04/05/2018 – Transportation & Logistics / Maritime / Shipping / Digitisation / Blockchain
New Wave: Digitising Shipping
As the EU greenlights Maersk and IBM’s blockchain venture, Industry Networker reports on how the new JV firm plans to make significant headway in charting the course of shipping towards digitisation – augmenting global trade and supply chains in so doing.
The cost and size of the world’s trading ecosystems continues to grow in complexity. More than US$4 trillion in goods are shipped each year, and more than 80 per cent of the goods consumers use daily are carried by the ocean shipping industry. The maximum cost of the required trade documentation to process and administer many of those goods is estimated to reach one-fifth of the actual physical transportation costs. According to The World Economic Forum, by reducing barriers within the international supply chain, global trade could increase by nearly 15 per cent, boosting economies and creating many jobs in the process.
It is with such promise in mind that, earlier this year, A.P. Moller–Maersk – the world’s largest container ship and supply vessel operator – and tech giant IBM announced their intent to establish a joint venture focused on providing more efficient and secure methods for conducting global trade via the use of blockchain technology. The joint company, to be headquartered in the New York metropolitan area, was recently given the EU’s blessing to proceed – and what could follow may prove a game-changer in an industry whose special characteristics have typically meant it has hitherto been slower to adopt technological advancements.
The aim of the new company will be to offer a jointly developed global trade digitisation platform built on open standards and designed for use by the entire global shipping ecosystem. It will address the need to provide more transparency and simplicity in the movement of goods across borders and trading zones. The technology underpinning such transformation, the new firm says, will be blockchain.
A new form of command and consent
The attributes of blockchain technology are ideally suited to the large networks of disparate partners that typify global supply chains. A distributed ledger technology, blockchain establishes a shared, immutable record of all the transactions that take place within a network and then enables permissioned parties access to trusted data in real time. By applying the technology to digitise global trade processes, a new form of command and consent can be introduced into the flow of information, empowering multiple trading partners to collaborate, and establishing a single shared view of a transaction without compromising details, privacy or confidentiality.
Maersk, a global leader in container logistics, and IBM, a leading provider of blockchain, supply chain visibility and interoperability solutions for enterprise, will use blockchain technology to power the new platform. It will also employ other cloud-based open source technologies including artificial intelligence (AI), IoT and analytics, delivered via IBM Services, in order to help companies move and track goods digitally across international borders. Manufacturers, shipping lines, freight forwarders, port and terminal operators, and customs authorities – and ultimately consumers too – could all benefit from these new technologies.
“The potential from offering a neutral, open digital platform for safe and easy ways of exchanging information is huge, and all players across the supply chain stand to benefit,” said Vincent Clerc, Chief Commercial Officer at Maersk and future chairman of the board of the new joint venture.
Speeding up adoption
IBM’s blockchain platform is already enabling hundreds of clients and thousands of developers to build and scale active networks across complex use cases, including cross border payments, supply chains, and digital identification.
“The major advances IBM has made in blockchain have shown that the technology can foster new business models and play an important role in how the world works by building smarter businesses,” said Bridget van Kralingen, Senior Vice President of IBM Global Industries, Solutions and Blockchain, who added that the new JV with Maersk would allow the two companies to speed up the adoption of the tech with the millions of organisations who play vital roles in one of the most complex and important networks in the world, the global supply chain. “We believe blockchain will now emerge in this market as the leading way companies seize new untapped economic opportunities.”
Tested with the best
IBM and Maersk began their collaboration back in June 2016 to build new blockchain- and cloud-based technologies. Since then, multiple parties have piloted the platform, including DuPont, Dow Chemical, Tetra Pak, Port Houston, Rotterdam Port Community System Portbase, the Customs Administration of the Netherlands, US Customs and Border Protection.
The joint venture will now enable IBM and Maersk to commercialise and scale their solutions to a broader group of global corporations, many of whom have already expressed interest in the capabilities and are exploring ways to use the new platform, including: General Motors and Procter & Gamble, to streamline the complex supply chains they operate; and freight forwarder and logistic company, Agility Logistics, to provide improved customer services including customs clearance brokerage.
Additional customs and government authorities, including Singapore Customs and Peruvian Customs, will explore collaborating with the platform to facilitate trade flows and enhance supply chain security. The global terminal operators APM Terminals and PSA International will use the platform to enrich port collaboration and improve terminal planning. With support from Guangdong Inspection and Quarantine Bureau by connecting to its Global Quality Traceability System for import and export goods, the platform can also link users to important trade corridors in and out of China.
To address the specific needs of the industry, Maersk and IBM are establishing an advisory board of industry experts to help further shape the platform and services, provide guidance and feedback on important industry factors, and drive open standards.
Information pipeline and paperless trade
“Today, a vast amount of resources are wasted due to inefficient and error-prone manual processes,” noted Michael J. White, former president of Maersk Line in North America, who has been appointed as CEO of the new company. “The pilots confirmed our expectations that, across the industry, there is considerable demand for efficiency gains and opportunities coming from streamlining and standardising information flows using digital solutions. Our ambition is to apply these learnings to establish a fully open platform whereby all players in the global supply chain can participate and extract significant value.”
The new company initially plans to commercialise two core capabilities aimed at digitising the global supply chain from end-to-end. Firstly, it will look to create a shipping information pipeline – one that will provide end-to-end supply chain visibility to enable all actors involved in managing a supply chain to securely and seamlessly exchange information about shipment events in real time.
Secondly, the two firms will look to commercialise Paperless Trade – digitising and automating paperwork filings by enabling end-users to securely submit, validate and approve documents across organisational boundaries, ultimately helping to reduce the time and cost for clearance and cargo movement. Blockchain-based smart contracts ensure all required approvals are in place, helping speed up approvals and reducing mistakes.
With regulatory clearance from the EU now approved, solutions from the joint venture are expected to become available within the next six months.