18 Apr Why are we building dexFreight, a decentralized logistics platform
Global logistics cost is projected to reach USD 15.0 Trillion by 2023 for all modes of transportation including trucking, air, rail, pipeline, and maritime. The US logistics industry total was USD 1.48 Trillion in 2016, and represented 8% of the annual gross domestic product (GDP). In logistics cost is USD 1.4 Trillion involving approximately 1 million companies. According to Armstrong and Associates statistics, global 3PL gross revenue in 2016 was USD 800 Billion. Logistics is the process of planning, implementing, and managing procedures for the efficient and effective transportation and storage of goods from origin to destination. It is also a complex and fragmented industry in which multiple stakeholders collaborate, compete, and transact to move goods from origin to destination.
dexFreight’s co-founders have been in logistics industry for over 20 years as brokers, freight forwarders, carriers, and shippers. When we sat down late last year and brainstormed which problems blockchain technology (with the help of other technologies such as IoT and AI) can impact the most, we came up with following list of problems —
- Over Reliance on Brokers — Shippers and carriers often do not transact directly. Instead they rely on brokers to find appropriate carriers and solve trust issues which translates to additional cost ranging from from 10–30%.
- Shippers Don’t Know End-Provider of Service — The number of decisions required to move goods from a shipper to consignee (receiver) is excessive. Most of these decisions are taken by freight brokers. Hence, shippers most of the time are not fully aware of who is moving their load. If a broker selects sub-par carrier to move shipper’s goods, which results in delay or theft then it triggers disputes between shippers and brokers.
- Payments to Carriers Are Not Instantaneous — Most carriers are not paid instantaneously after they have delivered shipment. Days to pay carriers can range from next day to over 90 days. Average payment time being 37 days. Carriers are typically paid by brokers, which has to be paid by shippers in conjunction with flow of paperwork such as invoices, purchase orders, proof of delivery etc. Hence, most carriers have cash flow issues and forces them to accept either discounts on invoices paid within a shorter payment cycle or to absorb additional expenses associated with extending credit to customers.
- Lack of Data Integrity — Logistics industry is rich in transactions, which often occur using legacy systems, phone calls, emails, incompatible systems between shippers, brokers, and carriers. Lack of data integrity across these systems is common resulting problems when settling claims and payments.
- Shippers and Carriers Cannot Monetize Data — Shippers and carriers that use third party applications have no control over how that data is used by the third party. Usually these third party software vendors aggregate and sell data to competitors, marketing firms, insurance, government without any compensation to the actual owners of data, which are shippers and carriers.
- Tightly Protected and Closed System — Most logistics software vendors build tightly protected and closed ecosystem with no incentives for third party to build applications on top for the benefit of users. They are walled gardens, not platforms.
We believe logistics industry is ripe for disintermediation. Being in the industry for so long, we are frustrated by unwillingness of the incumbents to innovate and reduce friction for shippers and carriers. With the advent of blockchain and proliferation of machine learning, we are motivated that a long overdue paradigm shift to re-define role of intermediaries is feasible.
dexFreight is a decentralized logistics platform with right mixture of blockchain technology, machine learning, community governed, platform thinking, and open access to third party developers.
dexFreight’s mission is to allow shippers and carriers to perform peer to peer transactions. We believe a decentralized platform offers a secure, transparent, and cost effective alternative to centralized platforms that operate as walled gardens.
We are under NO illusion that blockchain will do it’s magic and solve above mentioned problems so easily.Despite all the news articles you’ve been hearing about logistics being a low-hanging fruit for disruption due to blockchain, problems and challenges in the industry are non-trivial.
We are just getting started.
About us: Hector, who by the way runs a freight brokerage out of Miami area and I started dexFreight after meeting at a blockchain conference. Both of us are believers of cryptocurrency and blockchain.