For shipping, like other industries, blockchain holds the promise of transparency and efficiency for global trade transactions. In terms of efficiency, a report from CB Insights calculates that to transport a container by sea from Mombasa, Kenya to the Port of Rotterdam, Amsterdam, requires around 200 different communications steps involving around thirty different interested parties.
The advantages of blockchain for shipping
Each one of these steps takes time (which, in economic terms, represents a delay in time-to-market) and costs money, either directly in terms of fees or indirectly in terms of time wasted. Moreover, such a labyrinthine system is prone to deliberate fraud or accidental miscommunication. Fraud protection arises since no single party has the ability to modify, delete or append any record without the consensus from others within the network.
Transparency includes the ability of each participant in such a digital supply chain ecosystem to be able to view the progress of goods throughout the chain; with shipping this includes knowing where every container is in transit. There is also the functionality to review the status of customs documents and charges incurred, such as port docking fees.
Other advantages are with making the auditing of aspects of a shipping supply chain easier to monitor; to improve the tamper-resistance; and allow key metrics to be shared in real-time. In addition, the use of digital ledgers enable many various parties to agree the terms of premiums in a timely and efficient way.
To add to this cumbersome legacy systems like logs, spreadsheets, data intermediaries and private databases can be integrated and digitalized.
Danish business conglomerate Maersk, and the largest container ship and supply vessel operator in the world, has entered into collaboration with IBM to transform its shipping operations with ledger technology. Maersk which, along with other leading maritime logistics players, processes some 90 percent of globally traded goods, are exploring blockchain to increase efficiency and transparency in global trade.
The blockchain solution developed between Maersk and IBM is based on Hyperledger Fabric, which is an open-source collaborative effort created to advance cross-industry blockchain technologies. The stated aim is to manage and track a documented trail comprising of tens of millions of shipping containers throughout the world. This is by digitizing the supply chain process from beginning to end.
The digitalization process will enhance transparency and introduce a faster and considerably more secure means for sharing of information from one trading partner to another. As to how this may work in practice, the video below shows how IBM and Maersk are digitizing and simplifying the global shipping trade:
The model adopted will be made available to the entire global shipping industry, bringing with it a potential to save the industry billions of dollars.
For more on digital disruption in the shipping industry, see the Digital Journal article “Shipping is undergoing digital disruption.”