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Media

Blockchain for Shipping, Logistics and Provenance

Matthew Warner | March 2020

On the whole, the shipping and supply chain industries are stuck in the technological past. Even compared to a number of other industries, the continued use of paperwork (often in duplicate or triplicate or more) to track and transfer ownership of huge amounts of goods provides a huge issue in terms of efficiency and security. The lack of technological adoption increases costs, hinders throughput, complicates management and allows for a higher risk of fraud. It is because of this that blockchain technology is being explored to improve efficiency and security in these industries.

Blockchain has a number of properties that can benefit shipping and supply chains, combating the weaknesses and solving the needs both have. Immutability, security, disintermediation, transparency, trustlessness, authentication, 100% uptime all compliment the requirements of any solution the two industries might need, and smart contract-driven automation provides the flexibility to create all manner of solutions to meet the demands for highly customised and specific specifications. 

There are a number of noteworthy ways that the use of blockchain technology could immediately enhance processes and systems in place for shipping and supply chains. One such example is the digitisation of outdated and redundant paper systems which continue to see use, such as with Bills of Lading and other paperwork documenting ownership and provenance. Using smart contracts to replace paper contracts would reduce the cost, time and risk of fraud that the traditional systems engender. An immutable, transferable, auditable digital smart contract would be simple to create and easy to use. Another area that could easily be enhanced is the management of supply chains. Immutable, transparent documents tracing the ownership and provenance of items as they move from source to the end user would provide a simple and trusted method for tracking items throughout their life. In addition, it would also prove they meet safety, environmental, ethical concerns and more. Using the immutable nature of the blockchain to prove this enables a solution that is often wanted but hasn’t been possible until now. By using a global, distributed network for solutions also provides the opportunity for interoperable devices and automation to remove or reduce a lot of the waste that is currently seen in shipping and supply chain management at the same time as it would provide new avenues for interactions and commerce. It would also enable the addition of community-run or community-controlled applications such as reputation systems and independent verifiers, improving perception and flexibility of the systems in place. 

With the number of potential benefits possible through integrating blockchain technology with shipping and supply chains, it is of little surprise that such solutions are already being researched and used. The first of these began to be reported a few years ago and the calibre of companies experimenting and developing solutions showed how seriously it was being taken. In 2017, tech giants like IBM, Microsoft and Foxconn, as well as large global supply chain players like Maersk, Alibaba, and Walmart, all revealed blockchain protocols and/or pilots that sought to harness the strengths of blockchain technology for the benefit of the global supply chain industry. IBM co-founded Hyperledger, a blockchain open source association under the auspices of the Linux Foundation, with providing solutions for supply chains being one of its major goals. Last December, management consulting powerhouse Accenture announced that it was boarding corporates on to Marco Polo. New companies are also appearing in this space; Provenance is a digital platform that enables transparency in supply chains through the gathering and presentation of information about products and their supply chains, including verified data to support them. 

The interest in blockchain has led to some interesting and successful trials and proofs of concept. One of the first examples was with HSBC and the Infocomm Development Authority of Singapore (IDA), who created a blockchain application based on Hyperledger to replace the letter of credit transaction process between banks, exporters and importers. Maersk and IBM similarly used Hyperledger to create a solution for the network of companies involved in the shipping and supply chain process which digitised the supply chain – removing the inefficient and time consuming paper methods being used whilst also improving security. Another early example was Foxconn’s prototype for supply chain loans, which led on to plans for a global network where anyone could make loans in the supply chain. Project Manifest, developed by Microsoft, was designed to enable scrutiny of product provenance and tracking of items through the supply chain. In a similar vein, JD.com created the  Blockchain Food Safety Alliance to improve transparency in food supply chains, and created a blockchain solution which tracks beef products to provide proof of where they were sourced and how they were handled. Another member of the Blockchain Food Safety Alliance, Walmart filed a patent for a ‘Smart Package’ to track various details required to enable a delivery system built on top of blockchain technology. Alibaba also made early moves to develop the intersection of blockchain-supply chain management to improve tracking and reduce fraud. 

At a similar time, if not before, one of Blockpass’ partners – Chain of Things (CoT) – was making inroads into this space. Chain of Things began working on a use case that involved object identity, or a ‘factory floor birth certificate’, for goods and devices, as well as smart containers called “Smart Buckets” to track goods and products from origin to destination. Something of a pioneer in the space, Chain of Things was asked to hold a “Blockchain in Shipping” event during Hong Kong’s Maritime Week by the Hong Kong government from 2016-2018. CoT also saw that there were other startups that were looking at blockchain to facilitate the tracking of the origin of products in the supply chain. From as early as 2014, Provenance CEO Jessi Baker sought to empower product brands to gain supply chain transparency, present information about origins, and prove business ethical and sustainability claims regarding goods and products. San Francisco-based Chronicled developed a tamper proof CryptoSeal prototype that was designed to build an immutable supply chain which illuminated provenance and possibly the secure movement of physical assets. The necessity of identification for these solutions led CoT and Blockpass into business. 

Regardless of the specifics of the solutions being implemented, the idea of identity is key to the shipping and supply chain industries. Each individual element, from the smallest package of food to the largest shipping container, from port authorities to cargo ships, needs to have their own individual identification in order to interact. Specific items require individual identities so that their details can be logged and tracked as they move through the supply chain independently of others that may share the same journey for a time. People in the supply chain require their own identities to enable the transfer of ownership or responsibility, or to log who has conducted quality control checks or other services. Transportation and storage facilities have to have identities assigned to them so their conditions can be tracked and the location of items allocated to them. Without an identity for each part, the system will not work.     

This is, in fact, one of the primary reasons Blockpass was created. Though we currently  provide a user-centric, human KYC and AML solution for regulated industries, this has always been the first step in providing identity and verification services on a much wider scale. The end goal for Blockpass is to provide identity for humans, businesses, objects and devices – the components that will be required to enable secure and efficient services in any industry, but which are particularly applicable for shipping and supply chains. Without these base level applications in place, interacting and trade in any meaningful way can’t be facilitated. It is our goal to provide these opportunities as other companies continue to develop solutions which, by necessity, rely on identity and its verification; by working together, we will enable a future where fast, secure, efficient trade is the norm, rather than the exception.