Shipping blockchain: All in the uptake

Maersk and IBM's blockchain trial could revolutionise the shipping container supply chain. But to make real cost savings, all parts of that chain have to adopt the solution

Danish shipping company Maersk, which accounts for 15.8% of global shipping traffic, revealed on March 5 the completion of its first live blockchain trial for freight tracking. Overall Maersk profits have decreased in the past year, and the shipping company is keen to inject fresh technology to up efficiency and bolster those profits.

Built in partnership with IBM, the blockchain solution is based on the Hyperledger Fabric ledger. Members of this ledger include IBM, JP Morgan Chase & Co, Cisco systems and the Bank of England. The digital ledger uses a logging method to track entities which cannot be changed once recorded and all in the supply chain can see the transaction as soon as it is recorded.

Once the solution is developed for prime time use, it will not only be used for containers shipped by Maersk, but for the whole of the supply chain. IBM are working with Maersk, and intend to work with a network of shippers, freight forwarders, ocean carriers, ports and customs authorities to build the new product.

This is expected to go into production later this year and has the potential to reduce cost and the complexity which comes with trade finance.

But uptake is not guaranteed, and it has not been stated whether these members of the supply chain will have to adopt the solution with additional costs.

There is another hurdle to overcome – and it is a big one. All involved in the supply chain network need to have access to the digital ledger and have the technology as their primary device.

The cost-savings for shippers are potentially huge, and IBM wants to capture data on as many as 10 million containers by the end of the year. And Maersk has recently spoken of the relief this technology will bring in a manually constrained cross-border supply chain. For example, a single container can require stamps and approvals from as many as 30 people via the manual process currently used.

Although blockchain is the matrix to manual labour, there are still issues that need to be ironed out before it is implemented throughout a supply chain - namely, distribution. It can only be used if all members of the supply chain have access to the digital ledger.

As Jacob Stausholm, chief financial and tech officer at Maersk has said, this is the difficult part. Maersk admits it is still plotting different uses of the ledger technology and does not think it is ready for prime time fully. Together with IBM, Maersk has been seeking cooperation from customs authorities, freight forwarders and the producers that fill their containers. Last month saw the first trials with these partners, involving the shipping route between Rotterdam and Newark.

Often the development of blockchain-based solutions is described as a partnership, and this is often its downfall. It usually entails participants from limited parties, when it will only take off once there is an open access system. Even Maersk are unsure whether the future of blockchain can be potentially shifted onto a wider scale.

They said they are still in the process of quantifying the benefits.

It’s a step in the right direction, but blockchain needs a lunge over the Atlantic before it can be used as a primary tracking source. The technology is a speedy solution; the same may not yet be said for its uptake.