There are many whats and wherefores when it comes to thinking about blockchain and the technology’s application to the supply chain. It’s now a ubiquitous term when discussing the digitalization of the supply chain, but what it is and is not is key to understanding the great potential that blockchain holds for international shipping and trade.


Blockchain, or distributed ledger technology (DLT), burst on the IT scene over a decade ago as a FinTech [financial technology] system. In the early days, it was mostly associated with Bitcoin but has now established a name for itself.

At its simplest, blockchain provides a secure digital means for a transaction between various parties. Financial and banking services were early adopters and government agencies and other security conscious sectors such as healthcare and real estate rapidly followed suit. By 2010, blockchain’s application for international transactions had migrated into international trade and inevitably moved into the eco system of the supply chain. 

The Block in Blockchain

The DLT is based on what is called a peer-to-peer (P2P) technology that enables data to be stored globally on thousands of servers while allowing near realtime access to anyone on the network. The security of the network comes from the thousands of servers on the network – essentially a network existing in the cloud.

The “block” in blockchain is really the unique information stored about the transaction – time, date, amount etc. Blocks also store network information of who is participating in the transaction. Each block is different and stores a unique code or “hash” that separates from other blocks. Essentially each entry becomes a unique block in the data chain and while visible in the network, it is protected by encryption, in effect building a security network as well as a transactional one. 

The “block” in blockchain has, up until recently, been the expense in assembling both the type of encryption software and server networks to handle the specialized traffic of blockchain transactions. 

A principle selling point for blockchain is security. Each block in the blockchain is added chronologically to the end of the chain – setting each block with its own “hash” in a very specific spot in the chain. This makes it very difficult to hack as the rewrite has to fit in the entire chain – essentially block after block over thousands of servers.  

Most detractors have pointed out that the barrier to widespread adoption of blockchain is as much financial as technological. That’s becoming less of an argument as time goes on and costs come down. A secondary objection is more fundamental – do we really need blockchain? The thread of the argument being “while blockchain is good for financial institutions and Bitcoin, why do I need it for my business – particularly in an industry like shipping?”

Big Picture

The answer is evident in a holistic look at the supply chain. The transnational nature of the supply chain means that there can be many transactional breaks in the supply chain – the supply chain is often far from being a seamless network. More often it is really a series of chains linked at key junctures, leaving gaps in visibility and action ability for both the transactional segment and physical movement of the goods. And these gaps in the supply chain can prove to be expensive. For example, with more and more e-commerce driving international shipments, data breaches become a major threat. Steamship lines have already experienced cyber-attacks to their systems, as have retailers and manufacturers. And the stakes are getting higher. These breaches are getting more and more expensive in the current economic environment – a recent report indicated that it cost an average of $7.3 million per data breach in the healthcare sector this year. While this is a high number today, such costs are soaring. And there is the other long term issue – will my tech failure cost me a customer? 

From the big picture perspective, the supply chain is now evolving rapidly – no doubt the Covid-19 impacts are part of the reason – as new technology is being deployed in every segment of the supply chain ranging from a host of new sensors to terminal automation and AI. What is being created today on a daily basis will render obsolete many of the standard practices of just a dozen years ago. And blockchain is becoming a building block of the new supply chain’s effort to address the demands of higher visibility in logistics, better security and lower costs. Blockchain improves the accuracy by taking third party verification out of the process, which also lowers costs while the decentralization of the transaction improves security –  all factors central to making the supply chain both flexible and efficient.

TradeLens

One of the promising initiatives to apply blockchain to the supply chain is TradeLens. 

Maersk and IBM announced their intention to build a digital platform at THINK ’18 in San Francisco and by August 2018 TradeLens was officially launched. The platform itself came on-stream shortly later in December and by June of 2019 was actively building the network’s membership.

The concept behind TradeLens was to establish “an open and neutral industry platform underpinned by blockchain technology” which would be supported by major ocean carriers as well as other players in the supply chain. While there is nothing new about establishing an IT platform – Maersk had already been down this road with the development of INTTRA – the real difference was developing a blockchain platform specifically designed for the supply chain. IBM and GTD Solution Inc., undertook the task and created the TradeLens platform.

The advantage that Maersk had in the venture was that the other “M” in the 2M ocean carrier alliance was MSC [Mediterranean Shipping Company] the second largest boxship carrier behind Maersk. With the weight of the top two ocean carriers and arguably the biggest name in hi-tech, it isn’t surprising that TradeLens has grown by leaps and bounds.

In the early going – and it is still far from a mature undertaking – it is easy to see that the network is rapidly filling out – with terminals, ports, carriers, railroads, shippers, suppliers, forwarders and 3PLs all being added to TradeLens’ complex eco-system.

Equally, the number of product offerings and applications has commensurately grown with the network. Using, and in many cases, getting used to, blockchain technology is the ongoing process.

It is also an ongoing process for TradeLens itself. The open API environment and interoperability and the launch of an Applications Marketplace to enable third parties to build and mount third party applications on the TradeLens platform, is designed to allow the platform to evolve to meet challenges in the market – answering the wherefore of blockchain technology.