The global shipping industry is responsible for ensuring that all goods—including the most innovative new technologies—reach enterprises and consumers quickly and reliably. Yet, despite routinely handling the world’s newest and most expensive enabling technologies, much of the shipping industry itself remains comparably untouched by technology transformation. The shipping industry continues to depend on stamped cargo and paper freight documents that physically travel through dozens of stakeholders, from banks to customs bureaus and agents. According to a McKinsey report, a single shipment can require up to 50 sheets of paper that are exchanged between 30 different stakeholders. An electronic bill of lading alone, they estimate, could save the industry $6.5 billion in direct costs and enable $40 billion in global trade.
In its current state, the shipping industry is plagued by miscommunication between stakeholders, data unreliability, data mismatch and data loss. This data gap leads to increased turnaround times for shipments and high delivery costs. The persistent issues can begin to seem like simply the cost of doing business when working with such a complex network of intermediaries.
The adoption of blockchain technology, however, is poised to bring an unprecedented level of transparency and reliability to global shipping. By encrypting transactions between different stakeholders and storing them in a decentralized digital ledger, blockchain is emerging as the ideal glue to transform shipping into a fully digital process while creating an immutable source of truth. Data that needs to be viewed by the value chain participants can be captured on blockchain, and smart contracts can be used to automate processes that are currently manual and time-consuming.
For now, blockchain technology solutions are mostly limited to internal processes and pilot collaborations, and an industry-wide blockchain system for global shipping (see Figure 1) has yet to emerge. But already, there are signs that these pilot projects and emerging industry consortia will quicky speed blockchain adoption.
In our own work, we recently observed blockchain drive a successful new collaboration between a global technology company and an integrated container logistics company. By creating an end-to-end, digitized, open-source supply chain platform, they have been able to attract other major players, and hope to construct an ecosystem that encompasses shippers, freight forwarders, ocean lines, ports and customs authorities.
Another technology product company has created a track-and-trace product integrating IoT devices to capture shipment details from connected systems, providing visibility to the supply chain lifecycle and helping the company make timely decisions that minimize idle transit times. Similarly, a leading FMCG company now invites its partners to collaborate in its supply chain transparency efforts, tracking their products on the blockchain from the farm all the way through to consumption.
As a trustworthy platform that necessitates collaboration, blockchain is rooted in a partnership model that benefits all stakeholder—customers on both ends of the shipment and all the intermediaries in between. Leading industry players will increasingly collaborate on blockchain pilot projects and form collaborative blockchain consortia. The end result, in all likelihood, will be a comprehensive open blockchain platform that becomes the industry standard and drives mass adoption across the globe. Given the current speed of adoption, it is conceivable to imagine a comprehensive global blockchain for shipping emerging within the next 5-7 years.
In the meantime, shipping companies must begin preparing for the blockchain future by piloting their own blockchain initiatives and building the digital skills that allow them to become early adopters of this transformative technology. In particular, companies can expect blockchain to transform four aspects of the shipping industry:
1. Digitized shipment documents
Documents like freight shipping forms, bills of landing, certificates of origin and shipper export declarations continue to be stored in places like file cabinets, warehouses and local hard drives, resulting in both lost and fraudulent documents. Blockchain, in combination with a distributed file system like an Interplanetary File System (IPFS), will both store shipping documents and prevent them from being altered by any of the ecosystem parties without the authorization of all the others.
2. Real-time consignment and shipment tracking
Blockchain can track shipments in near-real time, ensuring a high level of security while simultaneously making information visible to all parties. As blockchain continues to integrate with IoT solutions, it will enable full-fledged track-and-trace solutions and advanced monitoring of environmental factors like temperature, pressure and humidity, providing alerts in case of any aberrations. This is likely to be one of the earliest “wins” for blockchain technology, and these sorts of blockchain solutions are already being adopted by forward-thinking shippers as they seek competitive advantages in a crowded market.
3. Customs clearance and auditing
Customs clearance continues to involve a trail of paper-based signoffs and financial transactions. Blockchain-enabled smart contracts will dramatically improve these manual and time-intensive processes, decreasing errors and accelerating clearance.
4. Cross-border shipments
Currently, sanity checks for cross-border shipments are a manual process, and the process may take days or even weeks to complete—preventing banks from releasing timely payment and compensation to the relevant parties. With a blockchain-enabled smart contract, a successful manifest check could trigger the automatic release of the shipment, as well as a notification to all concerned parties and the release of payments, making the process both more efficient and more immune to fraud and human error.
Plagued by disconnected players and paper-based processes, the shipping industry is in need of profound digital transformation. Blockchain is positioned as the ideal catalysing technology. Blockchain will benefit all stakeholders in the global shipping ecosystem, adding value in the form of real-time tracking, brand protection, anti-counterfeiting, and process digitization and streamlining. While the dream of a fully connected and autonomous supply chain may seem a long way off, the leading adopters of blockchain technology are already bringing that vision closer and closer to reality, while realizing new levels of efficiency and customer satisfaction.
Domain Consultant, Transportation & Logistics
Murali has more than two decades of experience bringing technology solutions to transportation and logistics, including customs clearance, warehouse management systems, e-Commerce, process consulting, strategic alliance and partnership management, forward and reverse logistics, supply chain visibility and transport planning. He has helped customers like FedEx, Premier, HSBC, McDonalds, Alcatel, Lloyds, McGraw Hill, Nissan, GM and Ford achieve transformative and cost-effective solutions. His experience with Lean, Six Sigma, design thinking, business process modelling and continuous process improvement methodologies further inform his strategic planning capabilities.
Karthik Subramanian R
With more than 8 years of experience handling transformation programs, Karthik enables organizations to maximize the impact of blockchain adoption. In particular, he focuses on using blockchain to bring supply chain transformations across domains like manufacturing, retail, consumer, and shipping and logistics.
Content Writer, iDEAS