Digital Ledger Could Have Many Uses in Transportation, but Industry Must Lay Groundwork to Realize Its Potential
Blockchain is more than just a tech industry buzzword; it’s a digital tool that could transform how business is conducted in a variety of fields, including transportation. While its use in trucking has not gained widespread traction yet, behind-the-scenes developments are well underway to advance blockchain applications and governance.
Blockchain technology relies on a distributed ledger system for transactions, meaning data is not stored just on one company’s server, but on numerous servers in multiple locations. Encryption and required verification processes make the technology more secure than other ways of carrying out digital transactions, and thus far no blockchain has been hacked.
“Think of this as very fancy digital record-keeping … that isn’t centralized,” said Jason Schenker, futurist and president of Prestige Economics. “Saying ‘blockchain’ is like saying ‘accounting software,’ which can be many things,” but the root of the concept is “individual transactions that are digitally encrypted and recorded.”
Plenty of confusion surrounds blockchain, in part because the technology is so new but also because some people automatically associate it with cryptocurrencies, such as Bitcoin. Blockchain is the technology platform on which cryptocurrency applications are built, but the two are not synonymous.
Similar confusion proliferated during the early stages of the internet, when some people used the terms “internet” and “e-mail” interchangeably, said Ken Craig, vice president of special projects at McLeod Software and co-founder of the Blockchain in Transport Alliance. “That’s kind of what you’re seeing with blockchain right now… The cryptocurrencies are just an application sitting on top of the blockchain technology platform.”
Putting It to Use
Blockchain is in its infancy, but “it is here and it will be disruptive,” Craig said. “Eventually, it will alter or replace many processes in the trucking and transportation industry” in addition to reducing risk and ultimately boosting profitability.
Experts indicate blockchain will cut down on a significant amount of paperwork and increase carriers’ and their partners’ operating efficiencies.
Smart contracts, also called self-executing contracts, are one of the most well-known current uses for blockchain. These contracts allow for tamper-proof documentation for the exchange of goods or services between two or more parties.
While this application could catch on in trucking, experts believe blockchain holds more promise for the industry in other areas, such as the distributed ledger concept offering greater visibility and traceability for shared information.
Trucking companies are expected to experience location-related benefits from blockchain’s traceability, including with hours-of-service data. It also can aid in proving compliance with commercial agreements and regulatory measures.
“At times, drivers are participants in commercial transactions that require visibility. You need to know where your load is, if the driver is actively driving and if they’re meeting requirements,” said Brad Taylor, vice president of data engineering, AI and machine learning at Omnitracs.
Storing information on a blockchain could ease regulators’ jobs as well. The information cannot be lost or altered on a distributed ledger, plus third-party regulators could download necessary compliance data “without access to siloed applications” they should not have permission to view, said Andrew Old, senior manager of software application engineering at Omnitracs. “Regulatory bodies can validate that [fleets and drivers] truly are operating within the rules set forth.”
Features such as traceability and transparency make blockchain a practical tool for chain-of-custody record-keeping, such as “where you have a high frequency of transactions between parties and you need to know where stuff came from,” Schenker said. “This could be a valuable use case for companies that move physical goods.”
Blockchain is predicted to become a major tool for high-service-performance transportation sectors with stringent compliance requirements, including hazardous material or food and beverage transportation, namely cold chain-of-custody management.
“Food safety is big,” said Vasanth Srinivasan, vice president of enterprise architecture at TMW, a Trimble brand.
Currently, food transportation information is communicated to the appropriate trading partners, “but there is still doubt whether the information you get is valid,” he said.
However, storing the necessary shipment and compliance details in a blockchain and “safely exchanging that information through the trading partners so they can make more effective decisions is important,” Srinivasan said.
Blockchains can’t be altered once they are verified, and additional data blocks must be added for related transactions.
“If there’s ever an issue of material quality, quantity or content, it’s all traceable … all the way back to the agriculture,” Schenker said.
There were multiple reports of contaminated food in 2018, including romaine. (Getty Images)
For example, if a company finds itself at the center of a public health scare because it has to recall a potentially contaminated food product, a blockchain record could help the business quickly and easily track every step of where that product had been, who handled it during transportation and where contamination might have occurred.
Food safety — specifically, multiple reports of salmonella and E. coli contaminated food in 2018 — is what recently prompted Walmart to deploy blockchain in its shipping operations. It asked suppliers of fresh, leafy greens to start tracking products to farms using blockchain. The systems are supposed to be fully functional by late next year.
Walmart’s statement about the change reads, in part, “It’s crucial to respond quickly and accurately to food safety issues like these. But with the traditional paper-based method of capturing information that exists at many farms, packing houses and warehouses, tracking down important data from multiple sources is extremely time-consuming.”
Shoppers walk through a Walmart produce department. (Beth Hall/Bloomberg News)
Walmart indicated that the process sometimes takes up to seven days to track a single item by contacting a supplier, receiving paper records and using the records to identify and contact the companies that transported items to Walmart distribution centers. It expects that the transparency and accuracy blockchain provides will cut down that process to merely seconds.
Quicker and more accurate transaction verification and proof-of-delivery via blockchain also could speed shippers’ billing and carriers’ receipt of payments. The paperwork and proof-of-delivery processes required through most existing systems lead to long lag times for payments. Plus, each company requires different forms and sets of data. But devising a standard blockchain system could help businesses capture and verify that data more seamlessly and rapidly.
“As we look at this ecosystem, shippers want visibility from the carriers, and carriers want quicker payment from the shippers,” Srinivasan said. “Having a blockchain system for some of these exchanges is a win-win for both trading partners.”
Despite the benefits, and the fact that new applications continuously are emerging, experts warn against getting caught up in the blockchain hype and attempting to implement the tool without first having a solid use case in mind.
“Blockchain isn’t the only answer, and in some cases it’s not the best answer,” Schenker said.
Many companies want to be at the forefront of blockchain adoption, but there are reservations.
“There’s a lot of opportunity, but we’re not yet sure what problem we’re trying to solve with blockchain,” said Holly Coombes, general manager for Navistar subsidiary Blue Diamond Parts. “We’re watching, listening, observing and trying to get our arms around where to start.”
Trying to grasp every aspect associated with blockchain and then adopt the technology is akin to “boiling the ocean,” Coombes said.
“It’s so abstract in some ways that we’re trying to figure out what could be a fit first, because there are so many different applications,” she said.
Quite a number of fleets and their partners have investigated use cases for how blockchain could solve some of the industry’s problems, but most of them reach the same conclusion: It’s not yet a mature enough technology to warrant heavy investments.
“After researching and working on [blockchain] for a year now, we realized standards first need to be established,” TMW’s Srinivasan said.
That collective realization led to the formation of the Blockchain in Transport Alliance in 2017. BiTA aims to create standards for blockchain use within the transportation industry, which could uncover additional use cases.
Interest in blockchain and BiTA membership is far stronger than organizers anticipated. They predicted the group would have a couple of dozen members at the beginning of 2018, but it has more than 500 and has received more than 2,800 applications. Members come from a variety of transportation businesses and related organizations, including carriers, logistics providers, equipment manufacturers, technology developers, service providers and government entities.
Small and large businesses alike are part of the collaboration, with giants such as UPS, FedEx, Target, Google and Anheuser-Busch among the members.
“[BiTA is a] common forum for people to talk a little more freely – sharing their experiences and insights without giving away their secret sauce,” Coombes said.
The alliance has formed technical committees in three areas: data and formats, finance and payments and interoperability. Each technical committee consists of several working groups and others could form down the line, along with a member-certification program to verify that a business is operating in accordance with BiTA standards.
BiTA’s work to create transportation industry blockchain standards includes addressing some of the developmental and implementation challenges that accompany an emerging innovation.
In our fourth episode of RoadSigns, we ask: What does trucking’s rush toward blockchain mean for an industry that relies so much on trust among business partners? Hear a snippet from Ken Craig, vice president of special projects for McLeod Software and co-founder of the Blockchain in Transport Alliance (BiTA), and get the full program by going to RoadSigns.TTNews.com.
Although blockchain is lauded for its transparency, there are drawbacks to having that kind of visibility that still must be worked out. For example, carriers must protect drivers’ identities and sensitive information when making hours-of-service and other ELD-centric data transparent on a blockchain. For now, that’s a sticking point.
“You can’t expose all the information because you’re violating driver privacy,” Omnitracs’ Taylor said. “Multiple parties care about where a driver is and their hours of service. But the parties … shouldn’t have visibility into that driver anymore after the packages are delivered.”
Similarly, blockchain technology’s transparency could expose trade secrets or contract pricing details that companies wish not to make public. Right now, the technology as a whole does not offer the capability of isolating sensitive information and hiding it from other parties who have access to the blockchain.
Data security is a common problem, and some people are hesitant to use blockchains for that reason, TMW’s Srinivasan said. But developers’ knowledge of private versus public information sharing is growing, as is the ability to limit who has access to a blockchain through techniques such as data encryption.
Because blockchain technology is so new, and because it processes and stores such large chunks of data, optimal processing capabilities have not yet been realized.
“Transactions that take place on a blockchain could take up to 10 minutes. They are not instantaneous computer transactions,” said Rich Wigren, senior business analyst at McLeod Software.
Still, the tool provides efficiencies over other secure record storage methods, and the processing speed will continue to improve.
Interoperability among individual blockchains and the companies that use them is one of the other challenges BiTA is examining. The alliance’s diverse membership reflects that many players in different industries need to find ways to work together. For instance, carriers and shippers would need to implement compatible technology.
“There’s not necessarily one blockchain that’s going to rule them all, but rather different implementations,” Omnitracs’ Old said. “A lot of what’s going to shake out is how the different blockchain implementations will work together across different industries so you can make innovative changes within your own business.”
Experts agree that eventually blockchain will become widely used and automatically be built into digital architecture. Users won’t discuss or even recognize that they are working with the technology, similar to what occurred with the internet’s maturation. But it will take years to reach that point, especially for the trucking industry.
Craig forecasts a large learning curve over the next couple of years about blockchain, its successful use and overcoming challenges.
“Probably from about 2021-25 you will see growth. … Then around 2026 or later, we will start to see maturity [and] it will be widely adopted and considered an integral part of the supply chain ecosystem,” he said.
“It’s always difficult to predict how widely a technology is going to be adopted … We see blockchain eventually being as pervasive as the internet,” Omnitracs’ Taylor said.