Blockchain In Supply Chain And Trucking – A Match Made In Heaven?
February 23, 2019
February 23, 2019
Blockchain and trucking are two things that we at FreightTrust love. Unfortunately, in the mainstream media, “blockchain” is now frequently thrown around as a buzzword without much being known of what is behind it, leading to many not understanding the true power that the technology holds in improving aspects of our world – in our case, trucking, logistics, and supply chain operations.
One factor which has been holding back the trucking industry for some time now is the technical inefficiency and general outdatedness of many operations within the industry.
But, you may ask, why is it such a perfect match, and what can really be done with blockchain in supply chain operations?
It Offers A “Trustless” System.
Sadly, this is a somewhat ambiguous term, but it essentially means that the need for trust in the system is far reduced from what was necessary before – “trust less” is more fitting.
For example, if we take a paper shipping document such as a Bill of Lading, which proves who has ownership and transport responsibility of a shipment, and look at the path it takes from its inception to the end of its life, it is fraught with potential for mistakes or misdeeds to take place. A normal Bill of Lading will be passed between several people throughout the supply chain, not all of whom may take good care of it, and can at times leave it vulnerable to theft or damage.
A blockchain, storing a digital Bill of Lading, would practically become the guardian angel of the data it holds, not allowing anyone to access it who doesn’t have permission. Additionally, the entire blockchain network helps validate what is allowed to be stored on the blockchain, making it as good as tamper-proof. The decentralized nature of the blockchain means that no one party has majority control of the system, so does not have the ability to maliciously edit the chain.
It Eliminates The Need For Paper
Currently, the trucking industry is heavily reliant on paper-based documents, which can be costly in both finances and time – and as we all know, time is money. Paper has to be taken care of, can be manipulated, stolen, or lost, and generally is inefficient and costly, not to mention bad for the environment.
To get anywhere with any level of haste, paper-based documents must also often be sent by expensive couriers, which over the course of a business year can rack up significant costs and is an unnecessary waste of time and resources. Truckers themselves would have one less thing to worry about if they didn’t have to carry all these vital paper documents with them – blockchain-based documents would instead allow them to have everything safely and digitally accessible at all times.
A blockchain system which generates documents, keeps them safe, and can display them to the necessary parties at a moment’s notice instantly solves all the problems that paper-based systems create. It is easy to see how blockchain can bring huge value to the trucking industry in this way alone.
Smart Contracts Smarten Up The Supply Chain
Smart contracts are essentially blockchain-based contracts which perform specific operations when triggers are hit, taking the need for frequent manual input out of the equation. For instance, continuing with our blockchain-based documents example, if a trucker reaches a destination or hands over their cargo to someone else along the cargo’s route, a so-called parametric smart contract could trigger (for instance based on the signing of the document or GPS data), and make relevant parties aware of the event – or immediately make the shipping document available to the next party who needs to interact with it.
When you take into consideration that administration costs can take a substantial bite out of a business’s outgoings, smart contracts appear as the saving grace to automate and simplify many of the proceedings behind the scenes that are currently often inefficient and slow.
A Transparent Audit Trail
All of the data that is tracked via the smart contracts mentioned above (and then stored on the blockchain) gives tremendous insight into the physical movements of, and interactions with, shipments. This can be very useful to weed out inefficiencies and any issues that may make themselves known throughout the supply chain. This also allows companies and customers to prove and check the genuineness of specific articles as well as their journey throughout the supply chain.
This is not only useful to companies who need to be sure of data accuracy and safety but also regulators and other bodies who need to know that certain products, such as food or medication, have been held in proper conditions and not been tampered with.
Payments Can Be Transparently Processed And Tracked
With traditional systems, either software-based or paper-based, it may not always be clear when a payment is due or when it has been paid, or crucial payments may simply be withheld or not made on time. On-chain payments would allow full transparency when it comes to managing and settling financial matters of business operations, as well as removing the need for any manual input with the aid of smart contracts.
For example, due to our partnership with First View Financial, a company offering both traditional banking services as well as being a Payment Rails and Program Administer for Visa and MasterCard, we will be able to offer a range of financial offers in combination with our blockchain technology to simplify and streamline all payment operations.
To name just a few valuable functions, smart contracts could cause payments to trigger as soon as a service has been rendered complete (using an “if this, then that”-style trigger); this could be a payment made either in cryptocurrency as part of the blockchain, or just simple wire transfers, bank deposits, or ACH. Payments can be securely held in escrow with no chance of any outside forces tampering with them, and useful services frequently used in the trucking industry such as invoice factoring or detention factoring can be easily integrated.
What this means in practice is that for a logistics company, several vital processes can be rolled up into one ecosystem, with far more transparency and data security than previously possible. A freight shipment can be set up, tracked, documented, and paid for, all on the blockchain, eliminating many external costs and inefficiencies, saving both time and money, and giving extra peace of mind in the process.
Blockchain technology may be young in age but has the potential to revolutionize many industries, and we at FreightTrust believe that trucking is one of the industries which can benefit the most from this transition. To this effect, we’re using blockchain technology to enable all of the features that we just mentioned above to give FreightTrust TMS far higher security, ease of use, and overall benefits compared to traditional methods.
If you’d like to find out more about how we’re using blockchain to improve trucking, then read more about how FreightTrust simplifies and streamlines trucking supply chains using blockchain and other cutting-edge technologies, and if you’re already in the industry and recognize the opportunity to radically improve your operations, sign up here.
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