A blockchain consortium of four of the world’s top eight container lines and four of the top global terminal operators has emerged, escalating an arms race between the newest entrant, based on CargoSmart technology, and the Maersk- and IBM-led initiative called TradeLens.
The new consortium, powered by Oracle Cloud Blockchain Service, involves CMA CGM, Cosco Shipping (and subsidiary brand OOCL), Evergreen Marine, and Yang Ming. All but Yang Ming are part of the Ocean Alliance, and collectively those lines deploy roughly one-third of total containership capacity.
The terminal operators include DP World, Hutchison Ports, PSA International Pte Ltd, and Shanghai International Port, the largest companies in that industry outside of APM Terminals. CargoSmart, a shipment management software provider, is owned by Cosco.
TradeLens says it has attracted about 100 partners onto its platform. However, the platform has only managed to get one carrier outside the Maersk Group — Pacific International Lines (PIL) — to join. The platform’s inability to attract any of the major east-west carriers has cast doubts on the feasibility of TransLens, a point recently acknowledged publicly by IBM.
Blockchain and shipping — theory and reality, to date
Blockchain is a catchall phrase for a distributed ledger that is encrypted in such a way as to make any tampering nearly impossible and highly evident. It’s being pushed by advocates as a way to drive data authenticity and accuracy among numerous parties that need to provide or access that data.
In theory it should be tailor-made for a multiparty, globally disperse environment such as logistics. But persistent skepticism about whether the technology is as ideally suited to global supply chains as first advertised continues to impact the most prominent projects in the space.
The participation of CMA CGM in the CargoSmart blockchain initiative is particularly noteworthy, since the French carrier’s subsidiary brand APL is engaged in its own blockchain pilot with AB InBev, Accenture, and Kuehne + Nagel.
CargoSmart provides software for shippers, freight forwarders, and ocean carriers. It was one of the original electronic ocean freight booking portals, alongside INTTRA and GT Nexus, and was long seen as affiliated with Hong Kong-based OOCL, which was acquired by COSCO this year (COSCO is now its parent company). The software company said in July it began working with Oracle on blockchain software for the container industry.
“CargoSmart started looking at blockchain technology [in summer 2017],” CargoSmart chief commercial officer Lionel Louie said in a briefing Tuesday with JOC.com. “At that point in the shipping industry, there were quite a few pilots. Hyundai was doing something, APL doing something on bill of lading, others were looking at cargo tracking, or working with BCOs [beneficial cargo owners] on particular visibility projects.
"We looked at that as very hard to scale. If you want blockchain to succeed, you need three things: you need a lot of participants; you need a lot of usage — use cases have to be quite well accepted, so people are gaining business value; and blockchain networks cannot live on their own. Bits of processes can’t be confined. There are business value gaps [in] the industry like trade finance, freight insurance, the supply chain. A lot of network connectivity needs to be there.”
So CargoSmart started by talking with friendly carriers — ones partnering with COSCO and OOCL in the Ocean Alliance — and affiliate businesses such as SIPG. The consortium, dubbed the Global Shipping Business Network (GSBN), will provide input on a platform intended to enable members to “develop applications and connect to other consortium networks to increase the speed of data integration and improve business performance.” TradeLens representatives have similarly touted the ability for developers to build applications on top of its blockchain platform.
Louie said the announcement in January that Maersk and IBM were working together helped CargoSmart better define its value proposition.
“Maersk-IBM to me is a very bottom-up approach,” he said. “There’s all the logistics end-to-end events chain they are capturing. We took the more pragmatic approach. CargoSmart has been in this data business for a long time, and there have been gaps for a long time. Blockchain doesn’t solve that problem. So we took a top-down approach. Let’s look at immediate business values if we could have a trusted distributed ledger.”
In other words, Louie said, the concept behind the CargoSmart blockchain is to allow users to derive their own values based on the immutable data captured in a trusted platform. That could, for instance, be a link to a trade finance platform provided by a bank through an application programming interface (API) that relies on events captured in blockchain, like actual time of arrival, cargo release, or gate-in.
"We’ve looked at the subset of events you need to get that business value,” he said.
The CargoSmart model — adoption phases
Louie described the model behind CargoSmart’s blockchain initiative in terms of adoption phases. The first involves the founding members announced Tuesday. The second phase would see BCOs, large non-vessel-operating common carriers (NVOs), freight forwarders, and regional terminal operators or port authorities joining. The third phase would see the platform tapping into what he called a “cross-industry network.”
"We’re no expert in trade finance, but somebody else is doing that — banks, financial institutions. We’ll let them run their thing — but we can create this trusted database, with bills of lading, and invoices, where they trust the network, not the individuals in the network.”
He gave an example of how a bank may not trust a merchant in South Africa, but a carrier will have trusted that merchant based on years of doing business with the company. The database would, in theory, provide the trust between the bank and merchant that has been built over years between the carrier and merchant.
“We decided against calling it a shipping blockchain network,” he said. “It’s not a blockchain network; it’s a business network.”
In terms of how CargoSmart will monetize the blockchain platform, Louie said the founding members were willing to provide the initial funding for the network. Any revenue that the consortium gets will cover the costs to develop and run the platform as adoption among other members grows.
"We’re not here to extract additional revenue from shippers and forwarders,” Louie said. “We’re here to get to a digital baseline and then we can talk about the value we can create.” Once established, the platform would be monetized through transaction fees and subscriptions based on products developed on top of it.
The GSBN is also intended to allow members to “share immutable records to other shipment stakeholders, enabling them to take quick action regarding critical milestones and to keep cargo moving throughout the supply chain.”
“The new platform will establish a digital baseline that aims to connect all stakeholders, including carriers, terminal operators, customs agencies, shippers, and logistics service providers to enable collaborative innovation and digital transformation in the supply chain,” the GSBN companies said in a statement. “The consortium’s leading members intend to collaboratively develop the platform and establish standards to facilitate the seamless sharing of documents and data across all stages of the shipping lifecycle.”
The container line-led blockchain initiatives are hardly the only ones being developed to smooth container shipping processes. Startups, such as Blockshipping, CargoX, ShipChain, and 300Cubits, are all using the technology to develop solutions to solve long-standing problems like bill of lading creation and transfer, and liner carrier overbooking/shipper no-show behavior.
Interoperability is a concern for those watching the development of blockchain solutions, with users understandably not wanting to have to plug into several platforms across the ocean carriers they use. Louie said CargoSmart is cognizant of this challenge.
“In the short term, BCOs may have to deal with multiple platforms,” he said. “There are some barriers based on interoperability. But blockchains are working with leading tech vendors on this as well. In a couple years, you will see interoperabilities in these technologies. In one of our applications, we’re demonstrating using APIs across networks, so that’s another means of doing it. Unfortunately, the tech is not mature enough, and there are gaps. We have that interoperability in mind in our design. I’m not speculating, but I believe we’ll receive a call soon from Maersk on how we can work together.”
Contact Eric Johnson at firstname.lastname@example.org and follow him on Twitter: @LogTechEric.