Two chains: Blockchain supply chain
When Bitcoin futures began trading on Monday, Dec. 11 and instantly rose 26 percent, it was a sign that people expect the top name-brand virtual currency to keep going up. Anything that goes from $1,000 to $17,000 in a year is eye-catching. Buying futures in it shows either belief in the concept, or belief that there are enough other people to keep the bubble inflated to provide a quick return.
The underlying technology of Bitcoin, blockchain, is a much more sober proposition, and one that is taking the business world by storm. It promises to make record- keeping almost perfect: reliable, transparent, secure and authoritative. All sorts of businesses are seeing the possibilities. Medical records could last a lifetime, instead of the usual five years as people or doctors move. Educational certificates could be transferrable across international borders. The music and entertainment industries could use it to fight piracy.
And then there's something dear to Portlanders: the supply chain. With firms such as Nike, Intel and Adidas controlling vast and swift empires of parts and getting them to market on time, supply chain management is a valuable skill in the Portland area.
Moe Jubitz started DAT as Dial-A-Truck in the 1970s to allow drivers to find loads quicker. Today, it is the trucking industry's premier load board, freight-rate aggregator and industry data provider. At the end of October DAT Solutions, the Beaverton based company announced it is joining a new trucking industry group to promote blockchain technology and standards in the transportation industry.
The Blockchain in Trucking Alliance (BiTA), as it is known, plans to "foster the development of uniform blockchain standards through increased collaboration among transportation industry leaders," according to a release.
"Blockchain is envisioned to support real-time, transparent information sharing among shippers, carriers, freight brokers, vendors and other stakeholders. For example, the blockchain participants could update tracking information, expedite payments and contracts to create a more connected and more efficient supply chain."
Fergus Caldicott, VP of Technology at DAT, told the Business Tribune that the distributed part of blockchain is the key to it all.
"The benefit is you don't have to rely on a central server," he said. "It's like you no longer have to log into your bank to see a transaction."
It's exciting for people to know when an expensive piece of freight is being handed off, to give it visibility all along the way. It is especially valuable for hazardous materials or expensive ones such as electronics. Shippers, brokers, drivers, insurers, manufacturers, and retailers all have an interest.
Brokers already have tracking systems, and truckers have their GPS systems, but with blockchain everyone can subscribe.
Although there is a bill of lading showing where the freight is going, often the parties involved barely used the Internet.
"Trucking is ripe for new technology," said Caldicott, and DAT Systems' work is already advanced. (During the hurricanes affecting Houston and Florida in 2017, their database of trucks and drivers was heavily in demand as the industry sought to work around the destruction.)
"The potential efficiency improvements are incredible."
The last fax
"Another huge thing is simply reducing errors. A truck driver might have a fat document, and he's trying to pick up a half million-dollar load and it's not terribly legible, and they're trying to get approval, and they using that document to create an invoice and get paid, faxing parts of copied documents..."
Although Caldicott is one of the creative minds behind what DAT Systems does with software, he defers to Craig Fuller, chief executive of TransRisk who is the co-founder Blockchain in Trucking Alliance.
"He's the one who's blazing the trail on the industry group, and we're talking to him."
Like the arrival of the Internet, or the World Wide Web or mobile applications, we look at the application. Blockchain is a technology that is always secure and immutable." (If anyone makes a change to a document, everyone sees it. If that sounds like Wikipedia, it's not. Wikipedia still maintains a central server where it has the final say.)
"It's a trustless environment. You don't have to know who you are doing business with."
The trucking industry remakes its platform every five years or so, so Caldicott knows what the challenges are.
"This is not a technical challenge, but it's a real social change. Trucking is still paper-based, you're used to getting a fax and having an admin go through the files."
FedEx and UPS
BiTA has around 100 members so far, with applications in for 500. All the big names, such as UPS and FedEx, are in.
According to another Beaverton-area company, Digimarc, blockchain is radical.
"Vinya Gupta wrote in the Harvard Business Review, blockchain challenges the traditional database model with 'a
radical proposition: What if your database worked like a network—a network that's shared with everybody in the world, where anyone and anything can connect to it?'"
"Blockchain technology is an open, decentralized database that facilitates transactions. Some people think of it as a decentralized public ledger. And through its transparency, blockchain creates trust among peers, for there is no one single party controlling data, and the community can easily verify content for accuracy," according to Digimarc.
"A blockchain is built by connecting many nodes, or computer users, who have a blockchain address (you establish an address by going to an open source blockchain provider). Once a blockchain database record is changed, that change is replicated across all the blockchain nodes in the network, meaning that the information is permanent and cannot be altered without replicating across the chain. Contrast this with the traditional database, which is owned by one party and can provide access as they see fit, as well as alter or delete records in the database at will."
Sharing is caring
Steven Carnovale, Assistant Professor of Supply Chain Management at the School of Business at Portland State University thinks blockchain has the potential to revolutionize how certain aspects of the supply chain work.
"Shipping is low-hanging fruit. Now it is all customs, bills of lading, DOT regulations, all different things. Not having some type of compliance, or having one incorrectly entered, could cause delays, and if you have perishable goods, bad things can happen."
He says the biggest step is it eliminates the need to have a neutral arbiter to show the transfer of ownership. "The key constraint is everyone agrees to share the information."
He says bitcoin uses cryptography to create a hash which creates the record. In the supply chain, companies that collaborate would have to share more information, which they are not used to doing for fear of industrial espionage.
"If everything was transparent, and there was a large inventory heading from A to B, people could read into that and make a new strategy. Any edge is crucial to winning."
Food for thought
"When I talk to people, they say in theory blockchain is a great idea, but there's an expectation of trust between parties that might not be there."
He said it's very early, and there are
only a few big players involved in blockchain. (IBM is heavily invested in blockchain, and JPMorgan, Microsoft and Intel are creating a computing system based on Ethereum.)
"I think it's analogous to ERP in the beginning. They saw the value in system-wide aggregated repository of information, but when you go to Oracle it's a multimillion dollar project."
It might be useful in the food supply chain.
"What's often sold as tuna is escolar, which can cause issues in large quantities. Or if you have a bag of lettuce with listeria, you could find which plant the food originated from and then find the farmer or source. You could trace every step along the food security path."
Reporter, The Business Tribune
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