The Case for Decentralized Logistics
The logistics industry is one of the biggest benefactors of the internet revolution, especially with the development of e-commerce. At the end of each day, you can be sure that a stunning number of 85 million packages and documents were delivered. Because the internet is still growing, the growth in the logistics industry is far from over. In 2016, researchers at the Transparency Market Research estimated that the industry would be worth $15.5 trillion by 2023 from $8.1 trillion in 2016 — a staggering 52 percent increase.
For all the growth potential, the logistics industry is lagging in terms of the level of innovation required to make the best out of the growth potential. And a big part of the lag reflects in the numerous inefficiencies that exist in last mile delivery — typically the final step of the delivery process involving dispatch from a distribution center to the end user/customer. The problem with the last mile of logistics ranges from the cost of transporting individual shipments to different destinations. There’s also the problem of a shortage of drivers, which, partly explains the problem of changing routes because fewer drivers have to deliver items to different scattered locations. The increasing demand for same-day or instant delivery, thanks to the continual growth in the e-commerce space, will only deepen these inefficiencies.
To be fair, the other phases of shipping aren’t quite as troublesome as the last mile. The phases involving ocean, rail, air and truckload are quite consolidated. Granted, these phases suffer from the ripple effect of the last mile inefficiencies — for instance, the capacity crunch in the last mile has been reported to cause ocean carriers to wait longer at the port waiting for trucks to pick up packages.
Let’s get a bit personal to help you understand the real-life implication of these inefficiencies. Sometimes, you need an item urgently, but it arrived late and you have no idea what happened. Here’s a recent personal experience that embodies the inefficiencies we’re discussing.
First Person Experience of the Inefficiencies in Centralized Logistics
I renewed my U.S. visa for a trip I had scheduled. Once the U.S. embassy in Tel Aviv renewed my visa, they sent it through Israel Post for delivery to my apartment by Sunday morning. Perhaps having too much faith in the centralized logistic system, I optimistically scheduled my flight for Sunday afternoon. As you can probably guess, my passport didn’t arrive on Sunday so I rescheduled my flight for Monday afternoon, again being optimistic that it was going to arrive well before then. On Monday morning, I tried to track my passport, but unfortunately, the best information their tracking system provided was the old-fashioned “package is in transit; package is being processed; package was delivered” status. There was no information about the expected time of arrival (ETA). After calling four different call centers that same morning plus long waits, someone was able to tell me that my passport will arrive by Tuesday or Wednesday.
Obviously, I had to reschedule my flight once more.
The Case for Community-Powered Logistics
After getting home, I decided I needed to take a different approach if I wanted to make sure I didn’t miss my flight again. This time, I decided to appeal to the goodness of the people. I mean, someone at the post office must have had similar frustration before, right? I thought if I appealed to the kindness of people, I would make headway.
Fortunately, I found someone who listened to me and understood the urgency of my situation and he graciously gave me the mobile number of his superior who was in charge — Shlomi. With the same approach of appealing to the goodness of people, Shlomi was more than willing to help. He tracked my passport, which was in a neighboring city (20km away) at the time (yes, crazy!), asked someone to take it out of the big bag so I could go there to pick it up myself. I drove down there to pick my passport from another person willing to help me.
This experience made the mentioned inefficiencies in the centralized logistics industry real to me. You see, I live roughly 3km away from the U.S. embassy — a mere 7-minute bike ride. But my passport traveled from the U.S. embassy in Tel Aviv to the logistic center in Rishon Lezion. After processing in Rishon Lezion, it would go to a post office branch in Bnei Brak before it goes back to the main hub in Tel Aviv and to a post office in my area before it finally arrives at my apartment. That’s some irrational trip, but that’s what their infrastructure allows.
Now, think of the inefficiencies mentioned above as reasons why they probably couldn’t have streamlined the process.
But the experience of appealing to the goodness of people proves that if we could incentivize a community to handle other people’s packages, the logistics industry will stop wasting money and time unnecessarily. This is where blockchain comes in and hence the PAKET solution.
If my passport (along with other people’s passports) were to be couriered through the PAKET platform, here’s how that would work out:
· Similar to the existing process, the U.S. embassy processes and barcodes the passports
· The hub across the street, where everyone entering the embassy places their bags, will pick up the passports
· A registered local courier will pick the passports for delivery within Tel Aviv and dispatch them on motorbikes for same-day/next-day delivery.
· Passports going to other cities will be sent through a registered intercity courier service to city hubs, where registered local motorbike couriers will pick them up for delivery within the next day.
One unique thing about the PAKET blockchain platform is that it includes some sort of insurance coverage for the sender of a package in that every courier operator deposits a collateral sum in a virtual escrow. This is to encourage people to feel safe in using a decentralized system to ship items. Therefore, if the package isn’t delivered by the deadline, the sender could ask for a refund of the amount they put in escrow, which would also give them the collateral deposit of the courier as well.
Do We Need Blockchain for This?
It’s valid to think about how sharing economy players like Uber and Airbnb have opened up the industries in which they operate to just about everyone and then ask why not just do take a similar approach without using the blockchain. The answer is that existing systems requires so much trust that might not help people feel comfortable using sharing platforms to ship their precious items. Blockchain helps facilitate a logistics service in a trustless. manner. Every aspect of the shipping process is governed by smart contracts.
In the end, we provide a platform for A to allow stranger B to ship their item to C. The blockchain gives A the assurance that B will surely deliver the item otherwise he pays them.
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