Logistics article(s)
April 17, 2018

Blockchain technology is set to trigger fundamental changes in the way many 3PLs in Asia and worldwide do business, particularly in relation to the exchange of information.


One of the key questions for those companies right now, though, is whether the main result of that development for them will be the emergence of significant new business opportunities or a serious threat to their future role.


“Blockchain is an enabler of collaborative business networks and the supply chain industry may benefit from such a business model by eliminating inefficiencies and gaining speed,” explained Martin Kolbe, chief information officer for global logistics group Kuehne + Nagel International.


“The still open questions, though, are what that model might look like and to what extent it might change the roles of the different players in the market.”


The potential threat to 3PLs was highlighted in a report on Blockchain in Freight Transportation published late last year by global financial services firm Morgan Stanley. It suggested that “3PLs stand to potentially be negatively affected by blockchain,” explaining that “blockchain platforms act as a clearing house and remove the need for logistics providers to act as intermediaries.”


The report suggested that if blockchain technology could successfully achieve quick, smooth, transparent and secure execution of supply chains, it should eliminate the need for middlemen in the process between the original shipper and the end customer.


“The first leg of participants closest to the threat are likely to be asset-light 3PLs which provide shipper-carrier matching services in addition to documentation and other process support,” it added.


However, Morgan Stanley also cautioned that when it came to the overall implications of blockchain technology for freight transportation, “at this point, there are more questions than answers.”


Ken Lyon, a specialist in the use of advanced information systems to manage logistics operations, managing director of Virtual Partners and an advisory board member for Transport Intelligence (both UK-based companies), said it was still too early to say how blockchain might impact the role of 3PLs.


“What is clear, though, is that any 3PL − or anyone else – that is expected to use a blockchain-based ledger for data-sharing and matters of record must have information systems capable of supporting it,” he said.


In that context, warned Lyon, if a global standard emerged for supply chain track and trace/visibility built on a blockchain, 3PLs and others which had “invested a fortune in proprietary systems” might find themselves facing some difficult decisions about those systems.


Currently, the majority of 3PLs around the world appear to be either assessing how to implement blockchain technology in their business or still wondering whether they should start doing so.


That point was highlighted in the 2018 Annual Third-Party Logistics Study jointly published by Penske Logistics, Infosys Consulting, Penn State University and Korn/Ferry, which examines major trends in the global logistics industry. It found that “while 30% of 3PLs and 16% of shippers see blockchain as a potential application, they have yet to engage with the technology.”


However, the pace of 3PL blockchain development does appear to be accelerating this year. In February, for instance, global service provider Agility reported it was collaborating with information technology giant IBM and container shipping line Maersk to run blockchain pilots via the hyperledger technology developed by the former.


“The joint venture uses blockchain technology to store events associated with individual shipments and shares and receives information about them with the aim of improving the ease of doing international business,” explained Biju Kewalram, chief digital officer at Agility Logistics.


Self Photos / Files - kuenhe + nagel truck in china 111216-bk-7011-2


Many other major global 3PLs are also already trialling blockchain in one way or another. Kuehne + Nagel, for instance, told Asia Cargo News that it was currently engaged in “two proof-of-concepts (PoCs) on first applications of blockchain technology” in its sea freight business.


“In one case, we are working on exchanging shipment data between existing systems of Kuehne + Nagel and those of our partner using blockchain technology. As a next step, transport documents will be included in the scope,” explained Kolbe.


“In a second activity, we are participating in an initiative that works on a PoC for exchanging the bill of lading between carrier, shipper and forwarder from import to export via a joint blockchain-based distributed ledger.”


A growing number of other 3PLs worldwide are also beginning to prepare for the advent of blockchain in their industry. One example is Hong Kong-headquartered international supply chain solutions provider Tigers.


“Tigers has started training its IT (information technology) staff in the use of blockchain technology,” reported Andrew Jillings, the company’s CEO and group managing director.


“We are fortunate in that we use a Microsoft technology stack – and both their Azure cloud hosting platform and their Visual Studio development solutions have a wide variety of blockchain technologies embedded in them. That will allow Tigers to quickly build or adopt blockchain applications.”


According to some logistics industry observers, one of the main challenges for 3PLs in general when it comes to adopting blockchain technology could be an ingrained reluctance by many companies across the supply chain to share their data with other parties. 


However, Jillings played down that point. “Sharing data shouldn’t be an issue for 3PLs – many widely adopted technologies do that already − although it is true that carriers have a problem sharing pricing data, especially,” he stated.


In fact, suggested Jillings, adoption was likely to be a bigger challenge. “Unlike other technologies, such as RFID, this is a network service so it will be very difficult to implement in isolation. There will be a number of competing technologies and the key trick for 3PLs will be to quickly adopt those that win the race for sustainable market share.”


Commenting on the same issue, Agility’s Kewalram admitted there was currently a lot of uncertainty in the logistics industry about “the implications of providing data to a repository which theoretically removes the proprietary nature of that data and diminishes the resulting relationship with the customer.”


“However, that is based on a misunderstanding of some of the technology capabilities. A model that allows only trusted parties to subscribe to the data overcomes that limitation. Market forces will likely compel 3PLs to adopt this technology − and the early adopters are probably going to be best placed to bring value to their customers looking to integrate with their supply chains.”


Kewalram agreed that while the advent of blockchain technology could be seen as both a new business opportunity for 3PLs and a challenge to the way they currently did business, “the technology does provide the opportunity to offer more value in our services to customers.”


Jillings was equally positive, suggesting there was “every reason to believe that blockchain could become standard technology for 3PLs in the near future.”


“Applications will come along, developed by tech companies or carriers, which will allow even small 3PLs to utilize blockchain,” he added.



By Phil Hastings

Correspondent | London

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