No-one reading the maritime press can have avoided the multitude of articles lauding the potential application of Blockchain technology to logistic supply chains.
These articles once again demonstrated that shipping is remarkably herd-like in its approach to the latest technological novelty that promises to cut costs and increase efficiency.
In the current rate environment this of course makes perfect sense and in an era where we cannot turn around for reading about how the future of shipping depends on being smarter and more digitised, Blockchain is perfectly on-trend.
Blockchain is not a silver bullet
At WWL, we do not believe that Blockchain is a silver bullet. Ultimately, its success hinges on how far we as an industry are prepared to co-operate in setting standards that enable us to fully leverage the technology. In the spirit of reasoned debate, I would like to propose some modifiers to the apparently inevitable wave of Blockchain disruption.
The first is that Blockchain’s importance to shipping is no different to the TCP/IP infrastructure that underpins the Internet. In other words, it is the wiring that allows us to do the things we now take for granted, but it is not the application itself.
If users do not generally care too much about TCP/IP, why would they be concerned with Blockchain? To coin a phrase, “it is the thing that gets us to the thing”.
The second is that Blockchain offers a unique opportunity for the shipping industry to create a cross-industry platform that can be shared between owners, operators, shippers, logistics providers, regulators and end users, to mutual benefit.
Opportunities to enable improvements in the supply chain
The opportunity for Blockchain to enable improvements in the supply chain is considerable. Equally considerable is the risk that an excessive focus on the technology in all its inevitable varieties fosters incompatible, competing systems growing in an uncoordinated way.
This has happened in technology before and is likely to happen again. If we don’t act together, we will seriously hamper our ability to take advantage of that opportunity.
To be clear, I am not proposing a regulated instrument. If Blockchain is to be a unifying protocol across the supply chain it needs to be publicly-owned and work to open standards. Similar to how the World Wide Web Consortium governs the Internet, we need to agree on a common foundation across the industry that allows us to develop tailored applications on top.
Such a level of co-operation needed might sound too rich for shipping, but this subject deserves a conversation about how we want the industry to progress and where there are common, non-commercial interests that Blockchain could serve.
So far there are very few specific examples of what the Blockchain could deliver but a lot of hyperbole. There is a growing perception that it will somehow increase transparency and reduce costs but its abstract nature means it is still hard to get to grips with.
When we talk to vendors and consultants, their view tends to be that Blockchain will be one of the protocols they will use to enter data into their cloud-based ERP systems. Again, it’s the wiring, not the signal. Conversations with industry players show there is less interest in the technology itself than what it might enable, but there is also a recognition that it might realise improvements in global supply chains that have so far been beyond the individual companies’ ability to instigate.
Blockchain-based Bill of Lading
The interesting part about Blockchain is the role it plays in relationships that are not based on trust. This could for instance be situations in which unknown counterparts interact or where regulators come into play, such as customs clearance where it is essential that the data submitted is accurate and tamper-proof. Further, in situations where there are many stakeholders to the same set of information, Blockchain is unsurpassed in allowing for a shared trust and transparency across a diverse group.
The obvious example is the Blockchain-based Bill of Lading, where the single-truth element allowed by the technology will reduce transaction costs across the supply chain. But there are other ways to think about it too.
In a simple automotive logistics example from WWL’s own business, a Blockchain based BoL could be used in the movement of cars from the factory to the dealers, where smart contracts would allow for instantaneous invoicing when services or processing has been performed, ownership could be transferred automatically while in transit with insurance terms adjusted depending on the exact geographical location of the car (higher while being transported, cheaper when in storage reflecting real risk).
It is really only the imagination of the users that sets the limits for the potential for improvements in the supply chain.
Beyond the applications potential, the most important conversation about Blockchain in shipping is whether it should be private (ie: company or consortium specific) or public (ie: working to open standards). If the aim is to create an informational logistics backbone across the supply chain it makes no sense at all that industry-wide initiatives should be private.
We need better communication standards
It is our clear opinion that the only way the industry can get full value from Blockchain is if it is a public system that anyone can tap into and leverage. The risk with private tie-ups between IT vendors, cargo and shipping interests is that we will end up with multiple proprietary Blockchain flavours which customers may have no option but to use.
We need better communication standards across logistics in general and Blockchain could be the technology that supports that. Now, the industry must create the dialogue necessary to ensure we do not end up in a Blockchain arms race to the benefit of very few.
The interest of some big industry names is both good and bad news for shipping’s Blockchain ambitions. It creates interest but also adds to the hype, without it being much clearer how shipping companies could end up using the technology.
What is certain though is that if we fail to create a common shipping platform for Blockchain, it is likely to flourish into myriad competing systems that fail to deliver wider benefits.
The question we need to answer is this. Is it better to let the market decide the future direction of the industry or for the industry to control this part of its own destiny?
Ari Marjamaa is Chief Transformation Officer in WWL ASA with responsibility for Business Transformation & IT. Ari will take part in the Lloyd’s List Business Briefing in Oslo on May 29, at the Astrup Fearnley Museum.