Blockchain is one of those words that has been picking up momentum in trucking and logistics recently. It is being touted as a technology that can make transactions and operations run more efficiently – particularly from a processing standpoint.
But many people are still unsure exactly what blockchain is, and how exactly the trucking industry can benefit from becoming an early adopter of this network.
Blockchain is a type of distributed, decentralized ledger database used to record digital transactions that are shared in a technologically secure way. In trucking, blockchain technology is said to expedite and better secure freight transactions for shippers and carriers.
Blockchain is currently in the stage where the internet was back in the mid-1990s, according to Kevin McMahon, director of emerging technologies at SPR.
“There is still a lot of work that needs to be done,” he told Fleet Owner. “There were a lot of benefits to being there early and shaping what the modern internet looks like. The parallels with blockchain are pretty significant. A lot of people think there is a lot of potential there. I don’t think everyone knows how it’s going to play out, but it will be interesting to see.”
McMahon explained that when companies are evaluating blockchain’s shared-ledger system, they look to see how it can help them address the three Ps of business: people, process and paperwork.
“If you look at all the players involved in shipping goods and the challenges faced in the trucking industry, I think there is a little bit of everything in that three-P statement,” he said. “Can we reduce middlemen by having more transparency in our network and being able to directly resolve informational disputes or have some sort of trust set up in the network of participants?”
The benefits of blockchain in trucking could include:
- Better visibility in the handoff of goods and payment transactions.
- Increased efficiently and reducing the need to double, triple and quadruple check business transactions.
- Better visibility in the supply chain network to ensure things like capacity planning operate smoother.
- Better ability to make smarter, more informed decisions that can optimize business.
Right now, McMahon pointed out, the industry is heading into the first wave of blockchain implementation, particularly with last year’s development of the Blockchain in Transport Alliance (BiTA). He believes the second wave of implementation will go hand-in-hand with leveraging IoT devices to unlock some next-generation business models and monetizing solutions that were developed utilizing blockchain.
“Blockchain isn’t a be-all, end-all solution,” McMahon explained. “From a technology perspective, it’s a very small piece of the current puzzle. It’s a piece of technology you can add to existing systems that will help you link up and reduce some frictions between transactions that you may have with your suppliers, competitors or some of your partners that just exist naturally.”
The three areas of friction that McMahon believes blockchain can help reduce are:
- Informational friction – When data is bad or someone improperly entered information to the point that now records between business partners are not in sync. McMahon stressed that it’s more difficult to get to those records in environments that aren’t trusted by everybody – such as email – or when there is a risk of information getting in the wrong hands. Those types of problems can be addressed in this decentralized ledger that uses cryptography and has some mechanisms that will smooth out or improve the imperfect data.
- Interaction – When it comes to moving goods from point A to point B, McMahon noted it is important to have more transparency driven by the shared ledger and distributed network. Blockchain also incorporates things like smart contracts, or governance rules, that help automate business policies will and reduce any potential friction that could arise.
- Innovation – McMahon pointed out that the trucking and financial services industries are two of the early adopters when it comes to blockchain because both industries recognize the benefits that could be employed here. He stressed that there are benefits of getting on a network earlier and leveraging your experience within the blockchain while the technology is still a bit mystical.
“There are competitive advantages still to be had, especially if you take the risk and try to set the network,” he said. “It’s really not a regulated industry yet. There is still a lot of work to be done around regulations, and being a first mover here can help you shape those conversations and what a future with blockchain in our industry would look like.”