Blockchain and Why a Freight Shipper Should Care

Blockchain Has Meaningful Impact on Finance as well as Freight Shipping: Here’s the How and the Why

What Even Is Blockchain?

By definition blockchain is a decentralized digital ledger that records transactions across a peer-to-peer network. Unlike traditional databases, which rely on a central authority, blockchain uses cryptographic methods to ensure that data is tamper-proof and transparent. Each transaction (or block) is linked to the previous one to create a chronological chain of records (Hence the name, blockchain).

We know, it’s complicated, but bear with us. It’s important and it’s only going to become more relevant with time.

The technology first gained prominence as the foundation for cryptocurrencies like Bitcoin, but its potential applications now go far beyond just digital currency, and that can be especially visible in industries such as freight shipping and supply chain management.

Why Should You Care?

Transparency and Efficiency

Freight shipping involves multiple parties at every step of the process. Shippers, carriers, customs officials and brokers, warehouses, and insurers may all have to work on your shipment, possibly even just a single shipment. These parties often work online which means they’re scattered across the country or countries and that they, more often than not, work on incompatible systems. Blockchain allows each party to view the same set of records in real time. This transparency reduces the risk of errors, fraud, or delays that could be caused by data silos or physical documents. Yes, some old school brokers and carriers still use pen and paper for the bulk of their workload.

Traditional freight processes can take time and be quite bureaucratic, with multiple documents like BOLs, customs forms, and invoices. By digitizing these documents on a shared ledger, blockchain could eliminate excess paperwork and automate tasks that would otherwise require human oversight. For you, this means that a potential customs delay would be caught and avoided right away, instead of having to wait for one party or another to locate the documents and process them…

Security

One of the core benefits of blockchain is its immutable nature. Once a record is added to the chain and verified by the network, it cannot be changed or deleted without leaving a trace. This makes it easier to detect tampering or unauthorized alterations, which is important in an industry where even minor inaccuracies can lead to disputes or financial losses. On top of that, by using crypto methods, blockchain secures data exchange, which is particularly useful when dealing with sensitive freight information such as blind shipments or sensitive cargo.

How We Can Use Blockchain in Freight Shipping

Smart Contracts & Chain of Custody

Smart contracts are a relevant concept made possible by blockchain technology. It allows for certain actions to be taken automatically once conditions are met. For example, a payment can automatically go through once a shipment is booked, or a tracking update could be released once a shipment is marked as touched at a warehouse. 

If a shipment is damaged or delayed, smart contracts can adjust payment terms or insurance claims instantly.

Blockchain’s ledger can track a shipment’s journey from origin to destination. Each handling event from loading to customs clearance, warehousing, etc. can be recorded as a secure transaction. If cargo goes missing, is damaged, or if there’s a delay, everyone involved can pinpoint what, where, and when happened. This aspect could help resolve insurance claims much faster and much more easily than before.

In some sectors (like pharmaceuticals or high-value electronics for example), it’s necessary to confirm that the received goods are correct. Blockchain can store unique product identifiers such as barcodes or serial numbers to make sure that tampering or counterfeiting is detected instantly if a mismatch between recorded data and physical goods exists.

Cross-Border Shipping & Customs 

Cross-border shipments are often bottlenecked at customs. Documents have to be verified multiple times, brokers may be delayed, or information between the broker and carrier might be missing. A blockchain-based system could allow customs officials to view and validate all relevant paperwork in almost real-time, which could reduce delays and red tape. This is especially relevant for countries looking into e-documentation for their imports and exports. You can see what reliable cross-border shipping looks like here.

Industry Examples and Initiatives

• TradeLens: A platform developed jointly by IBM and Maersk, with an aim to digitize the global supply chain. It uses blockchain to connect shippers, ports, customs authorities, and other stakeholders. TradeLens has shown the potential to speed up clearance processes, reduce the amount of paperwork, and improve the visibility of shipping routes.
• DHL and Accenture Collaboration: DHL has been exploring blockchain for pharmaceutical shipping solutions to maintain the integrity of medicines and to make sure they have eyes on those shipments at all times during transit.
• Walmart’s Food Traceability: While focused on food supply chains, Walmart’s use of blockchain shows us how quickly tracking can be improved. What used to take days to track now takes seconds. Walmart shows us that we’re moving towards transparent freight operations in other sectors too.

The Challenges

Scalability

Blockchain networks, especially public ones, can face scalability issues such as transaction speed and data storage. For freight shipping, where companies can have thousands of transactions daily, solutions have to be instant and handle high traffic without slowing or breaking down.

Interoperability

The freight industry is extremely fragmented. Different carriers use different software, and not all of them are ready to integrate blockchain. A possible solution is working on open standards or consortiums to promote interoperability. However, it’s not easy or even feasible for all companies to change their systems, especially in a smaller timeframe. Even simple updates can cause lost shipments, delays, and communication issues between carriers or even within a single shipping company.

Adoption and Costs

Implementing blockchain requires technical expertise and significant investment in infrastructure. Small and mid-sized carriers might find it hard to justify the costs if the expected benefits are not immediately noticeable. Carriers already deal with significant money sinks such as improving their fleets with newer, more efficient trucks, maintenance, equipment, etc.

Regulation

Regulations around data privacy, cross-border data sharing, and blockchain transactions are not yet universal so they can vary wildly from region to region. All involved freight shipping companies, from carriers to 3PLs, have to make sure that their blockchain implementation complies with both local and international laws such as, for example, data protection.

Even if the technology is solid, employees and partners need to adapt to it. Training teams and educating everyone involved on using blockchain-based systems can take a lot of time and just as much resources.

Conclusion

Blockchain is a promising technology for the freight shipping industry. It can provide transparency, security, and even efficiency in a very complex and fragmented market. The aforementioned features like smart contracts, traceability, and secure data sharing can help streamline cross-border shipping and prevent fraud. All of this can ultimately help save everyone both time and money in the long run.

While we’re still facing issues such as scalability, interoperability, and regulations, we also already have existing programs and companies that serve as a clear sign that blockchain is already stepping foot in the freight industry. Freightera, with its mission to make freight shipping easy and green, is excited to introduce this new technology for our shippers, once the industry overcomes initial adoption barriers and establishes common standards.

Freight shippers, carriers, investors, and innovators alike, should keep an eye on blockchain development. As the technology matures, it could reshape how we book, track, and pay for shipments. We can expect to see an improvement in safety and security for the logistics industry in the coming years.

And as always, happy shipping!