Blockchain to revolutionise shipping

Singapore

GLOBALISATION has brought the most advanced trading networks the world has seen, with the biggest, fastest vessels, robot-operated ports and vast computer databases tracking cargo - but it all still relies on millions and millions of paper documents.

That last throwback to 19th century trade is about to fall. AP Moeller-Maersk and other container shipping lines have teamed up with tech companies to upgrade the world's most complex logistics network. The prize is a revolution in world trade on a scale not seen since the move to standard containers in the 1960s.

But the undertaking is as big as the potential upheaval it will cause. To make it work, shipping lines and thousands of related businesses around the world - including manufacturers, banks, insurers, brokers and port authorities - will have to work out a protocol that can integrate all the new systems onto one vast platform.

Should they succeed, documentation that takes days will be done in minutes, much of it without the need for human input. The cost of moving goods across continents could drop dramatically, adding fresh impetus to relocate manufacturing or source materials and goods from overseas.

Rahul Kapoor, an analyst at Bloomberg Intelligence in Singapore, said: "This would be the biggest innovation in the industry since the containerisation. It basically brings more transparency and efficiency. The container shipping lines are coming out of their shells and playing catch-up in technology."

The key, as in industries from oil tankers to cryptocurrencies, is blockchain, the electronic ledger system that allows transactions to be verified autonomously.

The benefits wouldn't be confined to shipping. Improving communications and border administration using blockchain could generate an additional US$1 trillion in global trade, said the World Economic Forum.

APL Ltd, owned by the world's third-largest container line CMA CGM SA, together with Anheuser-Busch InBev NV, Accenture, a European customs organisation and other companies said last month that they have tested a blockchain-based platform; South Korea's Hyundai Merchant Marine Co last year tried out a system developed with Samsung SDS Co.

The shipping paper trail begins when a cargo-owner books space on a ship to move goods. Documents need to be filled in and approved before cargo can enter or leave a port. A single shipment can require hundreds of pages that need to be physically delivered to dozens of different agencies, banks, customs bureaus and other entities.

In 2014, Maersk followed a refrigerated container filled with roses and avocados from Kenya to the Netherlands. The company found that almost 30 people and agencies were involved in processing the box on its trip to Europe. The shipment took about 34 days to get from the farm to the retailers, including 10 days waiting for documents to be processed.

Maersk, the world's largest container shipping company, which has teamed up with IBM Corp to enable real-time tracking of its cargo and documents using blockchain, said: "The paperwork and processes vital to global trade are also one of its biggest burdens. The paper trail research that Maersk did uncovered the extent of the burden that documents and processes inflict on trade."

That plethora of paper processes has been one of the reasons shipping has lagged other industries in moving to electronic forms. The different languages, laws and organisations involved in moving cargo in the past made standardisation a slow process.

Instead the industry has relied on advances in transport technology and cargo handling to improve efficiency. In the 1850s, it took more than three months to move chests of tea from southern China to London. Now, thatjourney takes about 30 days. The biggest change came in the 1960s, when the industry adopted the standard-size steel boxes in use today, replacing the wooden crates, chests and sacks used for centuries.

With these containers sometimes holding products from different suppliers, and ship cargoes sometimes ending up with thousands of customers in dozens of countries, the transition to a uniform electronic system presents major challenges.

APL said: "Not all stakeholders are looking at deploying the same blockchain solution and platforms. This can be a challenge if stakeholders are expected to trade via a common platform or solution."

The shipping lines will also need to persuade the ports and other organisations involved in cargo trading to adopt their systems. Maersk said Singapore-based port operator PSA International Pte and APM Terminals based in The Hague, Netherlands, will use its platform. The cost savings could be visible in the companies' financial statements in about two years, said Mr Kapoor.

KD Adamson, chief executive officer of Futurenautics Group, said: "Shipping needs to stop thinking about itself as this standalone middle sector. It needs to start thinking about how the different elements of shipping fit into other ecosystems." BLOOMBERG