The modern transportation ecosystem relies upon technology every second of every day. From the practical applications of machine learning and artificial intelligence to the futuristic appeal of the Internet of Things and blockchain technology, every element of the global supply chain can now be influenced by technology. Yet despite the industry’s dependence upon different forms of technology, many shippers, carriers and consumers are unfamiliar with the innovations making it all possible. 

In our on-going Tech Talk series, we’ll be leaning on the expertise of our CTO, Jonathan Salama, to decode the most prevalent tech terms of the day. 

What is blockchain technology?

Blockchain is a shared, distributed ledger that facilitates the process of recording transactions and tracking assets in a business network. An asset can be tangible like a truck, or intangible like an insurance requirement. The blockchain that supports cryptocurrencies like bitcoin is a public network open to any investor with millions of users around the world. The blockchain proposed in the U.S. trucking industry would be a private one for shippers, carriers and brokers.

 Jonathan Salama is the co-founder and CTO of Transfix.

Jonathan Salama is the co-founder and CTO of Transfix.

Some view blockchain technology as a silver bullet for the freight industry, do you share that optimism? 

The promise of blockchain has, at times, outweighed the hurdles facing its implementation, at least as it relates to public opinion. If implemented well, blockchain could be the “silver bullet” that makes the entire trucking supply chain more efficient. The prospect of shippers, carriers and brokers collaborating on a secure, frictionless network, is undoubtedly exciting. 

This raises the question: What exactly is preventing blockchain technology from revolutionizing the trucking industry? In my opinion, there are three clear impediments. For starters, the technology itself is slow. As a technologist, the term slow and fast isn’t used all that often because it is imprecise, but in this case it does encapsulate the issue at hand. For context, consider Bitcoin and how that works. If you were transferring money from overseas to the U.S., the transaction could take days or weeks before Bitcoin. Now you’re seeing that transaction completed in 10 minutes. But that’s only what you’re seeing as a consumer, that’s not accounting for the backend, where vast amounts of data are being securely transferred. So while this was attractive for people moving money overseas, a 10 minute transaction process is not attractive for our industry when technology like Transfix’s platform can already move faster than that. 

The second reason that blockchain hasn’t caught on is that it would require participation and buy-in across the board. Small carriers, who have six or fewer trucks in their fleet, account for over 85 percent of all trucking companies. It’s difficult for any small business, not just those in trucking, to have the means to purchase and learn new technology. In order to participate in the blockchain, both carriers and shippers must have access to the software, hardware and operational knowledge of the technology. Additionally there would be a cost associated with a private blockchain system, particularly at the hardware level (private processors). 

As an aside, if the electronic logging device (ELD) rule taught us anything, it’s that getting complete compliance across the industry for any new technology is a massive lift even when backed by U.S. law. Despite organized informational campaigns, over 60% of all drivers waited until the final month to adopt the new and required technology. 

The third and final hurdle standing between our industry and blockchain utilization is data sharing. Convincing one of the nation’s largest, most fragmented, and traditional industries to trust a new online network and embrace data standardization, across the board, is a massive and delicate undertaking. Many shippers view their supply chain data as proprietary information and would be unwilling to part with it. On the carrier side, fragmentation and technological adoption issues have been present for some time. The electronic data interchange (EDI) is an example of an attempt to create a single standard in the logistics industry. EDI has been around for more than 30 years, but there is no single EDI standard. Different companies use different versions of EDI, which results in very meticulous and time-consuming integration and development work so that companies can collaborate. 

In the end, I don’t believe blockchain technology and the way our industry operates, makes for an ideal pairing. Current security, speed and transparency concerns are all well founded and would need to be addressed before we could realistically call for widespread adoption as an industry. While a blockchain-logistics marriage remains an interesting what-if scenario, platforms like Transfix are actually delivering reliable and flexible capacity at the speed businesses need to power their modern supply chains. 

If you have questions for our Tech Team, we’d be happy to answer them in upcoming posts! Tweet at us with the hashtag #TalkToTech.

Transfix accelerates into the fast lane with plans to go public via merger with G Squared Ascend I, Inc. (NYSE: GSQD).
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