very chaotic environment. Supplies are coming in from all over North America and situations are changing on the ground in real-time. Combine this with the immediate need to help people, the influence of politicians which are under the gun, and the sensational reporting by the media, you are going to have a ton of problems that blockchain could address.

To understand this, let’s look at what a disaster relief project would look like with blockchain applications being implemented.

First off- the funding of relief.

Insurance companies have been developing pilots to create blockchain products that mitigate fraud and accelerate pay-outs. While FEMA is not an insurance company, it serves a similar role as an appropriation fund for federally declared disasters. The agency handles billions of dollars in payouts each year. Imagine a world where FEMA implemented a blockchain smart contract that paid out when a hurricane hit and accelerates the amount of money based on the size of the storm itself. Once the hurricane hits landfall, the smart contract would automate payment to the state and municipal governments to accelerate the process of providing relief supplies. Insurance companies and flood insurance carriers would benefit from a similar offering.

Property records could also be held in the blockchain. One of the things that inevitably happens during a hurricane is that some people lose most, if not all of their worldly possessions. They also happen to lose personal records and documents that prove identity. With blockchain, this information could allow people to keep records without depending on a centralized government server or having documents in a house that is now unrecoverable.

Ordering of relief supplies like water and MREs could also be handled by smart-contracts. In disaster relief projects, there is a lot of delays that take place due to government bureaucracy and checks/balances. One of thing that I found remarkable is how slow FEMA and other agencies are to make decisions on what supplies to order and how many of each. In the hurricanes I was involved with, there can be seven government agencies involved in the decision tree. You can imagine how slow and painful that is to get a consensus. With smart contracts, the data could trigger automatic orders to ensure that the suppliers had the orders ready to go, track them, and handle payment. 

The routing of relief orders could also be determined through data and smart contracts, matching up locations of disasters with supplies among vendors. One of the things that astounding me during major disaster projects is that relief supplies could come from thousands of miles away. We dispatched 600 trucks to pick up water in Canada. It wasn’t because the water was colder. It was because the supplier chose to use the cheapest source of water and that was in Canada.

In a similar fashion, the amount of trucks could match up with the inbound supplies. On countless occasions, we would have trucks show up at loading docks only to find that freight had not been ordered or too many trucks had. We also experienced a similar problem, where there would be more supplies than trucks and some of the products would be left behind, even though the Feds were charged for the goods.

One of the things I also observed is that the process of tracking, billing, routing, and capacity planning is all done by hand. We had trucks coming from all over and we would use an excel spreadsheet to provide tracking of the loads. This would also be the ledger in Excel. In a normal freight transaction, the driver is required to get paperwork for billing purposes. This still exists in a disaster relief project, but it is compounded by the fact many loads do not have actual paperwork. Drivers are literally writing orders on pieces of paper and turning it in for billing.

There are also the delays in information getting to the folks that could make the routing decisions to deliver relief supplies. At a typical site, there are likely hundreds of trucks full of freight and only a few people on the ground have any idea of where the freight is supposed to go. A lot of it is due to the lack of transparency on what is on site and the various sites around the community that needs them. Blockchain could track all the inbound loads and network routing software could dispatch those trucks out to the destination.

In a disaster project, you end up dealing with so many orders and the stress level is very high. You are required to go outside your normal carrier network and deal with unknown carriers. The pressure is intense and there is a chance that some of the brokers in the business are not doing the normal compliance checks on the carriers. Having transparency to the fleet history, compliance, and safety record can all be revealed by the blockchain. The same can be said for the fleets knowing who the brokers are. In hurricanes, fraud is ripe. Carriers and brokers alike pop out of the woodwork to take advantage knowing that there is a lot of money and that things are chaotic. It’s important to know whether the other party is reputable.

The thing that also happens during the hurricanes that drive brokers crazy is when carriers fail to honor their commitments. One couldn’t blame the fleets. Brokers are literally throwing money at fleets and offer to double the price on other loads if they take it. In some lanes, DAT saw a doubling of price over a few days as brokers scrambled for capacity. In a smart contract environment, the broker and fleet could use a self-executing forward contract which requires that both parties live up to their obligations. Self-executing contacts could also be used for handling things like driver and fuel advances.

In the case of a self-executing contract, the moment the truck picks up a load, the contract could pay out a fuel advance of a pre-agreed rate. No human intervention or paperwork needed. The blockchain contract would use IOT data from the ELD device, knowing that the driver has picked up the load and automate settlement. When the driver delivers the freight to the site, he could get paid upon arrival. He could also receive payment on a daily basis for every day that he is involved in a task, which is tracked through a blockchain ledger.

Fraud is also rampant during major storms. Stories of people taking advantage of both residents and the government are frequent because of the gold-rush nature of money in these situations. Using the blockchain, a large amount of this fraud be mitigated. Every single load of freight and item on the trucks could be tracked from order creation to delivery to residents. Through the blockchain, you would know everyone that touched it and have a perfect record of everything that happened to the goods. This would eliminate theft, accelerate billing, and provide a forensics ledger to ensure that a transaction that is being billed took place. Since a large percent of disaster projects are cost plus, the ledger would provide an accurate, trustworthy record of all transactions and costs associated with the project.

One of the other use cases for blockchain has to do with paying contractors for the work they do. This includes the drivers. Fleets get paid for an hourly or daily rate for being involved in disaster project. It is almost impossible for the government officials to have visibility to whom was involved, how long they stayed, and what work they did. Through blockchain, this would change. The government, private contractor, and driver would all know and be able to bread-crumb their entire involvement.

Craig Fuller is the co-founder of the Blockchain in Trucking Alliance, the standards organization for blockchain in trucking. He is also the founder of TransRisk, a provider of financial contracts for managing price risk in trucking. Prior to getting into financial services, Craig ran relief logistics for US Xpress, one of the largest contractors for FEMA disaster relief. His accounts of experience with FEMA is highlighted in an earlier article

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One Comment

  1. Barret

    Sounds great. But in an event like Harvey, is the data network (already stressed and limping) going to support the excess burden of organising such an effort?

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Craig Fuller, CEO at FreightWaves

Craig Fuller is CEO and Founder of FreightWaves, the only freight-focused organization that delivers a complete and comprehensive view of the freight and logistics market. FreightWaves’ news, content, market data, insights, analytics, innovative engagement and risk management tools are unprecedented and unmatched in the industry. Prior to founding FreightWaves, Fuller was the founder and CEO of TransCard, a fleet payment processor that was sold to US Bank. He also is a trucking industry veteran, having founded and managed the Xpress Direct division of US Xpress Enterprises, the largest provider of on-demand trucking services in North America.