Blockchain & Trucking: the Promise & Potential

Blockchain, sometimes referred to as distributed ledger technology (DLT), has been making a lot of headlines lately in business news.

So why the buzz around blockchain? Simply put, it’s a very streamlined, cost-effective and transparent way to record and validate transactions. For any business that transacts any product or service of value, and what business doesn’t, blockchain has the potential to transform how things are done.

Using blockchain, freight can be tracked throughout the supply chain, and freight services monitored carefully on a shared digital network, keeping commodities safer and maximizing efficiency. Other potential use cases for the trucking industry include expedited payments, stronger fraud detection, easier compliance and more.

In the trucking industry, blockchain could be used to streamline freight transactions by enhancing:

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Security

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Visibility

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Data Accuracy

Understanding blockchain – what is it & how does it work?

So, how does this shared distributed ledger differ from any other form of managing transactions? Most forms of recording, validating, tracking and finalizing transactions within an organization’s business network happen through a centralized process. Asset movements are tracked, for example, within the company – as well as any outside financial institutions – using a central authority, such as a back-office department or third-party clearinghouse. As we’ve seen throughout history, these centralized systems are susceptible to manipulation and fraud. These central departments or authorities aren’t always efficient either, and typically add substantial overhead costs to each transaction.

With blockchain, there is no central authority, so those inefficiencies and costs related to recording, validating, settling and managing transactions are virtually eliminated. The ownership of assets is tracked and certified through a shared network of many institutions. Any transactions are verified on an open and shared ledger for all (authorized) parties to see, cutting down on the possibility of fraud or manipulation. Without the need for a central authority, back-office departments or outside clearinghouses are no longer needed, dramatically decreasing overhead while increasing transparency and security.

CENTRALIZED LEDGER VERSUS BLOCKCHAIN

Centralized Ledger vs Blockchain Chart Centralized Ledger vs Blockchain Chart

How Blockchain Works

To understand how distributed ledger technology works, it’s helpful to look at why it’s named blockchain. The term “blockchain” actually refers to the way transaction data is stored. This is done in transactional “blocks” of information that are linked together to form a chain.

As transaction numbers grow, the blockchain grows along with it. Each block includes a record and confirmation of the time, as well as the sequence of transactions, so there’s no possibility of someone inserting data between blocks for fraudulent or misleading purposes. The data is transparently logged and locked into the blockchain.

Ideally, this all happens within a discrete network governed by rules and standards that all the network participants must follow and abide by. This is particularly important in any industry with private institutions, such as trucking. Only the participating players, such as suppliers, shippers and brokers, can participate in their blockchain network.

Key Characteristics of Blockchain

Immutable

  • Distributed database that maintains a continually growing list of records
  • Managed by a peer-to-peer network with protocol validating new blocks
  • More than half of the network would have to participate to change recorded data

Transparent

  • Each block holds a timestamp of a transaction and links to a previous block
  • All users have identical visibility of ledger information
  • Designed to prevent data from being altered

Secure / Automated

  • Blockchain lacks a central point of vulnerability, all data stored across network
  • Transactions in blockchain can be customized and automated as necessary

Trustless Operation

  • No centralized official copy of records exist
  • No user is trusted more than any other
Blockchain & trucking

For the trucking industry, blockchain offers benefits in interoperability and visibility within the supply chain. It could also be a means of linking companies currently using different operating systems, which could help reduce industry inefficiencies.

Many in the industry contend that blockchain will likely impact contract transactions most heavily in the beginning, with warranty and truck parts supply chain transactions following closely behind.

With a digital supply chain, blockchain can:

  • Streamline transport and logistics processes
  • Improve order accuracy
  • Help track many types of physical assets, such as trucks, trailers and containers
  • Secure freight bill pay
  • Audit transactions across freight brokerage and dedicated carriage operations

BITA Use Cases

The Blockchain in Transport Alliance or BITA (originally Blockchain in Trucking Alliance) has identified eight use cases that apply to the transport industry in the major areas of performance history, optimization and payments and pricing.

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Performance History

Blockchain could allow parties to see solid and definitive evidence of past performance in all the relevant metrics. This removes the trust aspect from all deals.

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Vehicle Maintenance

Blockchain facilitates item-by-item records of vehicle repairs, with no need to rely on any individuals or entities to record and store an extensive repair history. Plus, this history moves as the equipment moves for anyone to see.

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Quality Assurance

With a distributed ledger, everyone involved in a transaction has access to all data points. Disputes can be reduced by simply taking photos and evaluating freight at pickup and delivery locations, all shown on the blockchain.

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Compliance

Blockchain and electronic logging devices (ELDs) can work flawlessly together. ELDs can stream data to the blockchain in real time. Plus, when this data is paired with traffic, weather and other real-time information, up-to-the-minute rerouting is possible.

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Capacity Monitoring

Available capacity can change any time throughout the day. Blockchain offers transparency to know when and where capacity opens up, so all parties can take advantage of shifts in demand.

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Payments & Pricing

Processing and settlement of payments is secure on the blockchain with all transaction information easily accessible. Rates can also be more easily determined with detailed historic payment records.

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Fraud Protection

Everyone on the blockchain network can see every transaction with the assurance that nothing can be removed. Fraud and double brokering can virtually be eliminated with distributed ledger technology.

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Theft Protection

The blockchain can contain detailed information and rules. These can even include ID pictures and rules for the pickup and delivery of the freight, increasing security and reducing the possibility of theft.

The International Truck POV on blockchain

At International® Truck, we’re optimistic about the potential of blockchain technology and intend to help lead the way in untapping this. In our view, in order for blockchain to successfully move the entire industry toward greater transparency and efficiency, certain objectives must be achieved:

  • There needs to be a unified agreement on a standards framework, as well as protocols for uniform data entry.
  • Blockchain for trucking must be a private network for authorized industry players.
  • All players – large and small – must participate en masse.
  • Blockchain applications need to be crafted to support common trucking-industry functions, such as tracking freight throughout the supply chain, or enabling driver payments.
  • All applications need to be thoroughly tested for reliability, security and seamless implementation.
  • Policies should promote cooperation between all industry players.

For a deeper dive into our point of view on blockchain,

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