Distributed Leisure,  Innovators

How blockchain tech is changing this $10 trillion industry

Logistic’s last mile is getting a lot closer

“In the year 2025, if cash is still alive
If blockchain can survive, we may find…”
With 2,525 apologies to Zager and Evans.

Entrepreneur Charlie Oliver’s Tech 2025 has been a hidden gem in New York City’s technology scene over the past couple of years with in-depth events on key issues, many of which don’t otherwise get much coverage around town.

One topic that Tech 2025 has been covering since at least last year is the global logistics industry and the challenges and opportunities that it faces from new technologies and changing work forces.

Last mile
Photo by Michael Hillmeyer for Modern Consensus.

So, what is the logistics industry? In short, it’s the transportation of physical goods, from raw materials to final products, around the world in what is known as the supply chain. Also included is every type of service associated with the supply chain, including order processing, inventory management, product tracking, and even storage.

Why should we care? Well, the global logistics industry has been estimated by Transparency Market Research to be worth around $10 trillion (that’s trillion with a “t”) in 2018 as fleets of planes, trains, trucks, and ships move more than 90 billion tons of physical goods around the world between businesses and all the way to consumers like us.

A multi-trillion dollar market tends to get noticed and draws the attention of those who hope to make that market more efficient with new technologies and new techniques. The global logistics industry also attracts literal pirates, both on the sea and on the road. It is extremely vulnerable to theft and fraud, both large scale and small, and via organized crime and small time criminals. Where would we be without movies about pirates, gangsters, and complicated heists?

That’s all well and good, but why should we here care about global logistics aside from the tenuous opportunity to riff on the now obscure late 1960s pop hit, “In the Year 2525”?

The answer for us is blockchain.

While blockchain in its current form is not yet ideally suited to the ultra-high transaction volumes in a lot of the financial services industry, its trustless record-keeping, immutability, security, and easy visibility and tracking can be a good fit for the logistics industry. However, given the large size and diverse aspects of global logistics, it is easier to begin by looking at smaller, more discrete parts of the industry.

To that end, Tech 2025 brought in Shankhri Balaji of Fr8 Network to talk about blockchain and the “last mile”, which is the final leg (up to around 100 miles) of the journey for shipped goods to the end user or customer. At an estimated value of $80 billion globally in 2018, last mile logistics might be small when compared to the entire industry, but it’s obviously huge when considered on its own. That’s billion with a “b” after all. It’s also become a key interaction point with consumers who often rate the products that they receive at least partly by their delivery experience.

Last mile
Photo by Michael Hillmeyer for Modern Consensus.

Bajali listed what she sees as the some of the main challenges of the last mile including minimizing costs, ensuring transparency, increasing efficiency, improving infrastructure, and making delivery frictionless with retailers and logistics partners increasingly shouldering the cost of delivery. Combined with the increasing shortage of truck drivers in the United States, those challenges are only getting bigger.

Not all of the challenges of the last mile can be addressed by the blockchain, and the blockchain can’t deliver goods to our homes and businesses (maybe someone will invent a block train?), but it can be used to increase efficiency by simplifying and speeding up much of the paperwork (yes, real dead trees are still being used) and improving record keeping, and the tracking of goods.

The distributed ledger aspect of blockchain means that at every stage of a product’s journey, there can be proof of its provenance, location, condition, and ownership with a much higher accuracy than currently exists while greatly reducing opportunities for fraud or theft

The “trustless” nature of blockchain means that the different organizations involved in the supply chain don’t need to trust one another or their records, with each participant being given permissioned access to the parts of the distributed ledger that are relevant to them. The distributed ledger, in turn, will be verified by consensus algorithms via proof of work or proof of stake.

We should note that blockchain doesn’t completely eliminate the scope for fraud or error. It just makes it much more difficult. For example, “garbage in, garbage out” still applies as it does for data analytics and artificial intelligence. If the original information can be altered at the source or is just wrong, then that error could propagate in a poorly designed system. For an unlikely but egregious example of an error at the source, think of a pig raised as a cow by a clueless city slicker-turned-new farmer. Despite being verified by the clueless new farmer as a cow, when that pig arrives at the slaughterhouse, no amount of lipstick will disguise its true nature from those who know better.

For some real world applications, Balaji highlighted current blockchain projects by IBM, Walmart, and others to track food in the supply chain from its source all the way to its end users. In fact towards the end of Tuesday night’s MLB All-Star game, we saw an IBM commercial about food-tracking with its blockchain. Fr8 Network, has developed a “standardized logistics protocol layer that enables the secure, compliant and efficient management & development of digital applications (dApps).” We think this means that their technology helps other companies develop blockchain applications to fit their needs. Fr8 Network has an upcoming ICO in August for their utility tokens, and their technology will be used by CVS and the United States Postal Service to enable the secure delivery of medications to patients throughout the United States.

Oliver interjected here to add that around 90 percent of the active ingredients in our medications are currently sourced from China and India. Given the obvious need for extra security in the pharmaceutical supply chain, she believes that this is a huge opportunity for blockchain technology. We are afraid this might mean that in 10 years we can look forward to a new “Breaking Bad vs. the Blockchain” television series.

Balaji went on to say that the trucking industry is not currently incentivized to do things most efficiently with many trucks traveling empty or half full. Solutions involving both blockchain and artificial intelligence could help here. Speaking of artificial intelligence, she mentioned that drones, delivery robots, self-driving cars, and last mile storage could also increase the efficiency of last mile delivery.

Last Mile
Photo by Michael Hillmeyer for Modern Consensus.

Oliver brought up Amazon’s recent announcement that it is looking to get started helping small-scale delivery businesses with hyper-local knowledge. This could be particularly useful in difficult to navigate urban centers as well as in lightly traveled rural areas. She also highlighted recent articles in the Washington Post on the large and increasing shortage of truck drivers in the United States despite rising wages for those positions.

In fact, Tech 2025 ran a workshop last year on driverless trucks with Seth Clevenger of Transport Topics News. Clevenger had said that truck makers are initially focusing on systems that assist rather than replace drivers. For example, lane keeping instead of mere lane warnings. Technologies like adaptive cruise control and autonomous braking already exist while highway driving assist systems are experimental in passenger cars and automated steering is the next step. He cited statistics from the National Highway Transportation Safety Administration which show that over 90 percent of vehicle crashes are due to human error. Up to 80 percent of those crashes could be mitigated eventually with autonomous vehicles.

Clevenger believes that long haul trucking, mostly away from urban centers given its generally lower complexity, will be the first place where driverless trucks appear. He believes that they are not far off. He also addressed the last mile problem by saying that remote truck drivers, much like remote drone pilots in the military, could take over for or assist the self-driving technology once the truck gets close to its destination or passes through a more complex area.

We saw “Logan” last year, and the CGI driverless trucks in that movie were disturbing as they zipped by CGI horses without seeming to notice them at all. We hope that real driverless vehicle technology does a better job of noticing and avoiding unexpected obstacles in the road.

Getting back to blockchain, while it may not solve all of the problems faced by the global logistics industry, it certainly appears to be on track to address many of them‑even if it makes future heist movies that much more complicated.

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Michael Hillmeyer has primarily been an independent consultant in the financial services, technology and healthcare industries since 2004. Prior to this, Michael was a senior sell-side equity research analyst at Merrill Lynch covering several technology industries. He owns no positions in any cryptocurrency but writes the “Distributed Leisure” column for Modern Consensus.