Early shoots of blockchain applications are beginning to sprout in logistics, popping up in air cargo and the marine sector as well as in e-commerce networks. Amid much hype about the potential of the technology to transform supply chains, they are seen as harbingers of a broad adoption to tackle a number of aspects, from transparency and visibility to changing processes and taking millions of dollars of cost out of shipping.
Perhaps not surprisingly, e-commerce players have been in the vanguard of blockchain adoption for logistics. In May Alibaba unveiled its Food Trust Network, a blockchain-encrypted platform which allows users of Tmall to authenticate, verify and record data throughout the shipping process. The declared goal of this is to promote transparency and prevent fraudulent manipulation of the foodstuffs during the shipping process.
Rival JD.com announced its Blockchain Food Safety Alliance already at the end of last year. Like its competitor, it aims to increase food safety and transparency. JD.com has partnered for this initiative with IBM, Walmart and Tsinghua University National Engineering Laboratories.
In the air cargo sector Brussels Airport has been a trailblazer. In June it launched a blockchain freight management app that is meant to replace the use of paper documents in the handover of cargo from handler to forwarder with a digital rights/release process.
According to the airport authority the new tool is designed to work alongside others like a slot booking app and is part of a broad drive to move communication between stakeholders into the cloud for faster and safer flow of data.
Ground handling giant Worldwide Flight Services is also working to leverage blockchain technology. In partnership with Olam, a Swiss not-for-profit organization, it plans to set up a proof of concept that can be used to track shipments throughout its operational processes as well as through forwarders’ warehouses and between forwarder facilities and its own terminal. It aims to cover status as well as financial information and ambient conditions like temperature and humidity, said Dany Nasr, CEO USA.
“All parties will add blocks of data throughout the process that can be used for different purposes, such as operational or financial,” he added.
In the marine sector CargoX has been an early mover. In April it demonstrated its smart bill of lading to live audiences at industry events in Paris and Slovenia. This is built around an exchange protocol to handle the transfer of ownership of bills of lading and a decentralized application that allows licensed users to issue smart contracts – computer programmes that run on the blockchain with source code that is universally readable.
These smart contracts define all the types of data that are stored in the bill of lading as well as rules for the change of ownership. All such changes go to the blockchain for evaluation against the smart contract.
According to CargoX, this offers significant savings in time and cost. It takes a bill of lading five to 10 days to get to the final recipient. Printing costs for bills of lading amount to some US$2 billion, and firms spend about US$5 billion on couriers to move the documents.
Maersk estimates that blockchain can save US$300 per container in terms of labour and processing associated documents. The shipping line has formed a joint venture with IBM to blaze a trail in the adoption of blockchain technology in the industry. This is meant to be an open and neutral platform that can provide value to all parties. According to the pair, 24 companies have come on board and about 70 are in the pipeline.
The Maersk-IBM venture is concentrating in the initial phase on visibility and documentation. For many, tracking is a starting point. In a joint undertaking with Accenture, DHL has developed a working prototype for tracking pharmaceuticals from origin to consumer. The pair also issued a joint study that concludes that the use of blockchain can help companies attain significantly higher safety standards at lower cost. They see a slew of applications in the supply chain, from asset management and improved transparency to the automation of commercial processes with smart contracts.
“We believe logistics is an area where the new technology will have a truly profound impact,” said Matthias Heutger, senior vice president, DHL Customer Solutions & Innovation. “Implementing productive solutions, however, will require further technological development and, critically, collaboration between all stakeholders.”
FedEx boss Fred Smith has characterized blockchain as the next frontier in logistics. According to International Data Corporation, global spending on blockchain will climb to US$2.1 billion this year, more than double the amount spent last year. In 2021 it is expected to reach US$9.7 billion.
Many forwarders and shippers remain hesitant, though, which is partly due to confusion over the nature of blockchain and cryptocurrencies, with which it has been associated.
CargoX has released a cryptocurrency for access to its system, but this is a non-issue for users, according to CEO Stefan Kukman. “Our customers never deal with cryptocurrency and need no knowledge about it, as our graphical user interface completely shields them from the underlying specifics,” he said.
By Ian Putzger
Correspondent | Toronto