Blockchain Fixes

Rajat Rajbhandari, PhD

For shippers, carriers, brokers and freight forwarders, blockchain technology is poised to address supply chain challenges and improve logistics efficiency.

By Rajat Rajbhandari

CEO and Co-Founder

dexFreight



With companies around the world continually investing in new products and markets, it should come as no surprise that the logistics industry is steadily growing. By 2023, its revenues are expected to exceed $15 trillion globally. From 2015 until 2024, freight volumes handled by logistics entities are anticipated to increase by 70%.


Logistics plays a central and essential role in the movement of goods and supplies, especially in a growing and increasingly global economy. And as the industry expands, with that growth comes the need for a new way of managing a complex set of business processes.


At the same time, there are several supply chain management issues to overcome. Many are the result of applying traditional practices, which have served the logistics industry well but now require modern solutions to modern challenges.


One issue, for example, stems from the large number of stakeholders involved in providing logistics services. Another is that the information that drives logistics is often in different systems, creating silos of data that slow processes, lead to accuracy issues and ultimately impede the ability to achieve higher levels of efficiency and productivity.


And there are deeper industry and process issues as well. In the highly fragmented and expanding logistics industry, the largest companies only control a small percentage of the market. By one estimation, the four biggest logistics operations hold only a 15% market share combined. That, in turn, leaves a vast number of smaller entities that often don’t have the capital or resources to make required information management technology investments.


One example of how that creates an issue for providers of transportation and third-party logistics services to shippers involves invoicing processes. While larger companies have integrated system solutions at their disposal, smaller operations often spend considerable time and staff resources employing manual processes to fix invoice errors. By some accounts, nine out of every ten invoices has an error that needs to be resolved.


There are trust issues as well. For example, double brokering can be a concern for shippers. The practice occurs when a broker uses a different brokerage to move a shipper’s load. In those rare instances, the shipper does not have a relationship with the actual supply chain entity moving its freight, and often only finds out it took place if an accident or cargo damage occurs.


The good news is that there is a rapidly developing solution to these and other challenges for the burgeoning logistics industry. Blockchain technology provides visibility into every aspect of a load by using a decentralized logistics platform. Without the need for a large enterprise management infrastructure, blockchain can remove data silos and allow integrations with other systems.


Blockchain accomplishes all that in several ways. It allows supply chain stakeholders to transact and collaborate transparently. Acting as a third-party notary, it saves administrative time and costs, eliminates errors, ensures data security, and solves the issue of false documentation.


Relationships built on trust between logistics stakeholders, including brokers, shippers and carriers, will be strengthened with blockchain technology. These solutions will improve planning, coordination and communication through full visibility over the entire process. With blockchain platforms as well, because the technology gives all parties access to the same invoice, bill of lading, purchase order and proof of delivery documents, it requires less time to approve invoices and settle payments.


Smart contracts are a core component of logistics blockchain solutions. On average, companies spend over three hours manually processing a single shipment, which also increases the risk of error. Using smart contracts, logistics operations can use unified records of every single aspect of a shipment’s transactions.


Agreement terms including rate, location, time, equipment, and payment are recorded in smart contracts, facilitating faster settlement and transactions between multiple users. And the smart contract is only created after both parties accept the shipment terms and the only way to modify it is if all the parties involved agree to do so.


In the fall of 2018, dexFreight completed its first blockchain-based shipment using a smart contract platform from RSK that allowed the shipper and carrier to directly connect, negotiate rates, and schedule pickup and delivery. Funds for the transaction were held in escrow by the smart contract on the integrated RSK platform, and were automatically released to the carrier upon delivery.


The dexFreight platform will also integrate with the blockchain-based Smart Bill of Lading (Smart B/L) solution from CargoX to provide shippers, carriers, consignees, and other supply chain stakeholders with a digital replacement for paper documents. The fast, safe, reliable, and cost-effective way to process Bills of Lading will reduce the total time needed to transfer cargo ownership rights from days to seconds.


dexFreight is building its blockchain based platform with the real world expertise of logistics stakeholders, including shippers, carriers, brokers, and freight forwarders. Open to U.S.-based companies, the dexFreight Early Adopters Program will evaluate new and advanced features of the platform to further foster effective collaboration, and to reach optimal levels of visibility and accountability for all parties involved. 


The dexFreight blockchain platform features TMS/FMS integration, load and capacity matching, safety data, rate negotiation, accessorial selection, P&D scheduling, shipment tracking, navigation and communication, and payment management. Its platform utilizes a novel approach of smart contract triggered invoice-free payments and escrow services. It also includes decentralized alternative financing for trucking companies managed by smart contracts resulting in much lower cost of borrowing. 


According to the 2018 Third-Party Logistics study, over 60% of shippers and carriers have shown interest in blockchain technology due to its potential to improve visibility. The global research and advisory firm Gartner has suggested that by 2023, $2 trillion of goods and services will be supported annually by blockchain technology.


Today, companies like dexFreight are unleashing the power of this technology to the benefit of shippers, carriers, brokers and freight forwarders around the world. With the dexFreight decentralized, blockchain-based logistics platform, supply chain stakeholders can transact and collaborate more efficiently, transparently and securely. For additional information, visit www.dexfreight.io.


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