Blockchain is gaining footholds in the cargo industry. Since early September the technology is an established channel in the maritime cargo business, after a shipment from China was released to the consignee in Slovenia. The cargo, which was loaded in Shanghai, travelled under an electronic bill of lading developed by Slovenia-based CargoX.
The technology provider has developed an exchange protocol for the transfer of ownership and an application that allows licensed users to issue smart contracts. These contracts define all the types of data that can be stored in the bill of lading and define the rules that govern changes of ownership along the chain. Each change of ownership is recorded on the blockchain and verified against the smart contract.
Pundits have fingered logistics as a fertile field for blockchain technology, which is essentially a distributed database that holds all records of activity in a way that cannot be altered, which makes it virtually tamper-proof. Often, as with the CargoX bill of lading, the blockchain element is supplemented with smart contracts that lay out the rules and can trigger certain events, such as automatic payment once a shipment is delivered meeting the contractual agreement defined in the contract.
According to Lisa Harrington, president of lharrington group, a strategic supply chain consulting firm, blockchain lends itself well to arenas of logistics that involve multiple parties and handovers. It is viable for large players, especially carriers and 3PLs, as well for high-value or highly regulated industries like life sciences, she noted.
Modes like trucking, which are essentially point to point and involve three parties, would see little benefit, she argued, adding that a blockchain should cover logistics end to end.
Notwithstanding early moves, most observers reckon that it will take three to five years for blockchain to become firmly established in the logistics sector. However, the adoption may accelerate considerably if a large and neutral party were to jump in, Harrington reckons.
Large logistics players are dabbling in the new technology. The most proactive has been Maersk, which partnered with IBM to develop a blockchain solution to manage and track container shipments. Several logistics firms have joined the initiative and agreed to participate in trials and share data.
Kuehne + Nagel took a step forward in September when it unveiled its upgraded portal for Verified Gross Mass (VGM) filings required under the SOLAS regime. According to the logistics firm, all information submitted via the portal is stored on-chain, which allows for using native blockchain interfaces for data exchange with third parties. The portal handles about 800,000 transactions in a month.
“The list of promises related to the use of blockchain in the logistics industry is long, but actual real-world applications are hard to find. The Kuehne + Nagel VGM Portal solution jointly developed by our sea freight experts and our IT team allows us to get a true hands-on experience with blockchain technology in an on-premise production environment and with a high number of transactions. Our customers benefit from a tamper-proof solution for information exchange with third parties with improved efficiency and higher transparency,” said Martin Kolbe, chief information officer of Kuehne + Nagel International.
“Operating the VGM portal on blockchain in an operational high-volume environment delivers valuable learnings and expertise for the development of joint blockchain applications,” he added.
The US Customs & Border Protection (CBP) agency is also dipping its toes into the water. In mid-August the agency announced that it would start live testing of blockchain functionality to verify certificates of origin for NAFTA and CAFTA before the end of September.
With this venture the CBP pursues the twin goals of verifying information to ensure participants are in compliance with requirements and of testing the waters with blockchain to be prepared for broader applications down the road.
CBP commissioner Kevin McAleenan revealed that the agency is working with companies from the private sector as well as the Department of Homeland Security Science and Technology Directorate to identify an “interoperability standard” for blockchain to ensure alignment with other government agencies.
While these small steps are being taken, CargoX founder and CEO Stefan Kukman is convinced that the benefits of blockchain solutions will draw in users. Besides cancelling out the danger of a lost or stolen contract, the blockchain-based bill of lading promises significant savings, he argued.
According to CargoX, the first shipment using its solution was charged a fee of US$15 – about 15% of the cost of sending documents by courier from issuer to shipper and on to consignee. Moreover, there are significant time savings over a process that so far typically takes five to 10 days, he argued.
By Ian Putzger
Correspondent | Toronto