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CIO Insight: The big chance with blockchain

Physical supply chains have evolved to be sequential in nature, like relay racers passing a baton, but there’s no reason the documentation associated with each shipment has to travel in lockstep with the physical movement of that shipment.

   I’ve written often in the last nine months about blockchain, and more specifically, about its relevance to supply chain and logistics. Drilling down further, I think it’s going to be incredibly important to the future of international logistics, and specifically to container shipping. I say this knowing full well that the number of logistics technology buzzwords consigned to the scrap heap of history is immense.
   Here’s why I think blockchain is important, and why it’s realistic to expect this buzzword to make the rare turn from hype to reality.
   Supply chains have evolved to be sequential in nature, but in truth, there’s absolutely no reason why they should be. Yes, the physical movement of a good is linear. A product can’t be stuffed into a box until it is actually produced, and that container can’t be loaded onto a vessel until it’s full, the drayage provider can’t pick up the box at destination until the vessel actually arrives, and so on.
   So the physical progress of a shipment is sequential, like relay racers passing a baton. But the problem is that the documentation associated with each shipment has tended to travel in lockstep with the physical movement of that shipment.
   A bill of lading is created, amended, and passed from exporter to forwarder to consignee. Associated customs documentation is generated in a similarly linear fashion. The progression is not exactly in sync—the U.S. Importer Security Filing and other advanced manifest mandates, for instance, have changed the timing of when some of those documents are filed—but the approach is much the same.

Blockchain should not upend existing shipping and customs documents. It might change how the data in those documents is submitted, but the flow should be the same.

   One party handles its own link in the supply chain documentation chain and hands it off to the next party to do the same.
   From a theoretical perspective, a bill of lading on a blockchain doesn’t change that process. But it does concretize the process. It makes the documentation electronic and, in the words of blockchain evangelists, “immutable.”
   And this is an important point when it comes to whether blockchain will realistically be adopted by participants in the ocean shipping industry.
In its simplest form, blockchain should not upend the existing assemblage of shipping and customs documents. It might change the way in which the data in those documents is submitted, but the flow should be the same.
   That, in short, is what makes the blockchain concept so exciting to me. Technically speaking, it is not “disruptive,” to use another another overused buzzword. It does not knock anybody out of the process that’s in place today. It just provides a more efficient, more trustworthy place to share data or documents.
   I think blockchain will take hold in some form in the supply chain, whether that’s providing a chain of custody audit trail for perishable or high-value goods, or getting suppliers paid sooner by linking money transfers to digitized visibility milestones.
   But the blockchain opportunity for container shipping is massive, and not really all that complicated. Take all the paper documents passed around by a bunch of disparate parties and convert them to a digital ledger that everyone agrees on.
   That simplifies document submission, improves data accuracy, and alleviates invoicing issues between carriers and their customers.
   And I’ll reiterate: At this most basic blockchain use case level, this is not a process change. Parties can still enter their data or attach electronic documents sequentially. Think of it like giving a voice command to your smartphone instead of typing it in. It’s changing the data input method, not the process.
   If the container shipping industry fails to grasp this opportunity, it will miss out on the second- and third-order effects of blockchain, namely the ability for all those disparate parties to provide their relevant data non-sequentially, the ability for the whole “community” (individual parties are referred to as “nodes” in the blockchain industry) to quickly identify which node is responsible for a missing or inaccurate document or piece of data, and the ability for that community to have inherent trust in new service providers or suppliers.
   These are all the things that blockchain providers are selling their product on—the future. But I’m much more interested in the present, because the container shipping industry has a chance to show that it is not what everyone thinks it is: slow to adapt and reluctant to adopt new technology.
   This will take buy-in from all sides—carriers, forwarders, shippers, suppliers, and port authorities running pilots on specific lanes. And all the better if customs authorities can be looped in, though the pace of bureaucracy might actually slow those initiatives down.
   There’s been lots of talk in early 2017 about how ocean carriers are embracing the digital challenge ahead of them via dynamic pricing, real-time visibility, and partnerships with e-commerce marketplaces. Those are all worthwhile endeavors, but they also require process changes.
   Blockchain doesn’t require that same level of disruption. All it requires is embracing a better vehicle for doing what’s already being done.
   Let’s once and for all show that the movement of data doesn’t have to mimic the physical movement of goods. And at the same time, show the technology community that container shipping isn’t allergic to progress.