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Using Blockchain for Transportation and Logistics

blockchain in transport alliance

People who study the cross-sector application of blockchain technology can list the benefits. Transparency, speed, efficiency, security, trust, savings; those six central assets are what distributed ledger technology (DLT) offers any industry to which it is applied. Only time will tell which industry will gain the most from the advancements; the finance sector has to be an early favorite, but it shouldn’t surprise anyone if the title ultimately goes to the transportation of goods and logistics space.

The Problem

Writing for CryptoSlate, Aliesha Duffin cites some of those usual suspects as the reasons for the problems the shipping and logistics space are presently experiencing: transparency, order origination, and lack of accountability.

Duffin reports that the industry sees hundreds of millions of dollars lost to theft every year, which is ultimately caused by antiquated infrastructures that need to be replaced.

From the Nasdaq article “UPS Steers into Blockchain Trucking Alliance,” we learn that it is “common” for vessels to show up for delivery before the bill of lading even arrives. Duffin tells us that fictitious pickups account for about 10 percent of all cargo thefts, which is somewhere in the neighborhood of $150M USD annually. Those numbers would have to improve if those receiving goods had a list of what they were supposed to be looking for before their shipment arrives.

The CryptoSlate article reports that, in total, cargo theft is costing the industry between $15B and $30B USD every year—and maybe even more because companies are embarrassed to report the thefts, with losses adding about 20 percent to end of line costs.

The Consortium and Member Companies Seeking a Blockchain Solution

1. Blockchain in Transport Alliance (BiTA)

A consortium of companies working together to develop blockchain standards and education within the freight industry, the BiTA website states its goal is “to bring together leading companies in the freight technology industries that have a vested interest in the development of blockchain.” Aside from the 60 or so current members, the Alliance reports that thousands of companies have applied for membership, and about 300 are currently being considered.

The BiTA belief is that, without a shared set of standards across the industry, the barriers that cause the problems of transparency and trust are going to continue existing.

For the transportation of goods sector, not only does the blockchain have the potential to create an immutable distributed ledger to replace the paper trail and offer streamlining as well as fluidity to logistics processes, but vehicle maintenance will be improved since every vehicle’s history can stay with it through the DLT.

Notable Members of the Alliance

  • FedEx: Assets Under Management (AUM)–$48.55B USD
    FedEx joins the BiTA, not only as a member but as a founding member, and a member of its standards board. The company is currently is in the process of testing some blockchain platforms for use cases for the Alliance. One launched pilot program is for the storage of data for dispute resolution. In discussing this, FedEx Freight VP of Strategic Planning and Analysis Dale Chrystie touches on another potential benefit of the blockchain. Chrystie says that the application can help the company’s customers to speak in a “common language.” A common currency is often listed among the potential benefits, but it isn’t often noted that that currency will indeed create a common language among the participants and be a unifying force in that manner.
  • UPS: AUM–$40.40B USD
    In joining the BiTA, UPS gives the Alliance the world’s largest package delivery organization. The still-growing company delivers to over 200 countries and owns more than 500 aircraft. With more than $45B USD AUM, UPS’s wide breadth and standing makes the Alliance worthy of consideration for any company, and it offers further validity to blockchain enthusiasts and skeptics alike.
  • SAP SE: AUM–€44.35B (2016)
    SAP announced joining the BiTA on the same day it announced joining Spain’s Alastria Consortium, which offers a common digital space for its members to develop services and blockchain products. These two moves speak of the lengths that the company is going to when it comes to the expansion of the blockchain. With the goals the Alliance has, a maker of enterprise software for the management of business operations and customer relations should prove instrumental, especially given the capabilities of Leonardo, the company’s digital innovation system. Leonardo, built on the Ethereum blockchain, is the foundation for the company’s own DLT co-innovation initiative alliance. With Leonardo, the company seeks to help customers navigate the ever-expanding data world, extending focus into the Internet of Things, machine learning, analytics, artificial intellience, and big data, along with the blockchain.

The following companies are other BiTA members.

2. IBM/Maersk Partnership

Fortune.com reports that a 2013 study by the World Economic Forum shows that righting the flow of information sharing and border administration in the world of international trade “could increase GDP by nearly 5% and trade by 15%,” an increase that would be in the trillions of dollars. If IBM (AUM $121.64B USD) and Danish shipping giant Maersk (AUM $61.18B USD, 2016) succeed in what they have set out to do, the blockchain will have a better chance of being successful in overhauling these concerns in the logistics industry.

The yet unnamed partnership will seek to digitize the world’s shipping industry. The two companies began testing the use of blockchain in 2016 when they tracked a container from Mombasa, Kenya to Rotterdam in the Netherlands. That test, and other successful follow-ups, convinced the parties of the system’s potential.

The IBM/Maersk technology is built on Hyperledger Fabric 1.0, an IBM-developed blockchain that is now overseen by the Linux Foundation’s Hyperledger Group. The new company’s CEO, Michael J. White, says he expects the venture to receive regulatory approval in the spring and then begin selling software subscriptions by the third quarter of this year.

3. Walmart: AUM $198.82B USD

Walmart is leading a group of major players in the food sector in another partnership that involves IBM and is being built on Hyperledger. This one searches for a food safety solution. Excited by results of early testing of a DLT application, Walmart is quickly reaching out to suppliers and retailers in regard to consideration of the consortium. Other notable joiners to this point are Dole, Nestlé, Kroger, and Tyson Foods.

The companies hope that applying blockchain technology to help secure digital records and improve traceability of foodstuffs. The blockchain would create its immutable and transparent ledger across its complex network. One major potential benefit of the application of the technology could come in the area of food-borne illnesses. Presently, an investigation into such a situation can take weeks where that can be reduced to seconds with a blockchain-based system.

The goal of the consortium is to see decreases in the percentage of people who fall ill every year from food-borne illnesses (currently 10 percent) and the number of people who die each year from contaminated food (420,000).

4. British Airways (AUM unavailable)

While in the early stages of their trials, British Airways and Heathrow Airport have teamed up with aviation tech leader SITA (AUM unavailable) in researching the use of blockchain to sync and share flight data so that all personnel connected to a flight are working with the same information and the same schedule. It might be easy to dismiss this as a move that more closely affects the transport of passengers, but British Airways ships freight to over 200 destinations in 80 countries. Having only been used in Proof of Concept testing to date, full adoption of the technology is still further down the line, but other airports and players in the space have taken notice of this research and are excited about the potential benefits of blockchain adoption.

Conclusion

These are just some of the major players applying blockchain tech to the industries of freight transport and logistics. Research into the field shows many others who are taking part in the movement and will undoubtedly add to the benefits gained. Those benefits, aside from the usual list assigned to DLT expansion, will include companies speaking in a common language across borders and fewer people getting sick and dying, and, while it’s good to know those things can happen, it will be better to know once they have.

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Written by Paul Keenan.

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Allen Taylor

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