An emerging technology: blockchain

Lim Guan Yu interviews Robert Morris on the use of blockchain technology in the maritime industry.


blockchain IBM maritime Robert Morris



Robert Morris is vice president of Global Laboratories at IBM Research.

 

How does blockchain technology work for the maritime industry?

Blockchain is an emerging technology area that enables trusted networks between known, permissioned participants, to ensure data and transactions are protected and consistent. The trust in this design pattern is powered by a ledger – in IBM’s case Hyperledger – which is open sourced and openly governed, allowing for governing transparency.

 

Built in a robust technology environment providing security, confidentiality, auditability, reliability and scalability, blockchain provides an open platform for sharing events, messages, and documents across all participants and systems, with detailed information only visible to owners and parties as necessary.

 

In the maritime industry, blockchain can be used by shipping lines, port authorities, freight forwarders, logistics services providers, and government authorities such as customs. They can share information about trade transactions, carry out financing operations, coordinate logistics operations by being aware of a large variety of shipping events, and manage documents such as letters of credit, bills of leading, port manifests, customs clearance documents, etc. This information is shared selectively with a “need-to-know visibility” across the ecosystem. The maritime industry is beginning to use blockchain to improve digitization of decades-old practices and document workflows.

 

For example, IBM and Maersk are collaborating to improve the global supply chain through the use of blockchain technology, specifically delivering a global trade digitization solution.  For shippers, the solution can help reduce trade documentation and processing costs and help eliminate delays associated with errors in the physical movement of paperwork. For customs authorities, it will give real-time visibility into shipments to help increase safety and security and increase efficiency in border inspection clearance procedures. The project will transform the shipping industry by increasing trust, reducing fraud and waste, and offering massive cost-savings potential.

 

Who can benefit from this new technology?

All participants in the maritime industry ecosystem stand to gain by improved use of information in blockchain-based ecosystems. For use cases such as digitizing document workflows and dispute resolution, each industry participant can expect specific benefits in terms of reduced operating costs, reduced operational risks due to information visibility, and increased efficiency. The increase of transparency and improved timeliness of data enables competitive advantage for early adopters.

 

Shipping lines can benefit from decreased operational and compliance costs, while getting closer to customers.

 

Port operators can reduce operational costs, get additional visibility into trade flows, and even deploy new business models.

 

Authorities can benefit from increased efficiency, visibility, and trust and potentially make their citiziens the beneficiaries of increased trade flows.

 

Forwarders and logistics operators stand to gain by offering new visibility-based services and lower costs.

 

What is the difference between blockchain in the financial sector compared to the maritime industry?

The ecosystem benefits of blockchain across industries like finance and maritime are similar in terms of decreasing cost, increasing efficiency, reducing time taken for transactions, and improving customer experience. Both industries stand to benefit from the visibility and trusted business processes that can be enabled on the blockchain transaction platform. Joint benefit can arise in areas such as trade finance that better coordinate these linked industry ecosystems.

 

What are some of the common concerns in adopting blockchain?

The two most common concerns arising out of blockchain adoption across industries are lack of clarity about legal and regulatory acceptance, and lack of a clear choice among multiple blockchain platform options. However, these concerns are to be expected in the early days of any new technology, and efforts are already underway to address them.

 

Legal and regulatory acceptance is best handled by engaging the authorities early on and by embarking on standardization efforts within the industry. This is already happening with governments across the world encouraging experimentation and exploring the fits and benefits of blockchain across a variety of use cases.

 

For example, the open source hyplerledger blockchain fabric is already in use, including a project where electronic goods from Schneider Electric were transported on a Maersk Line container vessel from the Port of Rotterdam to the Port of Newark. The Customs Administration of the Netherlands and U.S. Customs and Border Protection also participated in the pilot, clearing the shipment to leave and enter the respective ports. There are a growing number of live, enterprise blockchain networks running securely on the hyperledger fabric, an open source technology backed by 120 leading companies.

 

Open governance, combined with education, are critical to enable organizations to make informed decisions among the various options available to them today. Consolidation is already happening in the blockchain vendor space across public and private blockchain types and it is well understood that more than one network will exist. Hence interoperability, standards and open systems will become key focus areas while consolidation further continues in the vendor space.

 

What challenges do current ports face?

Today’s challenges are well known in the maritime industry. Concurrently with the glut in shipping capacity and falling prices, there are significant changes involving increasing vessel size and capacities, and new entries and actors in the industry. These changes have put different kinds of pressures on ports. Larger vessels create an operational challenge and require ports to upgrade and automate so as to accommodate the size and variability of vessel types. New business models and the threat of “uberization” of the industry put economic pressures on ports to find economies of scale and generate new services and sources of revenue. Technology has a significant role to play in addressing these challenges.

 

How do you go about developing a port into a smart, next generation port?

A smart, next-generation port will be more efficient, responsive and proactive.  Blockchain can also help by increasing visibility and accountability. Because it increases access to data, the blockchain ecosystem also enables leveraging new technologies such as cognitive analytics, the Internet of Things (IoT) and sense-making. This in turn enables further transformational changes in the way ports operate, making them more efficient, secure and competitive.

 

For example, in traditional port systems, there are swathes of data which when viewed jointly contain answers to questions like, “where are my bottlenecks?” and “which factors are influencing the effectiveness of my operations?” These new technologies can uncover signals hidden inside disparate data systems. Once implemented, brand new business models will become feasible that further enhance the productivity, quality of service and revenue of ports.

 

How do you see the development of the maritime sector in the next 5-10 years?

To ensure safety, efficiency and competitiveness there will be a significant shift towards automation, IoT and technology across all dimensions of the maritime sector. New businesses will be created and the maritime industry players who embrace shifts with bold vision and speed will win significant market share in the global trade economy.

 

Robert Morris will be speaking at Singapore Maritime Technology Conference, held in conjunction with Singapore Maritime Week 2017.