Is Blockchain the next big disruptor of the shipping industry?

How international trade can benefit from digitalizing the supply chain

American entrepreneur Malcolm McLean is credited with building the world’s first shipping container in 1956. This standard 20 ft x 8ft x 8ft metal box became one of the single most important catalysts for globalization by cutting down the time taken to physically load and unload ships. A process that used to take three weeks on average now takes just 24 hours. And today, ships are purpose-built to accommodate the maximum number of containers so businesses can transport goods to the other side of the world in a more efficient manner. But, six decades after the shipping container came into being, it is still not easy to track goods as they make their way across borders, ports and maritime checkposts. However, the challenges of cross-border logistics also present exciting opportunities for the coming of breakthrough technologies like blockchain.

A few years ago, shipping company Maersk followed a refrigerated container filled with roses and avocados from Mombasa, Kenya to Rotterdam, Netherlands and found that 100 people, 200+ transactions and 30 different agencies were involved in handling that single consignment. The shipment took 34 days to go from the farm to the retailers, with 10 days spent just waiting for documents to be processed. Now, take into account the volume of goods handled by the average shipping line with hundreds of vessels and millions of shipments, and the logistical challenges involved become truly staggering.

Blockchain technology is fast-evolving to ease communication between manufacturers, suppliers, freight operators and procurers involved in cross-border trade. Let’s look at some of the problems it is helping solve.

Here are some factors that hamper the efficient flow of goods across global trade borders:

1. Inconsistent information is available across checkpoints due to delays in updating information, or the presence of blind spots across the supply chain. This can have a domino effect, and it is often difficult to pinpoint the origin of issues to troubleshoot. A container may appear to be in two places at once, throwing upcoming delivery schedules out of gear, or a consignment can go missing because of incorrect data entered at the source. Statistics show that worldwide cargo losses exceed $55 billion annually
2. Peer-to-Peer messaging is not straightforward owing to the participation of so many different agencies and organizations, each with its own unique and rigid chains of command. A considerable amount of time is spent tracking shipment status, managing multiple documents and sharing data with third-party stakeholders. Coordinating resources, and communicating with intermediaries across language and geographical barriers and time zones make it very challenging to get visibility.
3. Every shipment requires a dizzying array of documents to be exchanged, such as packing lists, bills of lading, export-related documentation, advance declaration of goods, certificate of origin, dangerous goods declaration, customs clearances, commercial invoices and more. The manual filling out of forms and sheets makes this process time-consuming, cumbersome and prone to errors. Documents can be misplaced or not updated for days and weeks. So much so that administrative costs are twice the cost of physically shipping the container.
4. Moreover, risk assessments often fail to take into consideration all the complex factors at play further impacting a manufacturer operating with razor-thin margins in today’s competitive marketplace. Manufacturers are keen to reduce instances of malpractice which is common during clearance processes, with an IBM report estimating that fraud-related global trade losses alone amount to $600 billion.

How can Blockchain help ease these pain points?

The Param Network Approch :

• A single, unified platform to aid collaboration

Instead of scrolling through endless email threads, making calls, and chatting to communicate with your internal and external stakeholders, blockchain-driven platforms help promote a single version of the truth. Modern-day platforms such as the one created by ParamNetwork will allow businesses to onboard different entities and assign responsibilities to allow permission-based access for greater visibility.

• Ease of Digitalized Documentation

Digitalizing documentation helps dramatically reduce administrative expenses and the labour costs associated with maintaining documents physically. Going paperless helps improve the traceability of important documents and on-cloud storage makes it easy to store and retrieve paperwork, with access guaranteed around the clock.

Estimated global savings from more efficient sharing of information: $27 billion

• Custom-Built Enterprise Workflows

Supervisors can keep track of every step in the shipping process, by creating purpose-built workflows to suit the requirements of each enterprise on ParamNetworl’s low-code tool. For example, a third-party quality audit might be required before shipping expensive electronic components from the origin port where an inspection might be required after importing in the case of cosmetics and beauty products. Digitalizing this information makes it easier to track delays, and avoid demurrages and detention charges.

Deployment of blockchain technology can bring down the total cost of shipping by 15% — 30%

• Enhanced Compliance and Easier Auditing

Having this wealth of actionable information at your fingertips can make it easier for business heads to reduce unnecessary expenses by 70%, improve cash cycles, and ensure end-to-end accountability. Blockchain provides assurance of the authenticity and immutability of digital documents, helping improve trust and transparency across the process for easier auditing due to the presence of a secure trail.

According to the World Economic Forum removal of barriers due to Blockchain could result in more than US$ 1 trillion of new trade in the next decade.

ParamNetwork offers solutions to suit the specific needs of your enterprise because we believe one size does not fit all. We follow a consultative approach that focuses on making mindful but significant changes to your existing processes without disrupting business as usual. Our strength lies in adopting smart contracts and API-led, low-code tools that connect with existing ERP systems or SaaS-based products. So internal teams can be brought up to speed via workshops in a span of days, rather than weeks and months.

As global trade bounces back to pre-pandemic levels, will blockchain prove to be the biggest disrupter of freight movement across borders since the invention of the shipping container? We certainly believe in the potential of this technology to accelerate the next breakthrough in the shipping industry; watch this space to learn more about use cases and success stories from this domain.