Startup plans to utilize blockchain to create greater efficiencies in logistics
Talk about disruptive companies. Every startup in the transportation space these days is touting itself as a disruptive company. A few will become just that. Many, if not most, will not. But few are also introducing a technology, let alone a service, that is disruptive.
Smart Logistics Network (SLOGN) is building a “blockchain coin for decentralized logistics networks.” What exactly is that? Many have now heard of the blockchain – it’s a decentralized database that creates transparency with the contracts (or blocks or nodes) that travel within it. It’s most commonly associated with cryptocurrencies such as Bitcoin, but its potential within transportation and logistics is now entering the early stages of being explored.
SLOGN is one of the companies doing that.
SLOGN hopes to launch a blockchain-enabled logistics network next spring. Using SLOGN coins as the currency, the network would provide transparency and automate many of the processes currently found in the supply chain. Those processes can include things like matching freight to available trucks, negotiating rates and accessorials, transferring payments and more.
“Something like this requires extensive checks and [quick turnarounds],” Govind Singh, product strategy at SLOGN, tells FreightWaves, “and that is possible with blockchain.”
But the story of SLOGN doesn’t begin with the blockchain, it actually starts with a company called Bridge18.
Bridge18, founded by Singh, has been 3 years in the making. Singh saw an opportunity to create solutions for smaller trucking companies, 50% of which have fewer than 100 trucks and 90% have fewer than six, he says. The Bridge18 platform is a back-office management system for these fleets which provides them with equipment and driver management tools. It seeks to solve the most common problems smaller fleets face, Singh says: lack of a support team, poor quality management systems, and access to better paying freight in a timely manner. Bridge18 standardizes procedures for smaller carriers and provides that support that so many are missing
“We want to take the capacity of trucks to the brokers,” Singh says, adding that the idea is to open the door to more cooperation and capacity by connecting the smaller carriers and independent truckers.
“We aggregate the capacity of the smaller guys, but instead of competing with each other, they can work with each other,” he says. As an example, Singh notes a small fleet hauling a load when the truck becomes disabled en route. A spare truck is just not available and a late delivery may mean significant financial penalties to the carrier. But, if that carrier was able to access available capacity of another trucker and transfer that load, there would be a happy customer and at least a partial payment for the original carrier’s time.
It was during the time of building Bridge18 that Singh and his partners hit upon the idea of SLOGN.
“The more we were developing the product and the closer we are getting to the blockchain, we realized blockchain was the future,” Singh says.
Based upon the belief that blockchain will ultimately create the transparency and trust needed in the supply chain, SLOGN was born as a separate entity. While Bridge18 is trying to carve out its niche within the industry, SLOGN is seeking to do the same in an entirely different, and unique, way.
Singh, along with Ihor Pidruchny, who is in charge of product design; Govind’s brother Nanak Singh, who is responsible for industry relations; and Andrew Zubko, who is responsible for technology; are working with the development team to build out the SLOGN network.
Govind and Nanak Singh led their own trucking company for several years before Govind decided driving was not his future path. Nanak carried on, eventually growing the company to 132 trucks while Govind ventured off into software engineering.
The idea of SLOGN is to improve the process the entire way through the supply chain. The company is using a “high-level, open-source platform and marketplace” that offers full transparency, resilience and trust, it says, creating a credible source for instant transactions and contract executions, including immediate payments.
Other blockchains are available, such as the quickly growing Ethereum, but SLOGN says its network is optimized for the speed for transportation and logistics. For instance, a common industry problem is carriers waiting to be paid. Using SLOGN’s blockchain, that transaction can occur the moment the receiver confirms acceptance of the load.
The smart contracts can also ensure proper insurance levels are in place as well as the safe delivery of goods – eliminating potential claims or disputes. Fuel advances are another common accessorial that can be handled through the SLOGN blockchain.
“If a [broker] is handling a load for [a customer] and the trucking company is receiving fuel payments from the customer, that money can be transferred directly and [there are no fees that financial institutions would typically charge for the transfer],” Singh explains.
SLOGN coins, which will be utilized for all transactions, will accumulate in an escrow account, he says. So, for instance, if a trucker is receiving $2 per mile for the load, by using tracking technology and the blockchain, a SLOGN coin is transferred into the escrow account every mile that truck travels. Once the delivery is made and confirmed, the entire payment is then transferred quickly and easily.
Each company that participates in the SLOGN blockchain, which is not a public blockchain so all data remains out of public view and is only viewable by those involved in the transaction, will receive an account. Singh anticipates that SLOGN coins from those accounts will one day be able to be used to purchase goods and services such as fuel, food, and supplies.
Until that day arrives, though, “the challenge is to make it very easy for guys to transfer from dollars to SLOGN coin and vice versa,” Singh says. A small transaction fee will be charged to do so, similar to many credit cards.
Within the SLOGN blockchain will be standardized “smart logistics” contracts that participants can use, but the ability to add custom contracts exists as well. Having all the contracts on the blockchain, though, can quickly speed the process of moving goods.
“Contracts are needed for business verification, compliance, insurance, and payment structures,” SLOGN explains. “Since all the parties exchanging contracts are using different software systems, most contract documents are still exchanged using faxes, emails etc., causing a huge delay in the business process and leading to many mistakes.”
The blockchain can eliminate this problem. Once these smart contracts are executed, they generate a computational task to facilitate speed in transactions. “For every 50,000 truck drivers or significant industry professionals, blockchain would process 5.7 economically valuable transactions per second, which is ten times more than the Ethereum blockchain,” SLOGN says.
For those using the SLOGN network, the company has designed a user interface that it says is easy to use and offers interactive, comprehensive and intuitive screens.
Singh and the SLOGN team believes blockchain is the future of transportation industry. The question is, is that future now? SLOGN believes it is, and hopes to be that truly disruptive company come 2018.