Competitors Link Arms and Embrace Technology's Promise - Global Trade Magazine
  November 22nd, 2019 | Written by

Competitors Link Arms and Embrace Technology’s Promise

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  • When it comes to moving containerized freight around the globe, third-party logistics companies have a lot to deal with.
  • Blockchain designed for trade should disallow anonymity.
  • Blockchain technology, while still in its innovative infancy, has “a lot of potential” to facilitate trade.

Overcapacity. Low freight rates. Security problems. Data inadequacies. Stringent environmental regulations. When it comes to moving containerized freight around the globe, third-party logistics companies (3PLs) have a lot to deal with.

However, like a guardian angel, blockchain has arrived to solve all these issues and more for the 3PL industry, which stands to save billions of dollars annually through increased efficiency, improved processes and a digital transformation.

Blockchain technology, while still in its innovative infancy, has “a lot of potential” to facilitate trade, according to a report by Christine McDaniel, a senior research fellow at George Mason University’s Mercatus Center, Hanna C. Norberg, the founder of Trade Economista and the university that was released in May.

In “Can Blockchain Technology Facilitate International Trade?” McDaniel and Norberg explored blockchain technology’s usefulness in easing trade finance, improving customs procedures and tracking the provenance of goods. Their conclusion: “Adaptability, interoperability, and a policy environment that welcomes experimentation will be essential if the U.S. economy is to realize the potential benefits of blockchain technology across the international trade landscape.”

They also point out that numerous private- and public-sector efforts are underway to explore the benefits of blockchain technology. Financial institutions are experimenting with blockchain to increase access and decrease trade-finance costs.

The shipping industry is working with those along the supply chain and with customs officials to see how a distributed digital ledger can facilitate the transparent movement of goods across borders and seas. Companies and retailers are exploring ways to track their own supply chains so they can communicate tracking and origin information to consumers who increasingly demand such information.

Among those that are all-in with blockchain is Blockshipping, a Danish concern that was launched in May 2018 with a goal of developing the world’s first freight container registry. The startup claims its blockchain-based Global Shared Container Platform, which provides a real-time registry of 27 million containers, could save the industry $5.7 billion annually. For that to work, parties across the industry must apply sensors to all containers.

The same month that Blockshipping announced its arrival, global shipping giants CMA CGM and the Mediterranean Shipping Co. joined TradeLens, the blockchain-based digital shipping platform developed three years ago by A.P. Moller-Maersk and IBM. TradeLens is an open and neutral blockchain platform that promotes an efficient, transparent and secure exchange of information to improve collaboration between different stakeholders within the supply chain.

Ironically, CMA CGM and Hapag-Lloyd had criticized the workings of TradeLens in 2018, stating that for a blockchain-based platform to succeed within the industry, it would need to have a common standard. With CMA CGM and MSC now having joined TradeLens, the platform accounts for shipping data of over half the number of container lines that sail across international waters.

Surgere is a North Canton, Ohio-based digital supply chain and packaging specialist whose clients include Nissan and CEVA Logistics. In June, Surgere announced it had joined the Blockchain in Transport Alliance (Bita), a Chattanooga, Tennessee-based organization with nearly 500 members in more than 25 countries that collectively generate more than $1 trillion annually. The alliance helps develop industry standards, encourage the use of new solutions and educate its members who are mostly drawn from the freight, transportation and logistics sectors.

“Blockchain enables instant visibility of inventory transactions, captured by Surgere’s extremely accurate RFID solutions, which can be immediately and collectively processed throughout the supply chain,” said Rusty Coleman, Surgere’s vice-president of Digital Transformation, in the Bita announcement. “That visibility can remove artificially created demand patterns and make visible smooth and continuous demand for tier [suppliers] near real-time.”

Representatives from NBSF Railway, Daimler, Delta, J.B. Hunt, FedEx, Transplace and UPS are on the Bita board of directors, whose Standards Council chairman is Dale Chrystie, FedEx’s business strategist and blockchain fellow. “This is not a process improvement initiative; this is a breakthrough discussion,” Chrystie said from the stage of the Blockchain Revolution Global conference in Toronto on April 25. “This is a different way to think about how global clearance looks in the future.”

The notion that competitors are joining hands when it comes to the promise of blockchain was demonstrated by the fact that the FedEx executive was joined by Eugene Laney, head of international government affairs for DHL USA and Mahesh Sahasranaman, principal architect at UPS Supply Chain Solutions, in a discussion with Don Tapscott, executive chairman of the Blockchain Research Institute. Each agreed there is a common interest in embracing uniform standards for blockchain and getting governments on board with the technology.

“This is an issue that must be looked at with a global viewpoint,” Chrystie said. “These dots are going to connect. The question is how are you going to accelerate that process.”

Here is a deeper dive into ways blockchain can revolutionize the industry, according to the “Can Blockchain Technology Facilitate International Trade?” report from George Mason University’s Mercatus Center.

Trade and Finance

Blockchain could reduce the expense and time required to facilitate trade that depends on third-party lending or insurance. Such trade accounts for about 80 percent of global trade. This reduction of expense and time will be especially important for small and medium-sized enterprises that may face restrictions to accessing credit or for firms in countries with less developed finance markets.

Customs Procedures

The technology could reduce costs associated with obtaining import and export licenses, creating and verifying the accuracy of cargo and shipping documents, and making customs declarations. Blockchain could make a positive contribution to expediting customs procedures. The total impact of those procedures on global trade volumes and economic output is estimated to be greater than that of tariffs.

Tracking the Origin of Goods

Blockchain could improve how producers and retailers manage their supply chains by providing real-time information on the movement and origin of goods. Blockchain designed for trade should disallow anonymity. If such a design were to be widely adopted, it might improve detection of illicit trade flows and help deter illegitimate efforts to circumvent trade rules. A design without anonymity could aid customs and law enforcement while easing the flow of legitimate trade.