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WHHI ITTEEPAPAWP EPRE RBLOCKCHAINFOR forFUEL BLOCKCHAINFOR TRANSPORTATION:WHERE THE FUTURE STARTS

W H I T E PA P E RBLOCKCHAIN FORTRANSPORTATIONBlockchain for Transportation:Where The Future StartsAuthorTimothy Leonard – EVP Operations and Technology2017 Data VisionaryAmericas Data Heroes Awards by HortonworksContents1 Introduction2 What is a Blockchain?3 Types of Blockchain4 Components of Blockchain5 Applications of Blockchain6 Freight Tracking7Carrier Onboarding Made Easy7Trusting Load Board9Streamlining the Factoring Process9Internet of Things (IoT)10Protecting Sensitive Information10Master Data Management11Conclusiontransportation 2017 TMW Systems, Inc. A Trimble Company. All Rights Reserved.TMWSYSTEMS.COM1 (8 0 0) 4 01- 6 6 8 2

W H I T E PA P E RBLOCKCHAIN FORTRANSPORTATIONIntroductionAs digital technology reshapes the transportation industry, Blockchain has become one of the top priorities formost organizations. Blockchain is a decentralized distributed technology designed specifically to transform businessoperations. The concept was introduced in a white paper by Satoshi Nakamoto in October 2008. A year later, thefirst transaction was executed to transfer assets between two parties. Since then Blockchain has been widelyadopted by the financial industry and has slowly entered other sectors, including the supply chain and healthcare.Lately, the film industry has begun exploring the benefits of implementing the technology.Blockchain could be applied to help address global health issues. For example, large enterprises such as Walmart,Nestle and Unilever have partnered with leading technology companies to reduce food contamination. Rememberthe e-coli outbreak experienced by Chipotle? While Blockchain might not have been able to prevent the problem,it could be used to more rapidly trace the source(s) of outbreaks. The shared behavior of the Blockchain allowsorganizations to not only track products within their control but also across vendors participating in the transaction,thus providing a 360-degree view to business stakeholders. The permissioned aspect of the technology wouldlimit the required view to authorized participants. Each of these benefits, together with smart contract capability,make Blockchain attractive to leading businesses. While Blockchain has clearly been embraced by the supply chaincommunity, there are as of yet no open standards to help ensure successful implementation.This paper focuses on providing suggested practical applications and an overview of implementation guidelines forBlockchain within the transportation marketplace.1TMWSYSTEMS.COM1 (8 0 0) 4 01- 6 6 8 2

W H I T E PA P E RBLOCKCHAIN FORTRANSPORTATIONWhat is a Blockchain?To understand the applications and implementation details of Blockchain, it is necessary to understand its fundamentalprinciples, architecture, types and components.At its core, Blockchain is a shared digital ledger encompassing a list of connected blocks stored on a decentralized distributednetwork that is secured through cryptography. Each block contains encrypted information and hashed pointers to a previousblock, making it difficult to retroactively alter without modifying the entire chain and the replicas within the peer network.New blocks are validated by peers on the network, providing credibility and preventing malicious activity and policy violations.Cryptography and membership functions provide easy data sharing between parties without privacy breach and tamperingof records. All confirmed transactions are timestamped to provide full record provenance. Shown below is an illustration ofa Blockchain transaction in a Bitcoin network.How a blockchain transaction worksA and B wish toconduct an ‘interaction’or ‘transaction’.Once validated,a new block is created.Cyptographic keys areassigned to the interactionthat both A and B hold.This block is added to the chain,creating a permanent‘golden source’ of interaction.The interaction isbroadcast as verified bya distribution network.The transaction betweenA and B is completed.Source: Standard CharteredThere is some confusion about how Bitcoin differs from Blockchain. In fact, most people wrongly assume they are the same.Bitcoin implements Blockchain technology to allow anyone with Internet access to read and send transactions using PoS as theconsensus mechanism. There are some 900-plus cryptocurrencies within the market with Bitcoin being the most popular andhaving highest market capitalization. It is also the first cryptocurrency to use a decentralized public ledger—the blockchain.( Cryptocurrency is beyond the scope of this paper.)For more information, please visit YSTEMS.COM1 (8 0 0) 4 01- 6 6 8 2

W H I T E PA P E R“Blockchain is to Bitcoin,what the internet is to email. A big electronic system,on top of which you can build applications. Currency is just one.”BLOCKCHAIN FORTRANSPORTATION– Sally Davies, FT Technology ReporterTypes of BlockchainThere are three main types of Blockchain platforms—public, private and consortium. Organizations use these platforms basedon their specific needs. Public Blockchain, the de facto platform for cryptocurrency, is a decentralized framework that allowsanyone to add themselves to the network, read transactions, transfer assets and participate in the consensus process usingPoS, PoW or other mechanism. Bitcoin and Ethereum are a few popular examples.Private Blockchain, by contrast, is largely centralized in nature and strictly permissioned, allowing only a pre-approved setof members to read and send transactions and participate in the consensus process. It is often built to manage internalorganizational functions, mainly for audit purposes. Reference data management system is a good example of a privateBlockchain. Speed and performance are among the leading advantages of private Blockchain. Because it is set up in acontrolled environment with a limited set of nodes, transactions are executed much faster. It is important to note, however,that while public Blockchain can require between 2 and 10 minutes to validate transactions, the benefits often outweigh theperformance concerns.Consortium Blockchain is a hybrid of the public and private Blockchain platforms. It leverages the decentralized nature of thepublic Blockchain and the permissioned capability of the private Blockchain. As with any consortium, the entire network, alongwith validation rules and policies, is defined and governed by members/nodes. They control every aspect of the Blockchain,including validation of transactions, addition of nodes, managing node privileges, smart contracts, deployment of chaincodes, entralizedPartially DecentralizedAccessOpen Read/WritePermissionedPermissionedSpeedSlower ( 10 minutes)Faster (Same as atransactional system)Vary by the number of nodesConsensusProof of WorkProof of n IdentitiesKnown IdentitiesUse CasesCryptoeconomyReference Data ManagementSecure data sharingExamplesBitcoin, Ethereum, DashMONAX, MultichainR3, EWFBecause this paper focuses on the transportation landscape, we will explore the applications of private and consortiumBlockchain platforms that are most apt for logistics.3TMWSYSTEMS.COM1 (8 0 0) 4 01- 6 6 8 2

W H I T E PA P E RBLOCKCHAIN FORTRANSPORTATIONComponents of BlockchainTo better understand the applications of Blockchain, it is necessary to understand the basic elements:1.2.3.4.Membership Services – Responsible for managing identity, certificates and permission levelsConsensus Manager – Responsible for validating data and maintaining consistent data across all nodesDistributed Ledger – Stores timestamped validated transactionsSmart Contracts – Executes business logic through chain codeHyperledger APIs, SDKs, dgerStorageSecureRegistryEvent StreamHyperledger ServicesSource: Hyperledger.orgThe figure above shows Hyperledger’s architectural design for Blockchain. It encompasses Membership Services, coreBlockchain components such as Consensus Manager and Distributed Ledger, and the smart contract services that executesverified chain codes.4TMWSYSTEMS.COM1 (8 0 0) 4 01- 6 6 8 2

W H I T E PA P E RBLOCKCHAIN FORTRANSPORTATIONApplications of BlockchainFor many organizations, the ability to more effectively track goods across the supply chain is one of the most appealingbenefits of Blockchain. Our research shows, however, that there are many more, equally appealing, applications for thetechnology within the transportation industry.IoTDriver HOS& OthersParts Warranty,Vehicle ServiceRecords, Etc.TemperatureMonitoring,Fuel Tax Reporting& OthersRFP, Bid & AwardsEDIs(204, 214 & (Photos, Signatures, Etc.)Invoice & Settlements(Bitcoins)5TMWSYSTEMS.COM1 (8 0 0) 4 01- 6 6 8 2

W H I T E PA P E RBLOCKCHAIN FORTRANSPORTATIONFreight TrackingTracking in-transit freight isn’t new; organizations have been using GPS technology to track freight-hauling assets for multipledecades. Historically, location updates were provided by check calls and the use of fax machines. Later, they were replacedwith automated systems such as EDIs and APIs. Yet, as the industry faces ever-rising customer expectations and retailersincreasingly promise same-day or even one-hour delivery services, traditional methodologies won’t scale. We feel thenext wave of innovation will come through Blockchain, which not only addresses the newer requirements but also existingauthenticity issues.1980sPhones &Fax tions seek updated information so they can make proactive decisions and share data so other users/systems can dothe same. Hence, the authenticity of the data is pivotal for decision making. As data passes through various systems, thereare chances for it to be misinterpreted, altered or tampered with or without the owner’s knowledge or consent. This causesturmoil in a global supply chain. Blockchain, through which the entire network contributes to data validation, brings trust tothe entire eco-system. In addition, because data is stored in a decentralized manner, the integration of data is simplified—allsystems connect to a single node to access trusted data.ADVANTAGES16Single trusted source2Simplifies integration3Shared dataTMWSYSTEMS.COM1 (8 0 0) 4 01- 6 6 8 2

W H I T E PA P E RBLOCKCHAIN FORTRANSPORTATIONCarrier OnboardingOnboarding a carrier isn’t easy. It involves validating the carrier’s driver records to ensure they maintain a strong safety rating,verify insurance coverage and confirm their ability to meet service level requirements. Traditionally, shippers and brokers relyon carriers to provide this information either in paper or electronic format. The problem with this approach is that there arethousands of trucking companies in the U.S.As freight brokers look for capacity, they often find new carriers who are closer to the pickup location, but need to onboardthese carriers before assigning loads. Traditionally, shippers and freight brokers have a team of resources dedicated tovalidating carriers and managing information within a transactional database. The problem with this approach is that this dataisn’t shared with others. As a result, each business must invest time and resources in onboarding many of the same carriers.We believe we can solve this problem through the use of Blockchain to validate transactions and store and share records.Rather than rely on internal resources to validate carriers, we could use the Blockchain network itself. Network memberscould be incentivized for their work similar to the manner in which miners are currently rewarded with ethers through theEthereum system. Another significant advantage of this model is that the network adds the new node to the public ledger,allowing other participants to consume the data without additional effort.ADVANTAGES1Decentralized effortto validate carriers2Reward for performingthe work3Shareddata source4LowercostTrusting Load BoardOne of the leading concerns associated with load boards is trusting the data itself. In many cases, load board data is outdatedand inauthentic. When a shipper works with a set of freight brokers to transport goods, that information is typically enteredin multiple load boards, causing data duplication and inaccurate demand forecasts. For this reason, the use of load boards hasbeen discouraged by many organizations.Load Board 1Load Board 2Broker ALoad Board 3ShipperLoad Board 4Broker B7Load Board 5TMWSYSTEMS.COM1 (8 0 0) 4 01- 6 6 8 2

W H I T E PA P E RBLOCKCHAIN FORTRANSPORTATIONWe believe data authenticity problems associated with load boards can be addressed by implementing a Blockchain in theheart of this business model. For example, when a shipper posts a load in the Blockchain, it would be timestamped withkey information.Load Board 1Load Board 2Load Board 3ShipperLoad Board 4Load Board 5In the Blockchain scenario, when Broker A attempts to post a load in a load board, the technology first checks to see if theload already exists by comparing the timestamped information. If Broker B attempts to post the same load, the load boardwould identify it as a duplicate and alert the user. This can ensure that each load board will only have one record for a givenload. Another advantage to this model is that it also addresses the issue of outdated information: When a load is taken by acarrier and updated in the Blockchain, all load boards will reflect the updated status.ADVANTAGES18Single sourceof truth2Noduplication3No staledata4Accurate demandforecastingTMWSYSTEMS.COM1 (8 0 0) 4 01- 6 6 8 2

W H I T E PA P E RBLOCKCHAIN FORTRANSPORTATIONStreamlined FactoringBy some estimates, there are approximately 500,000 trucking companies in the United States, 80% of which operate 6 orfewer trucks. Typical pay period varies from 7 to 21 days, while it can extend beyond 21 days in some cases. Small truckingcompanies with limited cashflow can’t wait that long and generally rely on factoring companies to be reimbursed faster fora small percentage of revenue share. There are two main aspects to this business model:1. Validation – In addition to the proof-of-delivery receipts captured and uploaded by drivers, factoring companies rely onfreight brokers and receiving parties to acknowledge satisfactory delivery. Therefore, factoring companies need moreinformation from trusted parties before paying drivers, and they need it faster. In addition, data validation could behandled by a network rather than an internal resource.2. Payments – With cryptocurrencies gaining relevance in today’s business world and a single bitcoin currently valued atnearly 4,000, we foresee a future when drivers and vendors will be paid through this model. This shift will require majoradjustments in the transportation world, however. To begin with, users will need to be trained to work with cryptocurrencies, and TMS applications will need to support them.Internet of Things (IoT)Internet of Things (IoT) is a popular topic in many industries. According to Cisco, there will be 50 billion connected devicesby 2020. The introduction of V2V and V2I communications and other smart projects will only increase these numbers. Withthe continued proliferation of connected devices and associated data, securely storing that data will always be a challenge.IoT, together with Blockchain, can help solve the issue of core data capture and security. Moreover, IoT alone has becomeless of an advantage in today’s world of technology; it needs to be coupled with a system such as Blockchain to providesignificant competitive advantage.ACCELERATE TRANSACTIONREDUCE COSTSKey Benefitsof usingBlockchainfor loTBUILD TRUSTSource: iot.ieee.orgFrom a transportation perspective, there are several applications that could benefit from the marriage of IoT and Blockchain.In terms of telematics, it would enable manufacturers to add more sensors to help service centers securely capture and storeengine diagnostics data and other vehicle performance information. This information can be used with machine-learning algorithms to determine when a vehicle will require maintenance. The role of Blockchain in this example is to provide decentralizeddata storage, eliminate a single point of failure, provide a tamper-proof record and enable smart devices to autonomouslycommunicate with one another.Similarly, the combination of IoT and Blockchain can be used to ensure safe delivery of perishable food products by controlling the temperature throughout the transportation process. It also can be used to automate order fulfillment, invoicingand settlements using smart contracts. Each of these capabilities makes Blockchain an ideal component of an IoT solution.9TMWSYSTEMS.COM1 (8 0 0) 4 01- 6 6 8 2

W H I T E PA P E RBLOCKCHAIN FORTRANSPORTATIONProtecting Sensitive InformationThroughout this paper, we talked about how an entire network can be used to validate transactions. The basic idea behind thevalidation is that data is replicated on all nodes within the network, allowing members to access them. While this makes sensefor validation, there are certain types of sensitive information such as bids & contract, freight lane, freight volume, rates, etc.,that shippers and carriers want to keep private.Since Blockchain is built on a decentralized concept, all nodes will have exact copy of data. However, the data itself is protected using cryptography algorithms requiring members to have appropriate permission levels to access the data. Withoutthe permissions, the data can’t be decrypted. For years, carriers have been reluctant to share their data with technologyvendors for the purpose of cross-network optimization, machine learning, etc. They were worried that they would be at risk byexposing valuable information. Through the use of Blockchain permission levels and smart contracts, the system can performthese activities without human involvement and thus offer the protection members seek.Master Data ManagementLet’s look at Blockchain from a different perspective, exploring its potential application beyond operational needs. Thus far,we have focused on the use of Blockchain to capture and store data. Yet, if the technology can store all pieces of informationin a single place, it could also very well serve as a Master Data Management (MDM) system. If it were implemented as the coresystem, with access to key information such as:FREIGHT BROKERSHIPPERCARRIERUSERSMaster DataManagement EIGHTTRACKERS& TRAILERSLOCATION INFORMATIONincluding distribution centers,warehouses, service centers, etc. . . then Blockchain becomes the perfect solution for building a data lake for MDM. Because it inherently supports data validation by network members, Blockchain could provide the function of “data stewards” in an MDM solution. A key difference—infact, an advantage—is that the data validation process is much more refined in the Blockchain model since it would providecryptocurrency incentives to members who provide this value. This model would also encourage research by providing allpertinent data in a single location. The decentralized phenomenon allows each business entity to have a node in the localnetwork, providing easier integration to the single version of truth while protecting sensitive information via cryptography.All of the above make Blockchain a perfect framework for building a data lake for MDM.10TMWSYSTEMS.COM1 (8 0 0) 4 01- 6 6 8 2

W H I T E PA P E RBLOCKCHAIN FORTRANSPORTATIONConclusionTMW Systems believes Blockchain technology can have a significant, positive impact onmodern supply chain processes, and particularly in the transportation category. Its abilities arevirtually limitless. But a successful implementation of Blockchain requires a strong partnershipwith a technology provider that understands its intricacies and potential applications. In thispaper, we have intentionally ignored the technical aspects of the Blockchain framework,focusing instead on a few leading applications within the transportation environment.Building a Blockchain system that provides high availability, performance and security servicesis a challenge. It requires extensive planning and design. TMW Systems, with its transportationexpertise and technical knowledge, can help its partners get there faster, and thus deliver aclear competitive advantage.As a final note, it is our hope that we have raised awareness of Blockchain and its abilityto help the transportation industry solve difficult challenges. For more information aboutBlockchain and its application within a transportation business, please contact Tim Leonardat [email protected] or Vasanth Srinivasan at [email protected] (8 0 0) 4 01- 6 6 8 2

W H I T E PA P E RBLOCKCHAIN FORTRANSPORTATIONWondering how to prepare your businessfor the future of Blockchain?As the industry’s premier provider of transportation management, routing/scheduling, fleetmaintenance and business intelligence solutions, TMW Systems can partner with your business toidentify the right path to operational and competitive excellence. We can help you go for the WINby ensuring maximum return on your next technology investment.WINWITH TRANSPORTATIONMANAGEMENT SOFTWAREFROM TMW SYSTEMSTMWSYST E M S .CO M 1 (8 0 0) 4 01- 6 6 8 2RA TRIMBLE COMPANYTMWSYSTEMS.COMTMW is a leading transportation software provider to commercial and private fleets, brokerage and 3PLorganizations. Founded in 1983, TMW has focused on providing enterprise software to the transportationindustry, including asset-based and non-asset-based operations as well as heavy duty vehicle servicecenters. With offices in Cleveland, Dallas, Nashville, Oklahoma City, Raleigh, Vancouver and Melbourne,Australia, the company serves over 2,000 customers, including many of the largest, most sophisticatedand complex transportation service companies in North America. TMW is a Trimble Company (NASDAQ:TRMB) and part of the international Transportation and Logistics Division. 2017 TMW Systems, Inc. A Trimble Company. All Rights Reserved.

with automated systems such as EDIs and APIs. Yet, as the industry faces ever-rising customer expectations and retailers increasingly promise same-day or even one-hour