How Blockchain Helps Companies in the Shipping Ecosystem to Digitally Transform
Dec. 17, 2019
Going Beyond the Hype
Do you think blockchain is all hype and no action? Think again! Blockchain is picking up steam. In October 2019, the president of China, Xi Jinping, broadly encouraged innovation and collaboration by leveraging blockchain technology in an announcement leading up to the China International Import Expo. It is a strong directive for the country to push the envelope in the race towards a new round of industrial transformation, including applications in the areas of digital finance, Internet of Things, smart manufacturing, supply chain management, and digital asset trading.
China’s announcement outlines five benefits of blockchain—promoting data sharing, improving collaborative efficiency, reducing operating costs, optimizing business processes, and building a trusted system.
As companies are increasingly developing new applications for blockchain technology, we explored how blockchain lives up to the promise of these benefits for global shipping and logistics management.
Blockchain for Digital Transformation
Whether you strive to gain efficiency to excel against a growing field of competitors or to minimize costs to prepare for a slowing economy while maintaining profitability during a trade war, digital transformation can help businesses achieve these goals.
We see digital transformation as a journey. As businesses start the journey with the digitization of data, improved collaboration, and standards among supply chain parties, they can advance with better integration to achieve automation and optimization. Companies can further evolve to connect with industry ecosystems, which allows for synchronization and for businesses to operate more intelligently than ever before.
Blockchain, or distributed ledger technology, is a key enabling technology for digital transformation to take place. A permissioned blockchain enables a decentralized, trusted relationship among parties in the supply chain to share information from a single source of truth and to improve visibility of the data. Ultimately, it allows all shipping supply chain participants to work collaboratively to accelerate technology innovation and develop solutions through trusted and secure data exchange platforms.
Siloed Data Has a Costly Impact for Complex Trade Processes
Shippers, who are at the heart of the shipping ecosystem with products they are transporting through their supply chains, manage dozens of transactions and documents with their forwarders, customs brokers, NVOCCs, ocean carriers, and terminals. Data between their systems are often siloed and out of sync. A lack of industry standards in the transportation industry for data message sets and documentation requires immense resources and effort to verify information and communicate updates among parties to ensure that cargo is transported safely, intact, and on-time.
When shipping data is in silos, it can cause costly cargo holds or split shipments that lead to factories coming to a halt, lost revenue for missed sale dates, and costs for rescheduling truckers and labor at warehouses. Shippers may experience:
- Documentation Errors - Re-entering data into disparate systems can be incomplete or incorrect.
- Outdated Shipment Status - Accessing an out-of-date shipment status can be too late to take corrective action to update documentation or implement contingency plans.
- Lack of Predictive Visibility - When vessel, terminal, rail, and truck systems are not connected, it’s difficult to connect the dots to detect and predict the downstream delays.
Companies are increasingly looking to digital technologies to resolve siloed shipment management procedures that are particularly susceptible to causing shipment delays and increasing costs when information is not transmitted accurately and timely.
Leveraging Blockchain for Global Trade
Blockchain, with its distributed ledger technology, holds the potential to help businesses achieve digital transformation. By its technology nature, all records on the blockchain are distributed, shared, immutable, and secure. It therefore helps the ecosystem of shippers, forwarders, NVOCCs, carriers, and terminals to gain greater visibility and a more accurate picture of the status of transactions and documents.
With these capabilities, we see the following key benefits for ocean shipment management:
- Improves documentation transparency and facilitates paperless processing. The blockchain record is a distributed ledger, all network participants will be able to share the same record. Any updated version given proper security authorization granted should be visible to the agreed upon parties on the network. All partners who have permission to access the record can benefit from this single source of truth. As such, it minimizes the redundancy of data re-entry among relevant parties.
- Immutability and traceability eliminate ambiguity and inconsistency. With blockchain, data can only be appended. It cannot be altered or deleted. Transactions are recorded in chronological order, trackable with time stamps. It ensures the reliability and trustfulness of the data.
- Network effect to increase efficiency. The blockchain record is instantaneously distributed across participating partners. It renders the opportunity for respective participants in the network to integrate into their corresponding processes. The resulting streamlining and automation brings incremental efficiency optimization potential.
A shipping platform based on blockchain sets the stage for a digital baseline for a more accurate and complete picture for shipment management. With a clearer picture based on a digital baseline, the potential and the value of applications that are based on the data can grow and open up for new innovative applications.
Connecting Ecosystems Drives More Value
While the multiple parties within the shipping ecosystem can improve data sharing, visibility, and efficiencies, connecting to other blockchain ecosystems, such as FinTech and InsureTech platforms, can further create potential value.
For example, in order to apply for financial services, companies are required to provide banks with shipping documents for validation. By collaborating with shipping and banking blockchain networks, banks may be able to shorten the customer validation process, with a better understanding of customers’ backgrounds and with real-time, credible shipment event data.
Start Your Digital Transformation Journey
The shift from EDI transmission in an analogue format from one system to the next, that is not synchronized and requires redundant sending of messages, to a world where blockchain allows people to view and act on information instantly from a single source of data, offers the promise of a more efficient supply chain.
CargoSmart is running its customers’ shipment transactions in parallel by EDI and by blockchain. We are gradually adding visibility and APIs to the data to enable powerful applications. Join the CargoSmart Blockchain Platform to start building the foundation with your ocean carriers today.
Contact us today to sign up.