TradeLens, a blockchain-based supply chain solution for the shipping industry developed by IBM and Maersk, will be piloted by the Canada Border Services Agency (CBSA) with the goal to improve the efficiency of movement of goods across Canadian borders.
The pilot with CBSA announced in a press release earlier today marks one of the first with a border agency for TradeLens, which was first launched in August and is the product of joint development between Danish logistics giant Maersk and IBM.
The goal of the pilot program for the CBSA is to utilize TradeLens’ permissioned blockchain to improve business processes for the border agency. According to the press release, TradeLens can reduce the transit time by up to 40% and avoid thousands of dollars of costs involved in a shipment across its supply chain.
In a separate announcement, IBM and Maersk also unveiled that the Port of Montreal, Canada’s largest container port will be joining the TradeLens solution. The port will provide data on the movement of vessels and containers that will be integrated into the TradeLens platform to increase visibility into cargo movement and provide added business intelligence into the logistics of the operation.
How Blockchain Solutions like TradeLens can Help Modernize Global Logistics
While the global shipping and logistics industry accounts for enormous amounts of economic value every day much of the industry is still mired in paperwork and inefficiencies. Moving the industry towards a common platform that digitizes much of the documentation and automates some of the many transactions that happen along the supply chain could be the biggest change to the industry since the advent of standardized containers in the 1960s.
In 2014, Maersk tracked a shipment of avocados from East Africa to The Netherlands and found that “more than 30 individuals or institutions are involved in handling documentation and there are about 200 different communication interactions in the process, with public officials and between different companies,” the group said. “Consequently, the time spent waiting on paper stamps and email replies costs just as much as the actual shipment, which simply is not a feasible or productive way to do business.”
A solution based on blockchain could be an ideal platform to build upon for modernization of the industry. A blockchain-based platform could bring the following benefits:
- Using the immutable (un-alterable) ledger to record the various steps along a product’s journey would provide visibility for all stakeholders along the supply chain.
- Recording the various attributes of a product digitally in the blockchain could eliminate significant amounts of paperwork such as purchase orders, certificates of authenticity, Bills of Lading, trade documents and so on.
- The provenance of products could be authenticated by tracking their entire route along all of the transactions recorded on the blockchain.
- Smart contracts could be employed to automatically exchange funds as the product changes hands from one handler to another and could be based on whether or not conditions recorded in the history of the product on the blockchain were met.
The Challenges of Moving the Supply(chain) to the Block(chain)
Projects such as TradeLens could potentially have huge benefits for a massive global industry and save companies time and money shipping goods in the global economy. But there are also several challenges before that bar of soap you bought yesterday has been shipped across the planet on the blockchain.
One of the benefits of blockchain technology in logistics is that, in theory, it eliminates the need for trust between parties. This is true in the case of digital assets like cryptocurrencies which utilize the blockchain and consensus mechanisms like Proof of Work to determine whether or not something is true.
However, when dealing with physical assets like shipping goods there exists what is called the ‘oracle problem’. Namely, there needs to be trust that the information about the physical good that is recorded in the blockchain is from a trusted source, or ‘oracle’.
If an entirely blockchain-based system is implemented for the global supply chain then there still needs to be some oversight and checks and balances at certain points along the way that the information recorded about the goods is authentic. Finding the balance between automation and the oversight needed could be tricky as companies will look to maximize time and cost savings.
But perhaps the biggest challenge in using the blockchain for managing global shipping may be getting enough of the big players onto the same platform. Many of the advantages of the solution rely on it being ubiquitous across ALL of the various steps of the goods shipment. That way there are no gaps along the supply chain that are recorded separately. Given the breadth and depth of the global shipping, as well as all of the competing interests between companies and countries, getting everyone to agree on a common platform may be difficult. There are already other platforms looking at blockchain solutions for the industry such as Marco Polo, Viant, and VeChain with different approaches to the problem from TradeLens.
Regardless of the platform or platforms that help to modernize and improve the efficiency of the global shipping industry, it certainly seems as though blockchain technology will have a role to play.