FedEx Corp. is investing in blockchain technology to provide greater visibility and efficiency in its freight business as it explores how distributed ledger technology can impact the logistics and supply chain sector.
“We’re quite confident that (blockchain) has big, big implications in supply chain, transportation and logistics,” FedEx Chief Executive Frederick Smith said Monday at the Consensus 2018 conference. “In the area where FedEx makes its living, this could be a big deal.”
Cross-border transactions, for example, often involve inconsistent data among the parties involved in a transaction. It can also be a hotbed for fraud as groups look to ship illicit items or avoid paying taxes on the transaction. “What blockchain has the potential to do, for the first time ever, is to make that information available to all of the parties,” Mr. Smith said.
FedEx is working to develop technology that would allow it to monitor shipments beyond its own tracking systems. While FedEx keeps detailed records of custody using its own databases and internal systems, a distributed ledger shared across the industry would allow the company to track freight even when it moves to parts of the supply chain it doesn’t own, such as rail lines.
“This is such a game changer for us because it extends those boundaries outside of our four walls,” Chief Information Officer Rob Carter said.
Perhaps best known as the technology underpinning cryptocurrencies like bitcoin, blockchain seems poised to play a larger role in supply chain management. Firms such as Walmart Inc. are using blockchain to manage data for mangoes, berries and a few dozen other products, CIO Journal reported.
A blockchain ledger allows participants to add blocks of information after each party runs algorithms to evaluate a proposed transaction. If the parties agree that the transaction looks valid — identifying information matches the blockchain’s history and follows the rules created by the participants — then it will be approved, time-stamped and added to the chain. The data, encrypted and unchangeable, is always up-to-date on all participants’ systems.
At FedEx, the underlying technology has been built on Ethereum and Hyperledger blockchain platforms. Mr. Carter said the company aims to be agnostic when deciding which ledger technologies to use.
The technology is working, and industry partners are working to create standards around how it will be used, he said. FedEx is a member of the Blockchain in Transport Alliance, a consortium of firms brought together to develop blockchain standards for the freight industry. Mr. Carter said the alliance is scheduled to meet next week, and that he “wouldn’t be surprised if there was an announcement” about a pilot project with large retailers.
Craig Fuller, managing director for BiTA, said the alliance has “a number of big announcements” planned for next week.
Beyond the freight business, Mr. Carter sees potential for the technology to improve the customs process and provide more transparency and reliability for shipments of items across the aerospace, pharmaceutical, automotive and health care industries. FedEx has a “couple dozen” people working on blockchain projects, he said.
“The consequences of investing in this aren’t very high,” Mr. Carter said. “The consequences of not investing are extremely high.”
Corporate spending on blockchain software is expected to reach $2.1 billion this year, up from $945 million in 2017, according to researcher International Data Corp.