March 5, 2017 | Written by: Bridget van Kralingen
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Ninety percent of the goods in the global market are at some point transported by ocean shipping container. To get these shipments from one port to the next, a complex series of interactions must take place.
Global shipping and logistics leader, Maersk, found in 2014 that a single, simple shipment of refrigerated goods from East Africa to Europe can come into contact with nearly 30 people and organizations, generating more than 200 different interactions and a four-inch stack of paper along the way. These hand-offs lead to missing and sometime incomplete information, especially because it is compiled and transmitted through highly manual processes.
This growing concern led IBM and Maersk to join forces to collaborate on an industry-first solution that uses blockchain technology to advance global, cross-border supply chains and help eliminate much of the manual hand-offs and in turn, and reduce a lot of the associated fraud and waste.
The solution, based on the Linux Foundation Hyperledger Fabric, will help companies in the shipping and logistics industry better manage and track the paper trail of tens of millions of shipping containers across the world. Designed to connect large players in the shipping supply chain – including freight forwarders, shippers, carriers, and customs authorities – it has even greater potential for impact by connecting smaller players, such as growers and independent manufacturers or exporters.
Let’s consider an example. A florist in Kenya owns a small business and would like to expand into exports. As she explores her options, however, she sees the costs begin to mount. A full picture of the process of exporting her flowers to a port in Amsterdam reveals that the expense of compiling and tracking the paperwork is twice that of the actual shipping costs. Additionally, managing the various relationships and communications associated with these exports is exceedingly complex. She decides not to expand her business.
The trust, transparency, and efficiency built into the blockchain solution breaks down many of the barriers to entry that small businesses like our florist face. The cost of paperwork decreases, as proof of identification and origin simply live on the chain. The volume of communications among parties decreases as each step in the chain is visible and verified. Suddenly, going global becomes a possibility for our florist.
Consider the earning and spending power that could be unleashed if small businesses around the world were given access to the supply chain technology that we are building. We often take for granted the trust that is built into our financial systems, the ability to prove ownership or identification, or the ready access to affordable capital. These are not givens in developing economies, and the cost of overcoming these obstacles can be crippling to the point of effectively barring entry into the global marketplace. According to a 2013 World Economic Forum report, breaking down such barriers to entry with blockchain technology could result in a worldwide GDP increase of 5% and a total trade volume increase of 15%.
The nature of this partnership is both unprecedented and unsurprising. We have brought together the expertise of the world’s largest shipping company and the advanced blockchain research of one of the most respected technology companies to change the way business is done.
It is built into the fabric of both our companies to be at the center of such technological advances. We are driven not by change for the sake of change, but by a desire to use our capabilities to improve the world we live in. The next few years will reveal the ability of blockchain to increase transparency, break down barriers, and invite more participants into the global economy. I am proud that IBM and Maersk have partnered to usher in these changes together.