When a package arrives at your door, do you know exactly how it got there?
The truth is, you don’t—and neither do many of the companies involved in the shipping process. The freight and logistics industries are painfully outdated, in the sense that where an order begins and ends is essentially the only thing that is tracked. Everything that happens in between is loosely organized, handled by handfuls of third-party brokers and shippers, with fraud and product theft being a huge issue for all parties involved.
To give you a sense of how big of an issue this really is, 2016 reports from the US Federal Bureau of Investigations estimated cargo theft losses that amount to $30 billion.
That’s a big problem.
For the most part, these issues stem from a lack of both tracking and accountability. Once a product leaves a supplier’s warehouse, any and all checkpoints along the way are done manually. This means a warehouse worker receives the shipment, marks it down on a sheet of paper, and then (assuming they’re doing their job correctly) types that info into a computer, which then gets saved within that third-party system. But very little communication happens between that checkpoint and the original manufacturer. The package just sort of floats on “business as usual,” and all parties assume things are working as intended.
Except things don’t always work as intended.
The typical roadmap for an end-to-end journey in freight and logistics begins with a supplier, moves on to a manufacturer, gets passed along to a shipping company (a third party), before eventually arriving to a retailer or distributor and finally purchased by a consumer.
When you break that journey down into steps, however, it’s clear there are endless issues that arise between each checkpoint. And for the most part, they all stem from a lack of tracking data. With 15.5 million freight trucks in the United States alone managed by 1.2 million companies, the industry is fragmented to say the least.
This is how things have always been done—until Ethereum’s blockchain technology became an option.
If 2017 will be known for one thing, it will be blockchain technology and cryptocurrency. And already we are seeing ambitious blockchain-based companies sprint to disrupt age-old industries that could benefit greatly from Ethereum’s Smart Contract system.
For example, ShipChain is a blockchain platform specifically for the freight and logistics industry, leveraging Smart Contracts to orchestrate, fulfill, and track every step of a product’s shipping journey on a public ledger. When a shipment order is placed, a Smart Contract is automatically initiated, including the delivery information for the shipment, final delivery point, all carriers used, number of items, weight and dimensions, the whole nine yards. All of this information is accessible by the parties involved and encrypted in a side chain. A side chain is blockchain that runs adjacent to the Smart Contract and provides a more precise way to track a package, with contract completion automatically fulfilled upon delivery, and all recorded validations and waypoints recorded along the way.
In short, it’s nothing like the manual processes that undermine today’s current freight and logistics industry. If Elon Musk were getting into the freight and logistics industry, ShipChain is what I imagine he would build. And it looks like ShipChain is off to a great start with arguably one of the most stacked teams I have seen in the space, even Kevin Harrington is one of their advisors.
Blockchain technology is still so new that the general public is largely uninformed about what it does, and more importantly, what it can do. Imagine trying to explain to someone what the Internet was back in the mid-90’s. “Connected to everyone? How is that even possible?”
The same is set to happen with blockchain, and on a deeper level, the tokens many of these blockchain-based platforms use are in themselves operational currencies.
What makes industries like freight and logistics such perfect targets for disruption is the fact their long list of pain points are what make blockchain so enticing. It’s nearly a perfect fit. Recently, Maersk and Microsoft successfully completed a blockchain trial tackling the inefficiencies in the shipping insurance industry. And just a couple months ago, Walmart, Nestle, and Unilever announced a partnership with IBM to explore how blockchain can be used to improve security and traceability in food supply chains. Smart Contracts solve many of the cumbersome manual shipping processes. The indelible blockchain ledger solves for poor data management, storage, and human error. Fraud issues are solved by the astonishing level of detailed tracking. Accountability is solved by drastically improved communication practices.
The list goes on and on—and freight and logistics industries are only the beginning. Blockchain is already moving into other age-old industries like big pharma, banking and finance, insurance, and more.
But the real allure to blockchain technology, and why so many companies are welcoming the innovation, is because of the level of transparency it provides. In a conscious-consumer world where people want to know what’s in their food, what countries manufactured their products, and what labor practices were involved in their favorite gadgets, clothes, and household goods, it’s only a matter of time before consumers are also going to demand increased layers of honesty and accountability from all parties that touch those products along the way.
Blockchain technology and its public ledgers are as transparent as things can get.
And transparency is good for business.