The shipping industry is an essential element of the American economy. 70.6 percent of all cargo shipped in 2016 in America was transported by truck, generating $676.2 billion in annual revenue. 33.8 million trucks shipped 10.42 billion tons of weight, driven by about half of the 7.4 million Americans employed by the entire trucking industry. Whenever a consumer buys something from a shop, a manufacturer orders a new container of components, or a grocery store gets a new shipment of produce, chances are high that the products spent part of their journey on a truck.
Trucking’s importance to the economy is only growing. The American Trucking Associations (ATA) predict that goods hauled by truck will increase about 3% annually for the next five years. As the U.S.’s population and economy continue to grow, trucking will grow with it. Transparency Market Research estimates that the trucking industry could be worth $15.5 trillion by 2023.
But the trucking industry is also facing some significant challenges. Inefficiency and a talent shortage are both threats to its long term growth, and shipping industry members everywhere will have to find appropriate technological tools to overcome those obstacles. Fr8 Network, a startup founded by seasoned logistics veteran Jon Fox, thinks they’ve found the solution: blockchain.
The Trucking Industry Today
The trucking industry is fragmented; 90% of carriers have fewer than six trucks in their fleet, and 50% of carriers are owner/operators. This isn’t necessarily a bad thing — in some ways, the trucking industry represents one of the most significant bastions of small business in the U.S. – but it does cause problems when communications in the complex world of product shippers, receivers, and carriers are done inefficiently.
Arrangements between shippers (the groups sending out products) and carriers (the trucking companies) used to be mostly handled by brokers, who employed their Rolodexes of contacts to facilitate shipping arrangements in return for a fee. Because the system was paper-based and only as extensive as the size of any one broker’s Rolodex, it resulted in plenty of empty miles. Empty miles are driven whenever a trucker goes from one place to another without carrying a load, usually when they drop-off a load somewhere and then have to go somewhere else to pick up their next shipment.
Empty miles are inefficient on multiple levels. They waste time and fuel without the economic productivity of moving cargo. They increase the industry’s carbon footprint and its wear on national infrastructure. They make truck driving, already a dangerous profession, less safe: studies show that empty trucks are more likely to get involved in accidents. For owners/operators and drivers who are part of companies that pay different rates for empty miles, they’re economically wasteful, demanding drivers’ resources and time away from home while doing little if anything to boost their yearly revenue.
Unlike some other industries which used to rely on central brokers, trucking has been slow to move away from brokers and other outdated logistics tools. TechCrunch reports, for example, that 67% of shippers rely on paper records instead of software. The empty miles problem is only going to be compounded by a growing talent shortage. ATA estimated that the trucking industry was short by 36,500 drivers in 2016, and that number could increase to 174,000 by 2026 without aggressive recruiting strategies. Improving the efficiency of freight logistics could address this shortage on two fronts: by helping existing truck drivers handle the high demand for cargo transport more efficiently, and by making the economic conditions of truck driving more attractive to potential recruits.
Fr8 Network’s Blockchain Solution
Fr8 Network has created a multi-element blockchain-based solution to counter empty miles. They’ve launched Fr8 Board, an online platform in which shippers and carriers can create profiles and input their capacity or shipping needs. With the help of Fr8 Network’s bi-directional matching engine, carriers can use the board to eliminate empty miles, matching a shipment heading one direction with a separate shipment to carry back home. The Fr8 board is capable of holding far more potential shipping contracts than the average broker, without charging broker fees.
Of course, online platforms are only as good as the trust fostered on them. Brokers created trust-based agreements because they could vouch for their clients even if shippers and carriers hadn’t worked with each other before. Fr8 Network achieves similar levels of trust by requiring blockchain buy-in.
Fr8 Network Board users must buy Ethereum-based Fr8 tokens. When carriers and shippers make an agreement, a blockchain smart contract is triggered that places a set amount of Fr8 tokens in escrow. When the agreement is completed, settlement can be made either through Fr8 tokens (which can be re-used on the platform or sold on public coin exchanges) or through fiat payments. Users also give each other reviews that become part of their Fr8 board profiles, incentivizing good behavior even when temporary partners never meet. Fr8 Network is also creating value-added tools such as federally compliant electronic logging technology and credit services.
Fr8 Network exemplifies what can be accomplished when industry experts join forces with top-quality blockchain talent. However, platforms like these can only take off and spark progress if they are supported by the right mix of talent. Many blockchain applications are coming to the table and promising to revolutionize industries, but these revolutions (like the one that could take place in shipping) will only come to fruition if the right mix of development talent is found and added to existing teams. Luckily, the rise of decentralized job marketplaces are coinciding with the rise of decentralized application talent demands. Smart hiring platforms like Boontech are built on the blockchain to support instant transactions between companies and job-seekers.
Even with a philosophy steeped in decentralization, people will still be at the heart of blockchain applications’ successes or, in some cases, shortcomings. As an essential component of the American economy, we need the shipping industry to thrive, but we also need it to evolve to keep up with today’s demands for more sustainable and efficient delivering systems, and it looks like blockchain may very well be the answer on both counts.Be the first to know about our price analysis, crypto news and trading tips: Follow us on Telegram or subscribe to our weekly newsletter.