The Empty Miles: 20% in the Trucking Industry
Why is it that after nearly 40 years of de-regulation and free market policies, so much waste still exists in the trucking industry? Approximately 20% of miles traveled by commercial vehicles are when the vehicles have no freight on board; empty miles are certainly expensive.
Some would say that the issue is lack of technology; that if we could just see and quantify the waste, then it could be eliminated. Why haven’t we created the equivalent of the FAA air traffic control system in the trucking industry? If we could see the waste, the free market could eliminate the waste.
Well, the industry has had real-time tracking and GPS for more than 20 years. The technology has existed for a long time, yet the waste persists. There are many great uses of this technology that have created useful, but limited silos of visibility.
It must be something else.
I would submit that the reason empty miles exist in the trucking industry has more to do with business models, incentives, and trust than it does with technology.
In order to create economic activity, both buyer and seller must see how a transaction is mutually beneficial to their interests.
Trust is at the center of any business transaction. The buyer has to trust that the seller is accurately representing the goods or services being offered and must have confidence that what is promised will be delivered.
Incentives are powerful motivators. If we want ALL of the assets and statuses visible to the market, then we have to create an incentive for people to share their information.
Two powerful technologies are arriving in 2018 that will transform the trucking industry by creating greater trust.
Dynamic Load Matching
The first technology is Dynamic Load Matching(DLM) The concept of DLM is very simple, track all of the assets in real-time with all of their relevant constraints (hours of service, equipment type, available space & weight, et. al.) so that buyers of freight can find the capacity and contract it directly and transparently with the owner of the asset.
Instead of having to search for freight, DLM allows asset owners to receive opportunities based on their location, capacity, availability, and economics. Carriers are able to achieve significant efficiencies by choosing from opportunities that are presented to them.
The foundational technologies to support DLM are now widely available in the form of scalable cloud architecture, ELD data capture, and smartphone data links. So technically, there is no reason that DLM cannot flourish.
The real innovation is in the business model that encourages asset owners and shippers to share data and participate in an open architected DLM ecosystem. This is the true breakthrough required. Konexial’s GoLoad DLMis an open ecosystem that creates a set of business rules to increase transparency and trust for freight transactions.
These business rules allow for carriers and shippers to share expectations for the critical aspects of freight transactions in the areas of (1) fuel, (2) detention, and (3) payment terms. By creating business rules that create expectations of fairness and the value of time, trust levels can expand and business can move at what Stephen M. R. Covey calls The Speed of Trust.
FreightBlox and Blockchain
The second technology that will help transform the trucking industry is Blockchain, and the methodology was first published by Satoshi Nakamoto (pseudonym) in January 2009. While this architecture for a secure, distributed database has been famously used for the creation of cryptocurrencies, it is incredibly useful for creating records and transactions that can be instantly trusted.
By adding Blockchain technology to the trucking industry, information can be shared instantly and securely between buyers and sellers in a trusted environment. Each asset, driver, shipment, etc. can have its own secure, unique, database that can be shared at the data owner’s direction. Due to the distributed and encrypted features of Blockchain, the information being shared is not subject to tampering or fraudulent activity.
Blockchain closes the trust gap in business the way the internet closed the information gap, and the way the steam engine closed the power gap. By creating instant trust, parties can safely engage in transactions with counterparties based on their Blockchain history which is secure and unalterable.
Konexial is deploying Blockchain for use in DLM and the logistics industry as a broader base. There will be an Initial Coin Offering (ICO) where FreightBlox will be made available to interested parties who want to use Blockchain for the purposes of DLM and logistics.
Asset owners can boost their bottom lines through higher utilization, and shippers can achieve better cost/service tradeoffs by accessing capacity that was previously invisible.
With over 40 billion empty miles in the US alone, every year we are wasting over 6 billion gallons of diesel, 1 billion hours of driver time, and 60 million tons of CO2 emissions.
The time has come to incent parties to use DLM and Blockchain to eliminate the empty miles waste, and increase value creation for our companies, shareholders, and economy.
Content and information provided by Ken Evans, Konexial CEO