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Fr8 Network: blockchain’s powerful potential for reverse logistics



The push-pull of technological innovations in transport and communications is nothing new. It’s all a matter of how the technology is adapted and brought into the current marketplace’s way of doing business. The pull of trade generates a push in both markets to invest in the newest transportation developments. This results in what transportation economists call the “double-stimulus” of trade. The growth of the freight industry in the 19th century is such an example. As railway lines extended into undeveloped locations, farming opportunities emerged that were previously uneconomic. This encouraged trade and settlement that made demand for the railways self-perpetuating. Sometimes, too, you have to move backward in order to move ahead.

What’s fascinating about product life-cycles is that innovations first must go through an introductory stage before reaching a tipping point. The tipping point perpetuates the newly established technology (whether it’s a product or a system or both), and then emerges a growth period before maturity establishes, and then, inevitably a decline.

Over the past two centuries, these cycles tend to run in about 35 year lifetimes. One current example that fits this exact timeline is the case of 3D printing. We’ve had the technology for “just in time” manufacturing for the past 30 years, but up until the past couple of years it’s been used almost exclusively for prototyping. Now, with breakthroughs in industrial grade applications, we’re suddenly able to apply the making of goods to—well, just about anything. Now, the challenge is to educate and implement. The technology, in other words, has hit a tipping point and the only lag now is understanding how to design and utilize what we don’t even know we’re capable of.

Similarly, trucking is in the midst of a digital transformation, with revolutionary changes from all ends of the logistical supply chain. And with such a transformation comes the need for real-time data so freight efficiency across a range of metrics can be maximized. Nowhere is the potential more evident—and challenging—than through the application of blockchain technology across the fragmented supply chain.

As Fr8 Network writes in their white paper, “Coordinating logistics is the art of managing critical and valuable cargo at an incredibly fast pace through dozens of antiquated communication systems, all while pushing and pulling data with shippers, receivers, distribution centers, rail, truck, and air carriers, insurance companies, financiers, and government agencies. The complexity is more intense than a nonindustry participant would imagine. It is the premise of Fr8 Network that each leg of the journey and every stakeholder could benefit from the transparency and efficiency the Fr8 Protocol can offer.”

One of the more powerful, if unheralded, potentials of this transparency and efficiency is through what consumers think of as returns, and industry participants refer to as reverse logistics. We tend to hear about reverse logistics the most during the month of January when all of those e-commerce Christmas purchases that looked so good in November and December are returned. Reverse logistics is a year-round challenge, however, and it often takes shape in the form of damage control.

The costs of reverse logistics are estimated to be in the range of $750 billion per year, and the demand for reverse logistics has risen in recent years with the rise of e-commerce. According to Stacy Rudolph of Business to Community, up to 30% of all products ordered online become returns, placing an enormous burden on reverse logistics.

Using a reverse logistics blockchain strategy can help alleviate costs, increase efficiency, and also document responsibility. Take food as an example.

According to Bloomberg, three problems in the food value chain that blockchain could help solve are: (1) traceability and food safety, (2) price discovery, and (3) food waste reduction. Because of its ability to improve traceability, blockchain lends itself to improving food safety both from a preventive standpoint as well as drastically reducing reaction time in the case of a recall.

Using blockchain, digital ledger tech locking in shipment data, that process could be improved upon from days to mere seconds. Data captured, stored, transferred, and accounted for at each point in the supply path in real-time. Track items or transactions using a shared digital ledger significantly more efficient than any current method for logging and sharing information.

Blockchain is also a big selling point for the global food industry to identify food fraud by identifying fraudulent ingredients and to trace the source of contamination during product recalls, such as the mysterious case of this year’s very bad, no good romaine lettuce.

Speaking of fraud, startup Bonafi is working on a solution on a global trade problem worth nearly half a trillion dollars a year. It comes in the form of brand counterfeiting. The U.S. is hit the hardest for the simple reason that it is the largest of all consumer markets, and also the richest in intellectual property. Whether it’s pharmaceuticals, food and beverages, electronics, auto parts, hygiene and cosmetics, even fashion goods and toys, virtually any commodity is at risk. Pharmaceuticals alone account for an estimated $200 billion in illegally copied goods.

It could be a health or safety-related scam, or it could just be consumers thinking they have purchased an authentic brand name product like Nike, Coach, Gucci, etc. and have no way of checking if the product is genuine or a fake. 

“The issue with counterfeited goods is that people find out after the fact,” Steve Kuh, founder and CEO says. Kuh notes that a lot of small companies could use blockchain as a solution, especially companies that use IP and hold the patent.

“They produce a product and yet they have this influx of product coming from overseas. The counterfeiters make it so close to the real thing, and it’s really hard to tell until you possess the item. There’s lots of industrial applications for this as well in terms of recall of parts. It’s really good with damages.”

Yet another major example is for industrial recall. Think product defects. How much time and money could Toyota, for instance, have saved had they been able to pinpoint the person, part and/or location of the supply chain when they suffered their accelerator scandal? Between 2009 and 2011 there were numerous recalls due to floor mats causing pedal entrapment, and the accelerator sticking and overriding the anti-lock software.

Had blockchain been in place, the company might have been able to swiftly monitor supply quality and identify the partners who were most responsible for the defects. The ledger of blockchain allows records to update in real-time for all members of the supply chain, and that includes the relationships between engineering, procurement, and suppliers.

Sometimes you have to reverse engineer in order to move forward. It’s not about evolution right now, it’s about revolution backwards and forwards.