Beyond EDI, part 2: shippers, carriers look forward to ‘trustless’ freight transactions

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Updated Nov 3, 2017

Editor’s note: this is the second installment of the two-part series on “Beyond EDI.” Part 1 covered technologies carriers use to share routine data with customers. The current article looks at an emerging technology called Blockchain.

Electronic data interchange (EDI) has traditionally allowed carriers to edit transaction data before sending it to their customers. EDI transactions include shipment status updates, invoices and other routine transactions.

GSF Logistics, the private fleet of Golden State Foods, is working on a blockchain initiative with IBM.GSF Logistics, the private fleet of Golden State Foods, is working on a blockchain initiative with IBM.

Inherently, EDI can cause trust issues, which shippers and freight brokers have tried to solve by using newer technology that integrates directly with their carriers’ IT systems to automatically capture data.

An emerging technology called blockchain could further eliminate the trust issues by securing freight transactions using encrypted “blocks” of data linked together, distributed and stored on the computer systems of all parties involved.

Information in this distributed database, a “hyper ledger,” cannot be changed or edited.

On its website, professional services firm Deloitte explains the links between the blocks and their content are protected by cryptography that makes it nearly impossible for transaction data to be destroyed or forged.

Interestingly, no one owns blockchain; it is a protocol for the computer code and algorithms that anyone can use to build applications.

The technology can speed up transactions, secure data transfers, and eliminate intermediaries. It will not likely be free, however, as carriers will likely have new transaction fees coming to their freight networks.

A ‘trustless’ environment

Creating blockchain networks will involve negotiations among stakeholders for what data will be made visible. Shippers, 3pls and carriers can pre-negotiate all of their business rules for freight transactions. Once those negotiations are established, trust issues evaporate because data tells the story, which is something EDI could never do, says Tim Leonard, chief information officer of TMW Systems, which provides management software systems for transportation companies.

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“The more you capture those business rules in negotiation, the better the blockchain becomes,” he says. For example, a blockchain network could recognize a carrier delivered a load and trigger funds in escrow to be released automatically for the freight payment.

Leonard estimates that 40 percent of back office labor could be eliminated by automated freight payment applications, which would render credit and collections obsolete.

TMW Systems has been working on blockchain applications. One of the first steps was to develop a “metadata configuration” called the Trimble Freight Cloud. When negotiating contracts or data sharing agreements with shippers and brokers, a carrier can choose what data from the Trimble Freight Cloud they wish to share, he says.

TMW won’t release data from the Freight Cloud unless the carrier acknowledges that it has given a third party, or parties, the necessary authorizations to grab the information, he says, that may include accounting data, trip moves, stops, shippers, consignees, commodity types and more.

McLeod SoftwareLike other technology suppliers, McLeod Software is now in the discovery phase of how it will participate in the emerging blockchain applications, says Robert Brothers, manager of product development.

“We know we will end up being part of the transactional record,” he says, and believes that shippers will be the ones who drive the adoption of blockchain technology among carriers.

“Our role is to make sure there are standards so that implementations of blockchain do not end up being different for every shipper and every transaction,” Brothers says.

Gaining traction

Craig Fuller, founder of the Blockchain in Trucking Alliance (BiTA), predicts that blockchain will become the predominant technology in the trucking industry within a decade. BiTA’s mission is to educate technology suppliers, trucking and logistics members on the technology and to develop common standards for blockchain applications.

More than 60 companies have already applied to be members of BiTA. On a larger scale, Deloitte predicts that at least 10 percent of the global GDP will be stored on blockchain platforms by 2025.

Food supply chains stand to benefit the most from blockchain, says Shanton Wilcox, a partner at Infosys Consulting, a global technology services and consulting firm. The technology makes it possible to better manage supply chains and, perhaps most importantly, trace contamination in food quickly to the source and determine which products are effected.

Real-world applications

IBM is now working with a number of companies in the foods business on blockchain applications. Companies involved include Golden State Foods, Nestle, Unilever, Walmart and Tyson.

Bob Wolpert, the corporate senior vice president and president of GSF Logistics, the company that manages transportation for Golden State Foods, describes blockchain as a “cloud-based fabric” that will weave together the various “handshakes” that take place today between various IT systems in the supply chain by using EDI and APIs.

Golden State Farms Semi-TruckBy using blockchain, GSF Logistics will have single-system access to a complete chain of data events as food moves from the origin to the final destination. The chain of events will include temperatures, load tracking, certificates of quality and other details at every stage, and will be “immutable, secure, and real time,” he says.

GSF Logistics operates more than 1,000 tractor-trailer combinations to support its last-mile distribution of products to customers, which are some of the largest restaurant chains in the world. GSF Logistics runs more than 60 million miles per year.

Paper Transport, a 700-truck carrier based in Green Bay, Wis., is a BiTA member. Peter Covach, director of information technology, likes the idea of a distributed hyper ledger to “verify transactions as they occur” to eliminate disputes about who is to blame for a late delivery or detention event, he says.

Parties involved in a freight transaction — shipper, consignee, 3pl, carrier and freight visualization partners like FourKites — currently work with different systems and all have different versions of the truth, so to speak.

“I think the value (of blockchain) comes in eliminating the amount of effort and manpower that goes into reconciling events,” agrees Ben Schill, vice president of Paper Transport.  “It’s not going to speed up the delivery of a truck, but it will create significant improvements in the actual operation by eliminating all of the slop and backend support that goes into supporting and reconciling what happened.”

Blockchain has the potential to be disruptive, but given the amount of change the trucking industry has already gone through in the last few years, Schill and Covach want Paper Transport to be in a position to take early advantage of new opportunities.

“If we decide to stay status quo as an industry in 30 years we will be phased out,” Covach says. “If we are not constantly re-evaluating new technology, there is no way we are going to stay in competition with the Ubers and Googles of the world.”