Blockchain can help to end some of the shady practices that exist in the trucking space through the implementation of smart-contracts.

It’s Tuesday afternoon and I am in midst of preparing for a Blockchain presentation for McLeod’s up-coming user conference and watching Chad Bobbett’s Rate Per Mile Master’s user group on Facebook. If you haven’t checked it, I highly recommend it. It’s a collection of brokers, carriers, and drivers all discussing rates and other things on their mind that happens in trucking. It’s a great source of info.

One of the discussions that has garnered a lot of emotion and counter views are related to truck ordered not used (TONUs). A fleet is upset that a broker is not paying him a TONU for a load they tendered and subsequently cancelled on him. The broker says he doesn’t owe it, since the truck was not under dispatch at the time. I happen to side with the fleet- the broker should be liable for a TONU. Any time a load is tendered and subsequently cancelled, the broker should be liable to a TONU. Regardless of whether the truck was ever dispatched out, the fleet expected to haul that load and planned their operations around it. It is disruptive for it to be subsequently cancelled.

But the broker in question also brings up a great counterpoint. What happens when the broker tenders over a load and the fleet cancels? This is also disruptive. The broker (or shipper) are dependent upon a truck to show up and when it doesn’t, it disrupts their operations.

Both practices of cancelling and not delivering on commitments are shady, but are also common practice (anyone that knows my history with Xpress Direct can testify to my rabid use of overbooking and subsequently pulling trucks off other loads). They cost companies billions each year and strain operations. The reason that either party gets away with it is because of the lack of enforceability in agreements. Even if the agreements were enforced, no one wants to litigate these matters in court. Most in the market are too small to have the money for litigation and even if they did, the transactions are way too small to be worth it.

Carriers, brokers, and shippers have built a way of dealing with these issues, mostly just through tolerance. They allow the various parties to get away with it because they don’t have a lot of recourse. The brokers build out large teams of track and trace personnel to track loads and ensure appointment compliance. Carriers employ a team of load planners and customer-service folks to deal with the changes to their network and disruptions that come along with cancellations or appointment changes.

Even Silicon Valley understands the need. Venture backed startups like 10-4, Macropoint, and FourKites have sprung up to provide real-time tracking and visibility solutions to brokers and shippers alike so they can ensure circle-of-service compliance.

All of this could be solved through blockchain. By having firm self-executing confirmation sheets and contracts, fleets that accept loads from brokers or shippers could put in the contract a TONU charge if the load is cancelled. If the broker cancels the load after tender, the TONU would automatically be paid out to the fleet. In the same vein, if the fleet does not show or cancels the truck, the broker could be paid a penalty. All of it would be automatic and self-executing.

The best part of blockchain is that it is trustless, meaning that I don’t have to know who my counter party is. I don’t have to trust them at all or know anything about them. Through the constructs of the smart-contract, the payment and/or penalty is honored regardless of the counter-party.

To implement these offerings, all that is needed is cooperation between the technology providers, brokers, and carriers using blockchain smart-contracts for confirmation sheets and tendering loads using this technology. The great thing about blockchain is that it is decentralized, meaning any carrier, broker, or shipper can write to the contract without having to pay a third-party. It’s all open-source.

The companies that are working on these types of solutions are members of the Blockchain in Trucking Alliance (BiTA). Anyone is welcome to join. If you are interested in learning more, go to: www.bita.studio and sign up.