The Pursuit of Blockchain and a Digital Future

Tuesday, May 15, 2018

Blockchain is a hot topic, to put it mildly. Progressive Railroading recently interviewed me for an examination of blockchain as a game-changer. Read the article here.

It is important to recognize that blockchain is a generic technology, not a standard. Freight transportation will require standards for transmitting and adding to the blockchain, adjudicating ties and defining the messages, among other things. There is exciting potential in the Blockchain in Transportation Alliance (BiTA) and its ability to set those standards.

I think an even more interesting story is, "How is blockchain different from Electronic Data Interchange (EDI)?" EDI has been around for quite a while and is successful. It can be painful to implement if you are the small player and your partner is a giant who requires you to comply with its EDI standard. When two large trading partners come together, their EDI teams meet, send sets back and forth, and so on. There is a lot of manual labor required for EDI and, even when it is established, almost all transportation companies are still bombarded with emails, phone calls, as well as faxes in some cases. I hope that blockchain provides the buzz, funding and attention to reduce all that back and forth messaging.

I wonder about what shippers will do. It’s up to shippers and their proxies to decide if blockchain is worthwhile, and then to set standards. If major shippers request blockchain, carriers will follow suit quickly.

Clearly, blockchain technology has great promise for supply chain. Almost anyone will agree that freight transportation presents an excellent problem case for a distributed ledger. As blockchain develops, will we achieve the necessary level of granularity underneath to greatly reduce or eliminate all the emails, phone calls, on‑boarding kits, and PDF files? Can we institute smart contracts with all the terms and conditions built in?

Blockchain provokes the right conversation because it gets transportation executives focused on the digital supply chain: reducing touch labor and improving transparency. Every transportation company is trying to reduce cost and administrative overhead and trying to be more service-friendly. At your company you should be asking, “When blockchain comes, when our vendors start using it, when our suppliers start demanding it, what will we need to say about the way we think about business?”

If implemented, blockchain may show companies that manually keying in transactions and responses—essentially “faking” blockchain—will yield no savings. If blockchain gets executives trying to figure out what to automate and optimize, then that's a good thing.

I can see early blockchain applications in vendor payment and settlement. For example, a Class-I railroad could tell its short line partner, "I will put a smart contract on the blockchain, and on the following event I will release payment to you.” That would work nicely because the two railroads have a long‑term, durable relationship. If you release early in one instance, you can always catch up on the next one. Like other transportation companies, railroads want to reduce the amount of handling of information between them, and the tie to payments would be great for a lot of regional railroads that can use the cash flow and typically run lean operations.

Railroads and other transportation companies should be asking their customers if blockchain is on their roadmaps. If it is, they might say, “As your trade partner, we would like to be part of those conversations, so we understand what your requirements are going to be and what use cases we want to handle." That is a perfect situation to lean in and to be early on blockchain. I recommend establishing a commercial reason to develop applications and very specific use cases that result in real testing.

In short, blockchain is part of a wonderful, larger conversation about a future of greater efficiency and transparency. The pursuit of blockchain is the pursuit of a digital future.