ATA speakers: The future of supply chains and why blockchain is a team sport

We’re quite confident that blockchain has big, big implications in supply chain, transportation and logistics. It’s the next frontier that’s going to completely change worldwide supply chains.

— Frederick W. Smith, FedEx Chairman and CEO

Blockchain has been called the greatest advancement for shipping and logistics since the advent of the internet. From proof of delivery, to smart arbitration, to cheaper payment options, blockchain could dramatically improve efficiency in trucking.

The speakers were Tyler Jenks, SVP  of Solutions Architecture, and co-founder of Very, and Dale Chrystie, VP for strategic planning and support of FedEx Freight.

Jenks began with a basic definition: blockchain is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.

He quoted FedEx CEO, Frederick Smith from the recent Consensus event in May. “Blockchain is the next frontier that’s going to completely change worldwide supply chains, and the consequences of not investing are extremely high.”

Jenks emphasized the fact that the blockchain is open. It’s also distributed as opposed to being centralized. He added that perhaps it’s not as efficient as it could be, at least so far. The verifiable part is important, as well as the permanent. It’s always there and can be seen. “It can be changed but it’s extremely difficult and expensive to do, so for all intents and purposes, it’s permanent,” he said. “There are numerous blocks on the chain and it can grow indefinitely.”

Blockchain was invented in 2008 by Satoshi Nakamoto in order to create the world’s first reliable digital currency, Bitcoin. It’s limited to 21,000,000. Satoshi Nakamoto is an anonymous person or group of persons, and no one know exactly who or where it was invented. “This seems to add something to the fascination of the technology,” Jenks said.

“Digital money cannot exist safely or reliably without blockchain. It solves the ‘double spending problem, and the ‘byzantine generals problem.’ The bottom line is that it allows for reliability. In 2009, Bitcooin traded for $0.0001. Today it trades for $7500. 7,500,000x in 9 years. 6x per year, compounding. Sort of like a Moore’s Law,” said Jenks.

That’s where a lot of the noise and buzz comes from. But how much is actually software solutions that work with blockchain?

Currently, there are about 3000 different coins. You can get a blockchain free and open source and that’s led to widespread proliferation. Ethereum and others, allow for smart contracts. Ethereum came about in 2015. It’s programmable, nuanced, automated transactions that work much like a vending machine.

“For a certain amount of crytopcurrency or tokenized value, you can get something in return. It can be anything, but it’s programmable,” said Jenks. “It’s the instant transfer of value in a predictable way. Smart contracts modulate the execution. The resources have to be put into the system in advance. IoT devices have nothing to do with blockchain except that with connected devices, it needs sensons that send data to the internet…or to a blockchain.”

“Take Hoff sauce,” he said, by way of example. “It’s the best damn sauce ever. It’s made out of red jalapenos, habeneros, vinegar, garlic and sugar. So, how do they get all these things from different regions, especially the fresh, red jalapenos that they have to get from Mexico.”

“You could follow the planting, harvest, boxing, load, and border on the blockchain. All kinds of data can be captured about first of all what was happening to the soil and the climate during the planting. Same with harvesting: Who did it? How long did it take it? What was the method? Same with the boxing, and so on.”

“By the time it gets to the border, there are all kinds of processes that go into effect. It’s very complicated and there’s lot of organizations involved. Upon inspection, regulators could scan the shipment and all the details would be stored on the blockchain. Regulst of inspection also appear, as well as previous detentions. A smart contract can automate a bill of lading with all the necessary information,” said Jenks.

“That’s a simple product, but what about a jet engine with parts from all over the world. A centralized database helps immeasurably,” he concluded.

Chrystie began by saying another thing to understand is that blockchain emerged out of the financial crash. In particular, he wanted to emphasize the peer-to-peer aspect. You get to skip the middle-man, the house. It disrupts the third party. The main benefits of blockchain are lost if a trusted third party is still required.

“Why should we care about Bitcoin? From a FedEx point of view, it doesn’t matter. But if you think of it as a car, it’s the blockchain that’s the motor. The two are related, but the interest is certainly in the engine side of things,” said Chrystie.

“It’s a digital ledger that is permanent, transparent and shared. Shortest definition I could get it into,” he said. “Blockchain refers to a block of data that is chained together cryptographically. Trust: we think of it in a subjective  sense. With smart contracts, trust becomes objective. It’s not a leap of faith.”

Technology like this comes along only every couple of generations. “We believe there will no ‘winner,’ there will be multiple blockchains, and we need to play in a interoperable world. Think of this as a big secure database, with a big secure search engine on top,” he said.

“We believe that shipment visibility at the SKU level will reduce resources involved in chargebacks, claims, and investigations. It’s basically going to create a common language. It’s kind of like an MRI at the shipment and bill of lading level. Our first POC focused on getting to the SKU/Serial Number level in the Dispute Resolution area,” said Chrystie.

“In a blockchain alliance, establishing standards will be key, with competitors sitting side-by-side,” he said. FedEx is a founding member of the Blockchain in Transportation Alliance (BiTA), and a BiTA Standards Board member. FedEx is also a founding member of the Blockchain Research Institute.

“We believe it makes no sense for us to build our own internal blockchain. BiTA is asking people to come together and find areas of agreement. Where can we agree? That’s the focus and that’s why these alliances become critically important. We need the common language, and that’s what we’re helping to establish. Data formats, interoperability, and financial compliance,” he said.

“We are still fairly early in blockchain technology, maybe step 3-5 of 100. A year ago, 70% of CEO’s surveyed said they were not doing anything in this space. Early adopters will help establish standards and governance.”

“It’s just data,” said Chrystie. “Let’s help demystify it.”

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Chad Prevost

Chad is radio host and broadcast media specialist for FreightWaves.