By Elena Malykhina
Blockchain—a distributed database containing records that cannot be changed or deleted—has the potential to provide clearer visibility into all parts of the supply chain and lower barriers of entry into international trade for small and midsize enterprises (SMEs).
Blockchain initiatives focused on digitizing supply chains from end-to-end appear to be gaining steam globally. In one partnership between IBM and container giant Maersk, the companies jointly launched a blockchain platform called TradeLens in 2018.1 TradeLens allows different parties in the global shipping industry to share information securely and instantaneously. The platform utilizes open application programming interfaces (APIs) and standards, including the Linux open-source Hyperledger blockchain technology.
Five of the six largest ocean cargo carriers jumped onboard in 2019, and now more than half of the world's ocean container cargo is covered by TradeLens.2
The open system makes it easier for “players in the supply chain to publish and subscribe to information that needs to be shared,” according to IBM.3 For instance, if a cargo container is redirected or delayed, that information can be communicated in real-time via TradeLens. Maersk and IBM expect the platform to be fully available by the end of 2019.
Several other initiatives aim to achieve similar goals of increasing efficiency and removing redundancy in global ocean shipping.4 In one, nine major ocean carriers and terminal operators have joined to develop a blockchain platform called the Global Shipping Business Network (GSBN). Regulatory prep work is currently underway for the GSBN.5 Once established, this platform is said to allow shipping supply chain participants to collaborate through a “trusted and secure data exchange,” according to CargoSmart, a provider of software and services to the GSBN.6
Another group of companies has piloted a blockchain platform designed to eliminate printed shipping documents. In 2018, AB InBev, Accenture, APL, Kuehne + Nagel, and a European customs organization monitored 12 real shipments headed to various destinations with different regulatory requirements.7 Data related to these shipments was shared and distributed using blockchain. As a result, companies participating in the trial were reportedly able to speed up the entire flow of transport documents and reduce data entry by up to 80 percent.8 Accenture is now said to be looking to broaden the test to key players in importing and exporting.9
Should these and other initiatives move beyond the pilot stage, blockchain technology could shape the future of trade infrastructure. “Blockchain will be the biggest disruptor to the shipping industry and to international trade since the invention of the container,” the World Trade Organization said in a recent report.10
A key feature of blockchain is that it promises easy tracking of data, since information about traded goods can be instantly shared and visible to all parties involved. Further, all involved can monitor the entire shipping process and verify each completed step in real-time.11 Being able to tap into such transparency in the supply chain, say experts, can help SMEs more readily take part in international trade.
Research conducted by various organizations shows that SME participation today is limited for a variety of reasons.12 Among the trade challenges common to SMEs are: lack of transparency and cumbersome customs procedures, difficulties in accessing trade-related information, limited access to distribution networks, and high logistics and infrastructure costs.
One way in which blockchain can benefit SMEs is through the use of smart contracts—software programs that self-execute complex instructions inside a blockchain and remove the need for a middleman. Smart contracts typically work in conjunction with other technologies—such as sensors and smart devices—to send and receive data, making them particularly useful for automating international trade transactions.13
Blockchain and smart contracts, therefore, have the potential to pave the way for paperless trade,14 but much work remains. Interoperability and regulatory issues still need to be addressed on an international level for paperless trade to become a reality.
However, a lack of standards and blockchain’s immaturity is causing some confusion for potential early adopters, as many companies struggle to identify appropriate supply chain use cases for the technology. Gartner predicts that 90 percent of blockchain-based supply chain platform initiatives will suffer “blockchain fatigue” by 2023.15
What’s more, only 19 percent of companies ranked blockchain as a “very important” technology for their business, and even fewer companies (9 percent) have invested in it, Gartner found in a supply chain technology survey.16 The research firm attributes the lack of enthusiasm to “complicated hybrids of conventional blockchain technologies” currently on the market and limited real-world deployments.
Gartner remains cautious about early adoption, advising companies not to rush into implementing blockchain in the supply chain until complete, off-the-shelf solutions become available.
Blockchain technology has much potential to benefit transportation and logistics in international trade—from increasing transparency and improving collaboration among companies to accelerating payments through the use of smart contracts. As more blockchain-based supply chain platform initiatives make it past the pilot stage, stronger use cases are likely to promote greater adoption. Early adopters, however, are warned to be cautious, lest “blockchain fatigue” set in later this decade
Elena Malykhina is professional writer who has covered science, technology and business for more than 10 years. Her work has appeared in InformationWeek, Scientific American, Newsday, The Wall Street Journal and Adweek, as well as through the Associated Press.
1. “IBM and Maersk Bring Blockchain Technology to Shipping,” The Motley Fool; https://www.fool.com/investing/2018/08/13/ibm-and-maersk-bring-blockchain-technology-to-ship.aspx
2. “IBM's Blockchain Shipping Platform May Have Just Hit Critical Mass,” The Motley Fool; https://www.fool.com/investing/2019/07/02/ibms-blockchain-shipping-platform-may-have-just-hi.aspx
3. “TradeLens momentum grows with addition of two major ocean cargo carriers,” IBM; https://www.ibm.com/blogs/blockchain/2019/05/tradelens-momentum-grows-with-addition-of-two-major-ocean-cargo-carriers
4. “3 predictions for blockchain in the supply chain in 2019,” Supply Chain Dive; https://www.supplychaindive.com/news/3-predictions-for-blockchain-in-the-supply-chain-in-2019/546227
6. “Global Shipping Business Network May Bring Blockchain One Step Closer to Unified Ocean Cargo Reality,” Supply Chain Management Review; https://www.scmr.com/article/global_shipping_business_network_may_bring_blockchain_one_step_closer_to_un
7. “APL Tests Blockchain Solution,” Maritime Executive; https://www.maritime-executive.com/article/apl-tests-blockchain-solution
8. “Industry Consortium Successfully Tests Blockchain Solution Developed by Accenture That Could Revolutionize Ocean Shipping,” Accenture; https://newsroom.accenture.com/news/industry-consortium-successfully-tests-blockchain-solution-developed-by-accenture-that-could-revolutionize-ocean-shipping.htm
9. Can Blockchain Revolutionize International Trade?, World Trade Organization; https://www.wto.org/english/res_e/booksp_e/blockchainrev18_e.pdf
11. “Small and Medium-Sized Global Traders Are Banking on Blockchain,” Global Trade; https://www.globaltrademag.com/global-trade-daily/small-and-medium-sized-global-traders-are-banking-on-blockchain
12. Can Blockchain Revolutionize International Trade?, World Trade Organization; https://www.wto.org/english/res_e/booksp_e/blockchainrev18_e.pdf
15. “Gartner Predicts 90% of Blockchain-Based Supply Chain Initiatives Will Suffer ‘Blockchain Fatigue’ by 2023,” Gartner; https://www.gartner.com/en/newsroom/press-releases/2019-05-07-gartner-predicts-90--of-blockchain-based-supply-chain
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