April 2017 | Commentary | IT Matters: Logistics & Supply Chain Technology

Blockchain Set to Shake Up Shipping

Tags: Transportation, Logistics, Technology , Supply Chain

John Maley is Global Leader, IBM Freight Logistics, 800-426-4968

International trade is a maze of regulations, and mostly manual, inefficient processes that lack transparency. This is all about to radically change with blockchain technology.

Shipping today is riddled with documentation, regulations, and policies that require certificates of origin, letters of credit, bills of lading, vessel manifests, and customs declarations.

Blockchain converts documents, such as traditional vessel manifests, into a digital ledger that all parties can see and share. This distributed database maintains a continuously growing list of data records hardened against tampering and unapproved revision, and is about to shake up the industry in much the same way containerized shipping did 60 years ago.

Increasing Transparency

The mere size of the ships transporting cargo around the world today requires technology, such as smart containers, to monitor what is onboard a vessel. But this technology can only monitor factors such as the container's location, and doesn't track the numerous hands it passes through as it is transported, loaded, unloaded, bought, sold, and stored en route from the start of the supply chain through delivery.

Blockchain technology will help increase transparency. For example, information from smart devices will be able to communicate to blockchain-based ledgers to update or validate smart contracts.

Supply chain operators could also begin using blockchain to track information such as the movement of intermodal containers. This information can then be enriched with third-party situational data such as weather or traffic information, which can help address if a delivery is late or behind schedule.

For example, if the temperature in a container drops while shipping frozen food, the technology will know where and when the food melted. The distributed ledger is the centralized point of control and can be reviewed to determine which party is at fault.

Blockchain will benefit the logistics process by building trust, reducing costs, and accelerating transactions. Transactions and device data can be viewed peer-to-peer, removing most legal or contractual costs.

By removing the middleman from the process, blockchain enables more transactions overall. Contracts are verifiable, signed, and encoded in programming language to allow organizations to reduce the time they need to complete legal or contractual commitments.

Transforming Networks

Blockchain technology has the potential to radically transform multi-party business networks, enabling significant cost and risk reduction, while introducing innovative new business models such as real-time transfer of ownership while goods are in transit. Other business models allow for services such as shipping, finance, ground transportation, and insurance to be packaged together.

For years, record keeping in the freight and logistics sector has been inaccurate due to human error and/or incorrect calculations. Computers have helped, but there is still room for improvement.

Blockchain is a technology for a new generation of transactional applications that establishes trust, accountability, and transparency while streamlining business processes. It is an operating system for interactions and has the potential to vastly reduce the cost and complexity of getting things done.