So much can change in the shipping industry. Demand swings from overheated to tepid. One year there are too few containers, the next too many. Regulatory pressures come in waves. Right now, the global economy itself seems to be a main source of uncertainty. In a recent survey by Lloyd's List, 50 percent of shipping respondents cite recession as the dominant risk to their business. Other experts such as Deutsche Bank present a more bullish 2023 outlook. One thing remains certain, however: shippers need good information to make the most of any market.
Accurate, up-to-date, trustworthy knowledge is essential in the field of integrated shipping, where prodigious resources are put into play based on what all parties know at any given time. That's why blockchain technology has such tremendous potential. Analysts from practically every major technology consultancy see blockchain undergoing massive growth between now and 2027 within the shipping sector.
Blockchain is a digital tool that can be used to verify identities and transactions. As Professors Marco Iansiti and Karim R. Lakhani write in the Harvard Business Review:
“The technology at the heart of bitcoin and other virtual currencies, blockchain is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.”
From a technology standpoint, blockchain is a type of advanced database mechanism enabling the transparent, immutable sharing of transactional and asset data within a business network. Blockchain data can't be changed or removed by any participating trading partner.
You don't need to be a technology expert to consider how a digital verification tool could prove useful to shippers, customers, carriers, freight forwarders and other third-party service providers. You only need to think about the number of trading partners, documents and transactions involved in a typical shipment, and where risk and bottlenecks typically occur. Here are a few examples of how blockchain can tighten shipping operations.
The shipping industry runs on paperwork, and blockchain can let all parties know, exactly, what’s been done and by whom—in real time across ERP software, shared data networks and third parties. This could include simple documentation such as verified bills of lading, proof of payments, letters of instruction, export packing lists or invoices. Around 40 percent of containerized transactions still demand a paper bill of lading; blockchain could finally help digitize these documents. It could also enable smart contracts that automate the negotiation of pricing and terms.
This transparency across the digital supply chain will also improve overall trading partner accountability. For example, blockchain could create ironclad verification of fuel quality by a shipper from a fuel distributor, with the ability to trace specific deliveries from the supplier. It could even help enable verified performance metrics for specific trading partners—allowing you to analyze real-world performance versus contract agreements or past performance milestones.
Technology leader Samsung has recently tapped Vechain to help bring more transparency to product shipping. Singapore has become a hub of blockchain-based supply chain and logistics technology with 26 different startups working to become the next big provider of shipping transparency. In industries such as food and agriculture, where transparency is paramount to public health, major retailers like Dole, Nestle and Unilever are even working with tech experts to develop their own industry-specific blockchain.
Fraud is actually one of the main forecasted drivers of blockchain in the shipping industry. Cargo theft in particular is a major problem blockchain is positioned to help ameliorate. For example, around 66% of all cargo theft in North America happens during transit. Feeding Internet of Things (IoT) sensor data into blockchain networks could notify stakeholders of problems in progress. These sensors could even alert the network to physical changes in location, packaging status, light, temperature or humidity. A blockchain-enabled network could then automatically trigger some action such as notifying the appropriate authorities.
One company is even using blockchain to help prevent pharmaceutical fraud. UK-based FarmaTrust is implementing a blockchain “Track and Trace” solution that lets customers keep a digitally verified record of transactions from the manufacturer to the warehouse to ship, rail and truck—to the final point of sale. Consumers can scan a special code and confirm the legitimacy of a product right on their phone using data from a total ERP integration of blockchain-verified field data.
There’s a lot of efficiency to be found in simply having “one truth” from which all trading partners can work. Verified data, such as real-time shipment tracking even down to the parcel shipping level, can optimize practically every aspect of logistics. Shared status updates, schedules and a higher quality of general information means better decisions at every step. Verified real-time status can help make changes in anticipation of delays, avoid fees and fines, ensure service quality and validate shipment delivery.
Some of the world’s leading corporations are already implementing blockchain to help realize shipping efficiencies. Last year, Walmart Canada reported that it had deployed an automated blockchain-based system letting the company streamline management of transactions to its 70 third-party freight carriers. A shipping powerhouse, Walmart delivers more than a half-million shipments annually to distribution centers and stores around Canada. The system enabled the organization to reconcile several disparate systems and slash delays, disputes and discrepancies.
Most of blockchain’s challenges in the shipping sector are a result of its nascence. Operational costs can be high until implementations scale. Though a lot of intention to adopt has been expressed, conservative industries often have a “wait and see” attitude. The abandonment of the TradeLens platform by Maersk and IBM was seen by some as a setback.
On the technical side, new tech always offers interoperability challenges. Energy intensity remains an issue for some would-be adopters. And though efforts are in the works, there is no widespread established standard as to how blockchain is applied to shipping operations.
None of these challenges are unforeseen or insurmountable. Each is a normal part of the new technology adoption lifecycle, and the rewards for the earliest players who achieve successful implementations will be substantial. This technology will not only prove itself out in the shipping space, it will also serve as a catalyst for redefining performance standards for hundreds of operational, corporate and sustainability metrics worldwide.
While currently seeing modest adoption, this revolutionary technology is positioned to scale significantly between now and 2027. Blockchain in the global logistics and supply chain market is set to reach $3.3 billion by 2026, driven by a desire for more efficient operations and a push to reduce cargo theft. Its applications will bring more transparency, traceability, compliance and efficiency to shipping operations. By enabling all parties in a shipment to reference “one truth” that can’t be altered, future shipping operations will be able to reduce costs and risk, increase efficiency and make better decisions. Though suffering through the same kinds of headwinds faced by all new tech, experts agree blockchain will have a transformative impact on the shipping business.