The freight and shipping industry is in need of an upgrade. According to John Monarch, CEO of ShipChain, a blockchain and logistics company, a single transaction sometimes requires ten companies to get a shipment from seller to destination. Making matters worse, none of these companies use the same record-keeping system and they have an incentive to keep bad records in order to deflect blame if something goes wrong at any point in the process.
When Monarch saw what the Ethereum blockchain was capable of, he knew it was the solution to the industry’s woes. With a team including original ‘Shark’ Kevin Harrington, he started ShipChain, raising $30 million in a token pre-sale event early in 2018. With a recent legal tripwire avoided, ShipChain is set to disrupt freight, an industry that ranks among the world’s biggest at a value of $13 trillion.
Bringing Clarity to the Supply Chain
As Monarch explains, one pressing issue in freight is the problem with handoffs between different carriers along the supply chain. Due to our global economy, a shipment may need to cross half the planet in order to reach its destination. Along the way, it uses a multitude of different modes of transportation. It may start out on a container ship, then move to a train, and finally end up in a truck that spirits it to the fulfillment center. Each leg of the journey is often a different company or independent contractor, and their collaboration is orchestrated by a broker who charges a huge fee for the service.
ShipChain’s blockchain platform would solve this issue of cost by eliminating the broker, setting up a digital marketplace where shippers can deal directly with carriers in order to get the shipment where it needs to go. Smart contracts on the blockchain execute each time a handoff takes place, recording comprehensive data about the health of the shipment to the digital ledger, where the data cannot be deleted or changed. In order to ensure reliability, ShipChain also intends to employ teams of inspectors that will be present at the handoff or inspect warehouses where the freight is kept. According to the company’s recent tech update, the smart contract used for handoffs, known as LOAD, is operable and undergoing testing with the initial group of industry partners.
ShipChain’s platform is also open to third parties who wish to use the platform’s Transmission API (based on REST API) to make use of the smart contracts without having to develop their own. This encourages widespread adoption of the platform while keeping it decentralized at the same time. Companies with no connection to ShipChain can even use the source code to make their own tracking devices and smart contracts to suit their needs.
Solving the Transportation Labor Shortage
Another crisis-point in the freight industry is an acute shortage of truck drivers in the US. The typical driver is in his 50s, and there’s no sign of the younger generation picking up the slack. Although the money is increasing to the dearth of skilled labor, the issue looks to be getting worse, with studies showing a drastic increase in costs due to the undermanned workforce. Added to the broker fees that can reach 30%, this puts a significant and unnecessary financial burden on customers and shippers across the supply chain.
Monarch has made it one of ShipChain’s priorities to address this problem. Another of the smart contracts developed for the platform is RATING, which functions similarly to the reputation systems used by companies in the gig economy. Truckers who take jobs through ShipChain’s marketplace can earn rewards through such factors as safe driving, fuel efficiency, and on-time delivery. Such bonuses are paid out in SHIP token, the platform’s medium of exchange, and would incentivize more participation in the workforce. Younger drivers may also grow more interested in trucking as it finds itself on the cutting edge, technology-wise. The smart contract, RATING, is currently under active development. Like the other smart contracts and the blockchain more broadly, the data it records cannot be forged or tinkered with once it’s been verified and recorded.
And this is only scratching the surface of ShipChain’s potential. In ten years time, the freight and shipping industry may look like an entirely different animal — bigger certainly, but also sleeker, faster, and more powerful than ever before.