Nearly 130 million containers cross oceans each year. Every day, four of those containers fall into the water. In 1992, one of these rogue containers released 7,000 little yellow plastic ducks more than 600 miles off the Alaskan coast. The ducks traveled around the world, washing ashore in Russia, the High Arctic and Australia. One duck stayed at sea for 15 years, crossed three oceans, and finally landed on the western coast of Scotland. These yellow ducks illustrate that currents connect the vastness of our oceans into one circulatory system. Blockchain does the same for international shipping and is modernizing the way we manage logistics.
What is Blockchain?
Blockchain became popular as the backbone for cryptocurrency. Think of it like an accountant’s ledger. Each block, which contains completed transactional data, represents a new line item. The major difference is that instead of only the accountant owning the ledger, it is replicated across a network with all parties contributing and having access to the data based on enterprise needs. This is why blockchain often is referred to as a “distributed ledger.” Adding a block requires verification from multiple computers across the chain. Blocks cannot be edited after authorization, which keeps the chain safe and accurate.
Why is Blockchain Important?
International container shipping is notoriously slow, logistically labor-intensive and lacking in transparency. Blockchain addresses these significant inefficiencies with dynamic digital connections and real-time data exchanges.
Depending on the route and destination, trans-oceanic cargo voyages average two to six weeks. Preparing a shipment can add an additional 30 days and six more for cargo unloading at the receiving port. The delays largely stem from the more than 20 pieces of physical paperwork often required for moving goods between exporters and importers. Common documents include bills of lading, sales and charter party contracts, letters of credit and port paperwork, which change hands between parties as a shipment moves. By replacing physical documents with digital data through blockchain, all entities participating in the shipment – from transport to customs to insurance and billing – can execute their portion of the supply chain more efficiently.
A pilot project involving Accenture, AB InBev, Kuehne + Nagel, and a European customs organization successfully used blockchain to eliminate all paper-based forms for a series of ocean shipments. Documents were exchanged digitally using the secure information ownership and accountability that blockchain technology provides. The test, run multiple times on shipments with different destinations and regulatory requirements, sped up operations and improved supply chain visibility. Pilot participants believe blockchain has the potential to save several million dollars annually, reduce data entry by 80%, increase speed of cargo checks, and reduce custom compliance fines.
Blockchain keeps information encrypted and protected from fraudulent edits. The data collection feeds real-time tracking as well. This is especially important for temperature-controlled cargo where degree variations can compromise high-priced electronics or perishable products that impact public health. In fact, 8.5% of sensitive pharmaceutical shipments experience temperature deviations globally. Because degradation often is invisible, identifying the damage without temperature tracking is extremely difficult. Real-time location tracing validates the container’s chain of custody to combat costly theft and schemes as an added layer of protection for these sensitive shipments.
Uses Smart Contracts
Smart contracts are computer-based agreements between entities within the chain. The contract self-executes and acts on the negotiated terms and conditions. We’ll use the yellow ducks to illustrate how smart contracts work. If the container fell into the ocean, the smart contract could execute on the terms with the insurance provider allowing for the immediate processing of a claim rather than waiting three weeks for the ship to arrive. If the ducks made it to the port intact, the smart contract could trigger payment to the exporter, maritime carrier, and drayage company as the cargo completes its journey. Should the ducks sit on the container for too long at the receiver, the contract can automatically prompt detention fines. The ability for smart contracts to increase speed and better leverage agreement terms is predicted to help combat the $140 billion tied up in payment disputes across the supply chain each day.
Blockchain and Beyond
A study found that one refrigerated container shipment passed through 30 organizations and required 200 communications to avoid getting lost or delayed. Blockchain records these steps securely and sometimes eliminates them altogether, to create a better, more efficient supply chain. If blockchain seems like a fad or an idea relegated to IT gurus, it isn’t. A survey from the World Economic Forum estimates that at least 10% of global GDP will be stored on blockchain platforms by 2025.
Langham Logistics is using and building technology that paves the way for blockchain. Learn more about how we’re leveraging cutting-edge systems and best-in-class analytics to keep every duck in a row when managing our customer’s supply chains.