• 2017 November 9

    Blockchain logistics

    Surely you have heard about blockchain and have a general idea of what it is. Perhaps, you know less about using blockchain in logistics and would like to know more. This technology will let operators of marine container lines save about $38 bln annually. 

    Simple words about difficult things 

    Imagine a folder named “Nightmare” on your desktop, which is hardly surprising for a CEO of a forwarding company which should deliver a batch of ladies' footwear from Italy to Ekaterinburg before the season is over.

    The folder contains many files: Word agreements on sea shipping and highway transportation, PDF agreement on container removal from a port, BL documents, scans of customs declarations etc. It is only a part of documents related to the process which also means interaction with contractors and contracting parties. Part of information is stored in numerous messengers, e-mail, wherever it is possible.  You can alter any file, loose or delete it by mistake. That is why it feels like a nightmare, an information chaos.

    Now, imagine a different situation - one system accumulating all documents related to cargo transportation (excluding commercial agreements) in one format.  That means, that all bills of lading, delivery notes, declarations, certificates are available in their place, whoever is the owner.

    You cannot alter any o the documents. They are coupled like railcars in a train. The “tail” of the declaration in the form of a programme code is the beginning of a delivery note, the “tail” of which is placed in the next document. Moreover, all documents are available in the same order for you and other participants of the delivery process. Of course, all computers are integrated into a network developed specially for that purpose.  

    The blockchain technology can be described in simple words: different data parts (blocks) are coupled into a chain and are available for all parties involved. The technology is also known as an open registry, a public registry or a distributed ledger.

    What is it for?

    This concept of information storage and exchange excludes deception of data. Once uploaded document (a bill of lading, a receipt or a compliance certificate) will remain unchanged forever.

    A forwarder insists on having sent the documents by mail but they are lost? Someone at the port has amended accompanying papers? Well, it can be checked easily since the documents are in the public registry and that is enough to compare the data. All steps have been written and no one can rewrite them.

    A chain of deliveries is plain to see and available for everybody, it is actually “inscribed on granite” – that is the essence of a blockchain logistics. It will take several minutes to trace the entire way of the goods and to see who and when uploaded which information into the system. 

    An important advantage of a distributed ledger is its cyber and technical failure security.

    When information is available at any computer in the system, one intact computer is enough for work.  

    However, it's important to realize that blockchain is a technology for a document flow alone. Nothing else.

    The public registry will not let the managers of logistic companies develop optimal routes, neither will the process of fixing cargo become more perfect or controllable. Unlike CRM systems, blockchain has nothing to do with artificial intelligence, automatic learning, collection and analysis of mass data for optimal solutions, or personnel activity planning. This technology is not a guarantee of preventing agreement errors. It will not execute the task of lawyers, neither will it help financial experts make cost calculations. But it will save document flow time, allow for fast finding of the component with a mistake and reducing business expenses caused by losses, fraud or document forgery.

    Parallel world of bitcoin

    Another important aspect worthy of attention. The world’s first cryptocurrency is often equaled to blockchain technology. No wonder: the idea of a public registry was focused on making cryptocurrency possible. By today, blockchain has moved beyond the cryptoworld and is living its own life.

    Relations between the registry and cryptocurrency can be described as an interaction between a computer, as a sort of infrastructure, and specific programs that can be called up. Blockchain is a computer where many program products can be installed including bitcoin and other services and applications having nothing to do with a bitcoin. Actually, blockchain projects in logistics do not involve cryptocurrency.

    Spoiler: logistics experts are stoked on blockchain

    In summer 2017, British logistics company Marine Transport International (MTI) successfully completed its blockchain pilot program. Containers were to be delivered by seaborne and road transport to the Great Britain.

    All parties including a seller, a purchaser, sea and road carriers, customs authorities and terminals were included into a specially created blockchain. Each party uploaded information about its operations with cargo into the system, which was available  online for all the colleagues.  

    Jody Cleworth, chief executive of Marine Transport International, said online data exchange let decrease paperwork costs by 90%. Besides, communications between the process participants were optimized. They did not have to be involved in intense correspondence or make calls. All the communications were unified as all participants communicated in one place and in one format while the ability to trace current operations with the cargo allowed for being prepared to the next phase of works.

    The year of 2017 also saw a number of pilot projects performed by Maersk and IBM, including transportation of Schneider Electric products from the port of Roterdam to the port of Newark and fruit from Kenya and China to Europe.

     Ivan Kalinichenko