Blockchain – The case for digitalising shipping
As blockchain technology (of cryptocurrency fame) develops, it has gained its fair share of supporters and detractors, but despite this, it is quickly being adopted by the marine industry because of its proven ability to optimise costs.
“Shipping is a slow and age-old industry still conducted in large part by phone and email. Possibly the last true disruption to the industry was containerisation,” says Daniel Wilson, Director of Business Development at TradeLens. And he should definitely know. After all, TradeLens was launched in January 2018 by A.P. Moller – Maersk and IBM to apply blockchain to the global supply chain.
The TradeLens ‘ecosystem’ currently includes more than 40 port and terminal operators across the globe, as well as customs authorities, brokers, cargo owners, freight forwarders, transportation and logistics companies, and others. The TradeLens platform empowers multiple trading partners to collaborate on a single shared view of a transaction without compromising details, privacy or confidentiality. Think of it as cloud-based shipping where every transaction is sealed and stamped electronically.
The next big revolution in shipping?
During a 12-month trial, Maersk and IBM applied blockchain to the shipping industry and found that the transit time of a shipment of packaging materials to a production line in the United States could be reduced by 40%, avoiding thousands of dollars in cost.
“We believe blockchain can play an important role in digitising global shipping, an area of the global economy that moves many trillion dollars of goods every year. However, success with the technology rests on bringing the entire ecosystem together around a common approach that benefits all participants equally with an open and neutral system,” continues Wilson.
The ramifications are huge and some see it as a revolution akin to when container shipping replaced stevedores and sacks of rice.
So how does it work? Instead of keeping sensitive and often proprietary ledger records or asset registries in one place, on a computer in one warehouse for example, or in an office somewhere else only to be emailed back and forth, blockchain systems offer a tamper-proof way of exchanging data (or time-stamped blocks, as they are called) because of the simple fact that they are never just located in one place. The information that can be held on a blockchain – money, information, a contract, a bill of lading – exists as a shared and secured decentralised and encrypted public ledger. It is inherently resistant to modification and is thus easily verifiable.
“The application of blockchain technology in the shipping industry has the potential to cut administrative and operational risks for shipowners, charterers and brokers,” says Michael Saava, a partner on the shipping team at law firm Watson Farley & Williams in Dubai, and co-author of an important paper on the subject.
The case for blockchain
By digitising the paper trail of international shipping – signed and stamped cargo and freight documents involving hundreds pages that need to be physically delivered to dozens of different agencies, banks, customs bureaus and other entities – the blockchain could save, and make billions by increasing time to market for products, cut trade barriers and thereby create jobs.
“The expectation is that blockchain technology will create a platform not anchored down by endless paperwork and complex transactions but instead be fully digital thus enabling more fluid freight movement and reduced costs and resource waste,” continues Saava in Dubai.
But unless the whole world can agree on one open blockchain standard, not unlike today’s email, GPS or GSM mobile communications standards, detractors see a situation where a few global players will retain their own ‘siloed’ and proprietary way of working. This benefits no one.
“How all this will be achieved remains to be seen,” admits TradeLens’ Wilson. “But we are growing at a rapid clip.”
The hope of course, as with other important world standards, is that companies, governments, authorities, and other interested parties will be able to agree on a common and basic standard that works with existing systems, and then apply monetisable applications on top of it all.
Wärtsilä, for its part, is closely monitoring all these developments and is actively participating in accelerator programs with start-up companies on all fronts of the maritime sector. The new maritime business accelerator programme formed in Turku, Finland in August 2018, is a case in point. It brought together innovative start-ups and maritime industry companies like Wärtsilä, Royal Caribbean, and others to find new growth companies for partnerships.
With more stakeholders coming together in this manner, a future where growth is enabled by blockchain isn’t that far off the horizon.
While many industry players have been trying to come up with a blockchain solution to help strengthen industry collaboration, the idea of a truly open platform where all could collaborate without any inhibition still needs some work.
In November last year, five shipping lines and four terminal operators had announced a consortium to develop a blockchain platform to digitise the industry and transform documentation flows.
Christened the Global Shipping Business Network (GSBN), the collaboration consists of the Ocean Alliance members CMA CGM, Cosco/OOCL and Evergreen, Yang Ming, DP World, Hutchison Ports, PSA and Shanghai International Port. The tech company is CargoSmart.
GSBN will allow shippers to digitise and automate the documentation and processes around ‘dangerous goods’, a category of goods classed as hazardous and which is subject to a range of regulatory schemes. However, the ultimate aim is to “facilitate the seamless sharing of documents and data across all stages of the shipping lifecycle,” CMA CGM said in a statement.
GSBN drew obvious comparisons with its competitor platform TradeLens, a joint effort between Maersk and IBM, which was launched in January 2018 and since then has been criticised for alienating much-needed potential partners because of Maersk’s heavy involvement.
TradeLens allows trading partners to collaborate by establishing a single shared view of a transaction without compromising confidentiality. Shippers, shipping lines, freight forwarders, port and terminal operators, inland transportation and customs authorities can all have real-time access to shipping data and shipping documents.
The new alliance also raised similar questions within the industry. For instance, how will private data be handled? What processes will be covered in the platform? Will it be open to other services? Will it have vendor lock-in by default, or will it enable companies to take out private data and process it in their own way?
However, the new question is: will these new endeavours also trigger a competition within the industry as companies compete for adoption?
Industry experts point out that a major drawback is that these initiatives, which aim to provide an industry platform, are controlled by a small group.
In an ideal world, the industry would benefit the most if all were interconnected without having to make a choice between platforms and offer smooth collaboration.
“Smart technology allows a much broader and horizontal approach to be taken across the industry, replacing the vertical view traditionally followed today. This means soon enough we will see a different approach to collaboration, competition, security, safety, and technology,” explains Marco Ryan, Wärtsilä’s Chief Digital Officer and Executive Vice President.
Wärtsilä has always been at the forefront of cross-collaboration within the industry. In November 2017, Wärtsilä had announced its vision for a Smart Marine Ecosystem. More recently, in this year’s SMM held in Hamburg, the company unveiled ‘An Oceanic Awakening’ – a global initiative focused on the radical transformation of the world’s marine and energy industry into one supremely efficient, ecologically sound and digitally connected ecosystem.