A while back, my boss, HDT editor in chief Deborah Lockridge, asked me to get up to speed on emerging blockchain technology with an eye toward doing a web article.
I duly went out and read a few articles on the subject – but I didn’t get it. So I found a couple of promising YouTube videos and watched them. And it still didn’t click for me. It just seemed to be an incredibly complex concept that I was never going to grasp.
Last week, TMW Systems hosted a web seminar to explain blockchain and its forthcoming move into this technology and market. This seminar was better – but I still didn’t have a handle on what, exactly, was going on with blockchain. So I called TMW Executive VP Tim Leonard, who graciously helped me out.
Turns out I was overthinking it.
So if you’re like I was, having trouble wrapping your head around what blockchain is and how it works, let me see if I can help you out. (I mean, that’s my job, after all.)
The first thing you need to understand is that blockchain is an internet-based system that enables efficient, fully transparent agreements for companies that need to ship, or are in the business of transporting, goods. It’s a logistics-enabler.
In a way, it’s sort of a mini-internet. Think of Amazon: It’s a slick, powerful commerce network in its own right. But it is also powerless without the internet. But when it is plugged into the internet, it becomes an incredibly powerful and efficient tool for buying, selling, shipping and receiving goods.
Same basic concept, here.
Now, imagine there’s a brand-new widget rolling off an assembly line right now in China. And that widget is destined to be delivered to a florist in Ohio sometime next week. The manufacturer of that widget needs to tap into a logistics chain in order to get that part to its customer on, or before, the designated delivery date. And, obviously, if your fleet can offer to help out during one of the segments in that logistics chain, you’ll make some money.
To get things rolling, our Chinese manufacturer logs into their blockchain network and places a bid out. Chinese truck fleets on the network are able to see are the pertinent requirements for landing this shipment: When the widget needs to leave the plant, where it needs to go when it needs to get to its destination, and they can bid for the business.
Once a shipper and a carrier agree on everything, an electronic contract is created that everyone can circle back to and confirm all the details of the agreement any time they wish.
And voila! The first “block” in the logistics chain that will take this widget from China to Ohio has been created!
Next, our widget maker needs to get its part across the Pacific Ocean. Luckily for them, shipping companies and air freight companies are also on this blockchain network. And so, the bid process repeats itself, and once completed, the second “block” in this logistics chain is set in place.
I think you’re starting to see how this works. But let’s take it a few steps further.
Now, our Chinese manufacturer has arranged to get his product across the Pacific. And now he needs to get it across the United States to Ohio. He's going to need an American trucking fleet to do that. And so, another bid is generated to any interested carriers on the blockchain system.
Now, our Chinese friend doesn’t know much about U.S. DOT laws. His part will arrive in San Diego on the 19th of the month. And he’d like it in Ohio by the 22nd because (and this is in his block agreement with the shipper that kicked off this whole chain of events) he gets a bonus if the shipment arrives early.
But that’s not going to happen. Because every transaction and agreement in a blockchain is constantly checked and double-checked against all pertinent rules, regulations, and laws. So any delivery will have to happen within the framework of hours of service or any other releveant rules, laws or regulations. And there’s not going to be an early delivery with fudged paperwork, either. Because the whole blockchain process is encrypted and transparent. Again, both parties can log in and double-check any aspect of the block they’re engaged in any time they like.
Now, at this point, you as the carrier, can plug in additional caveats to the deal as need be: fuel surcharges, for example. The shipper can as well. They can, for example, stipulate that the product be kept at a certain temperature during shipment. That's in the agreement. And sensors in the trailer can track and record that data and transmit that information into this block in the chain as well so that, once again, any party privvy to the agreement can open up that block in the chain to verify the shipment is proceeding as agreed upon.
The receiver can also weigh in: Let’s say in this instance they’re a tree-hugger, Sierra Club-type florist. So they can stipulate in the block with both the shipper and the carrier that the last mile delivery has to be completed in an electric delivery van or a CNG-powered truck. And that requirement will be in one of the last blocks in this particular blockchain.
Best of all, once the blockchain is completed, everything is double-checked and signed off on in real time. If all the conditions of the blockchain were met, payment is approved and rendered to the carrier immediately, since all the invoicing and billing is part of the blockchain, already in place and ready to go once the delivery is made.
That, of course, is a highly simplified, extremely basic example of how a near-future logistics business agreement using a blockchain system works. Tim Leonard at TMW Systems told me he envisions the entire network of blockchains around the world interacting and communicating with one another in a vast logistics information matrix. And I’ll talk about that and give some examples as to how blockchain networks will serve as the platform enabling seamless, fully-transparent, real-time logistics operations that can support and enable virtually every operational aspect of fleet management in the process.