Port of Call: Blockchain's Impact on Supply Chains is Broader Than It Seems

Noelle Acheson is a 10-year veteran of company analysis and the author of CoinDesk Weekly, a custom-curated newsletter delivered every Sunday, exclusively to CoinDesk subscribers.

As CoinDesk reported last week, the European port of Antwerp has launched its first blockchain pilot.

While on the surface this seems like another step towards supply chains moving onto blockchain platforms, the greater impact could end up being elsewhere.

Tie the project in with two other recent trends – container shipping consolidation and an increase in security hacks – and you begin to get a feel for how this project could help both smooth the industry’s growing complexity and consolidate its role in the world economy.

Docs for docks

The container shipping sector is grappling with the most severe financial crunch in its 60-year history. Growth rates have plummeted over the past few years as a slowdown in world trade, combined with overcapacity, has pushed down volumes and rates. And things don’t look like they’ll improve much in the short term.

To help offset this, large shipping companies have been forming alliances, "sharing" space on container ships. It’s not hard to imagine the maelstrom of documentation this entails. According to the port authority, paperwork now accounts for up to half the cost of container transport.

A blockchain platform – on which all participants can access and verify documents in real time, removing costly duplication and errors – could lower costs, which would encourage more trade and provide a welcome boost to the shipping ecosystem.

While ports are only one step of the shipping process, they are a crucial one, as well as a potential processing bottleneck. Bills of lading and transport contracts change hands at ports, as agents unload the containers and send them on the next leg of their journey. Erroneous data and inconsistent forms delay the process, leaving goods on the dock for longer than necessary.

Any port in a storm

It is also on the dock where security issues tend to appear.

The Port of Antwerp’s blockchain platform was primarily designed to solve a particular problem: containers awaiting pickup are assigned a unique identifying number, which passes through several parties before reaching the intended transporter. The solution ensures that only the designated agent is given clearance to pick up the goods, and the distributed nature of the information blocks any attempt at manipulation.

While that is a relatively rudimentary example, port security concerns around the world are intensifying in light of recent events. Earlier this week, shipping giant AP Moller-Maersk was hit by a cyber attack that affected all areas of its business, including its port operations, some of which had to be temporarily closed.

When you take into account the synchronized steps of supply chains, closure of part of the process, however temporarily, causes major disruption, the ripples of which can be felt around the world.

No doubt global maritime centers are aware that a distributed network of blockchain platforms could enhance the security and integrity of key operations. And while the Antwerp project is focusing on a specific use case, it’s likely other trials will soon follow. Rotterdam, the largest port in Europe, is also working on blockchain solutions for logistics.

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Given the global nature of the shipping business, the interconnectedness of the different parts of the logistics operations and the common problems shared by most operators, it’s curious that an international blockchain consortium of ports and shippers has not yet emerged.

When it does, the work already started will undoubtedly reveal further applications for distributed ledger technology that could help solve some of the industry’s woes. For there are many, and an ailing shipping industry will hold back economic growth around the world.

Blockchain-based platforms can help make supply chains more efficient, which should boost global commerce. But the potential goes way beyond that. It’s about strengthening both the business model and security of a key part of those chains. Without resilient ports, the chains that bind world trade together won’t hold.

Port image via Shutterstock