Digitization Promises To Level The Supply Chain Playing Field

If there is one segment of global freight movement that fosters distrust, it is the supply chain. Goods move around the world, change hands multiple times, sit unattended for long stretches, and ultimately show up in a warehouse or on a store shelf. Few know how they got there, and most don't care.

But all the intermediaries responsible for ensuring that good reached that shelf do care. They care that the product is in good condition; they care that it arrived on time; and they care that it arrived in the least costly way possible so as to maximize the profit margin. Slip up in any one of these steps, and someone doesn't get paid.

The result: lack of confidence in the system. Take the example of the trucker who picks up product and makes the delivery on time, only to find out the load was damaged during loading. It's not the driver's fault, but the receiver wants to hold someone responsible, so damage costs come out of the driver's pay. Can that driver go back to the shipper and demand the lost payment? Maybe, but the time and expense of doing so will likely cost more than the lost payment is worth.

It is exactly these types of scenarios that blockchain backers believe the technology is destined to solve. According to the Institute for the Future, "A blockchain is an online database that stores information across a network of personal computers, making it not just decentralized, but distributed. This means no central company or person owns the database, yet everyone in the network can use and help run it, but not tamper with it."

At the Blockchain in Transport Alliance (BiTA) Spring Symposium in Atlanta, Agoric CEO Dean Tribble explained how the immutable aspects of blockchain technology underpin smart contracts and build that trust.

"Blockchains provide high integrity to data and choices," Tribble said. "A smart contract reduces the cost of creating arrangements with people that you can rely on. That's the game-changer; that's one of the reasons why people are so deeply excited about this."

A key element of a blockchain is that it requires a cryptographically created key. Without the key, the information is hidden. The key may be nothing more than a login screen, but it helps provide the security that ensures the blockchain is a true representation of the transaction it represents. In the supply chain, that is the movement of shipments.

One of the special features of a blockchain is that everyone included in the chain has access to all the data in the chain — complete transparency — but can only alter their part of the chain. Basically, blockchain is a record-keeping tool, and the supply chain is all about record keeping.

Within the supply chain, the movement of a single box can generate hundreds of documents and thousands of data points. Customs paperwork, bills of lading, vehicle GPS data and even available driving hours for truck drivers are just a few of the possible data points. The digitization of these data points, and the use of blockchain to verify them, is the here and now.

In the journey of a shipment, what happens if a driver shows up late?

Typically, there may be some kind of financial penalty, but what if the contract stipulated penalties are not to be assessed for situations beyond the driver's control, such as weather or detention at the pickup facility? Without the ability to document and verify those circumstances, it becomes the driver's word against the receiver's, and drivers rarely win that argument. A blockchain-based digital record, though, would record all that data, including GPS location, and verify that the truck spent more time at a facility due to slow loading. It could also pull in weather data and "lock" that information into the digital record, showing that the driver had to slow down or even stop due to a snowstorm.

That is the hope that blockchain and digitization provide for the supply chain. It is the ability to document, verify and record data points that prove a single point of truth and eliminate the he-said, she-said aspect of transactions.

FreightTrust is one company that has taken the digitization of the supply chain to new levels. The company offers a complete cloud-based electronic data interchange (EDI) and paperless document platform for shippers, carriers, brokers and other third parties.

The digitization means finance and factoring can be integrated, allowing for real-time insight into the finances of any job and shipment details. Integrated real-time GPS tracking and instant quoting and carrier availability streamline costs. Additionally, parties sign documents electronically and automate customs paperwork and even duties payments.

The current supply chain is siloed and burdened by trust issues. Trucking and the supply chain may be about relationships, but they are relationships built on a hill, one rainstorm away from crumbling. Blockchain and the digitization of the supply chain promise to transform the status quo.

"Digitization will change that, bringing down walls and creating a completely integrated ecosystem that is fully transparent to all the players involved," according to an article in the Harvard Business Review. "This ecosystem will depend on several key digital technologies — including logistics platforms, analytics, robots, and even 3D printing. Those who move quickly to digitize their supply chain will gain efficiencies, develop new business models and revenue streams, and create competitive advantage."

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