World trade settlement will be revolutionized by blockchain technology.
Virtual currencies like Bitcoin are only the earliest use cases of blockchain technology. Blockchain technology will soon find application in real-world supply supply chain management.
The Supply Chain and Global Trade
Ocean freight accounts for roughly 90% of goods traded globally. Surprisingly, ocean transportation is currently highly dependent on paperwork that has not been securely digitized. Shipping information usually travels through numerous companies and contractors, any one of which can cause a delay. A late approval or lost form can leave goods stuck at a checkpoint or port.
The NYK Virgo is a container ship owned by the Barlett Marine Corp.
A supply chain blockchain could boost transparency, trust, and predictability by allowing users to track where a shipment is at any given time. Since a blockchain is an immutable ledger, changes in possession and ownership of goods as they move from their producer to their point of retail could be entered into the ledger instantaneously and permanently. Because a blockchain is decentralized, it has no single point of failure. So, shipping, possession and ownership information could be better protected from tampering or hacks.
Supply chain professionals can use blockchain technology to gather and use tracking data in dynamic new ways. For example, entries in a blockchain database could trigger other tasks such as the assignment of the next batch of goods arriving at a port to a certain dock or container area.
Applying blockchain technology to instant settlement of transactions could also reduce friction in commercial financing, which underlies global trade and is currently an area from which many trade disputes arise. Additionally, dispute resolution rules could be agreed upon beforehand and applied instantly on the blockchain when necessary.
A busy container terminal at a port.
Smart Contracts
Smart contracts are self-executing contracts that can be triggered by an external real-world event, the details of which are provided by a trusted oracle. Once a transaction is logged, smart contracts can instantly release payments held in escrow to a counterparty. Smart contracts, timestamped entries on to the blockchain, and digital payments could greatly reduce the time and costs associated with intermediary processing. Smart contracts can currently be built or deployed on certain blockchains, such as Ethereum.
Current Blockchain Solutions for Supply Chain Management
Factom, IBM and Skuchain are early movers in the application of blockchain technology to supply chain management. Factom’s proprietary documentation verification and authentication system can be used for logistics related documentation. IBM is partnering with Maersk to create a blockchain-based shipping supply chain firm. Skuchain helps buyers control their inventory procurement across partners.
There are also several other notable efforts to apply blockchain technology to logistics. Hyperledger has used its Sawtooth distributed ledger technology to bring add traceability to supply chains in the seafood industry. Everledger’s blockchains trace the supply chains of diamonds and other ethically sourced bridal jewelry. (Everledger has also launched a bespoke blockchain for colored gemstones.) UPS and FedEx are privately testing blockchain-based logistics.
The port of Los Angeles is the busiest container port in the United States, followed by the Port of Long Beach which it adjoins.
Helping Sellers, Intermediaries, and Consumers
The application of blockchain technology to supply chain management could reduce errors, delays, and fraud, improve inventory management, and identify and resolve issues faster. This will help sellers, intermediaries, and consumers.
Sellers will be able to better track costs and capacity, better estimate delivery times for multiple routes, and make more intelligent decisions. Transport providers will be able to post details about available capacity and routes and reduce transport time and costs. Consumers will know where their products come from and will benefit from reduced costs and shipping times.