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October 13, 2021Blockchain in Shipping: What It Is and What It Means for Ship Owners
Blockchain technology has been a hot topic in the last few years. The benefits of reducing fraud and improving trust have been well documented. However, not all companies are convinced that blockchain technology is worth investing in. For most people, when they hear “blockchain”, they immediately think of Cryptocurrency, Bitcoin, Etherium etc…but it is so much more than that. Blockchain is the technology of the future. It’s not just for cryptocurrency but can be used in many different industries, including shipping and logistics. This article will explore the basics of blockchain technology and its potential applications in shipping and logistics.
What is blockchain?
Blockchain is a transparent and distributed ledger used primarily to record transactions. It is a secure, distributed database that uses cryptography to protect records from tampering or revision. It provides a single source of truth that cannot be corrupted by any one party. The most popular example of this technology is the cryptocurrency, Bitcoin. Another key factor is that it is always up-to-date. It’s impossible to alter or change records on the shared ledger, thus making it secure.
Potential in the Shipping Industry
There is stiff competition in the shipping industry. Companies are trying to stay ahead of the competition and maintain their competitive advantage. They’re demanding technology that can help them carry out their operations more efficiently. To do so, they need to use systems that connect various parties in the supply chain such as warehouse operators, freight forwarders, and transportation providers. This is where blockchain technology comes in and can play a very critical role.
It will:
- increase trust,
- reduce errors, and
- ensure transparency
by providing secure records of transactions.
How does it work?
The shipping industry is one of the most traditional industries in the world. That makes it the perfect candidate for disruption by the blockchain could provide a disruptive change. According to Agility’s Logistics Insights , one shipment can generate up to 200 communications documents. That’s a lot of documents. The cost of processing and administering this documentation is estimated to be up to 20% of the cost of transporting goods.
In a nutshell, it:
- Reduces the need for paper-based documentation for record-keeping
- It digitizes this documentation
- Makes the information available across the supply chain
- Helps stakeholders make better decisions.
Is it worth the investment?
With all the potential impact that blockchain can have on the industry, adoption in the industry has still been slow. According to a survey done by BCG, while almost 90% of ship Owners believe that blockchain will revolutionize the industry, only about 25% of them are looking to put it in place. Implementing blockchain can get quite expensive depending on the complexity and functionality required. Yet, before cancelling it out as “expensive”, you need to compare the advantages and cost-saving benefits against the cost. Early adopters report that implementing this can save a company up to 25% in costs. Compared to the initial costs, the savings it gives makes it a worthwhile investment.
Risks of Implementing Blockchain in Shipping
Blockchain can offer many advantages to the shipping industry. However, there are still some risks or obstacles that need to be addressed before it can be fully adopted. Many of the factors that make the shipping industry ripe for disruption are the very same things that make it difficult.
Some of them are:
1. Lack of regulation:
Blockchain is a new technology that is very complex and not yet regulated. For example, the peer-to-peer transaction system means there’s no way to prevent identity theft. Also, each blockchain has its own set of functions and limitations, so there are no established protocols to allow transactions between them.
2. Lack of standardization:
Another obstacle with blockchain is the lack of standardization for how to use this technology in this industry, which causes problems when trying to connect different systems together.
3. Evolving Technology:
Blockchain is new and is constantly evolving and quickly too. Being an early adopter and implementing it could mean some implementation and iteration challenges as time goes on.
4. Integration with Existing Systems:
There are existing IT systems already in operation across the industry and integrating blockchain into the existing ecosystem could be a challenge. Until a majority of industry players embrace the potential benefits of blockchain in the industry, the benefits will be slow to be realized.
Main Benefits of Blockchain in Shipping
The benefits of incorporating blockchain in the shipping industry are vast and can impact operations locally, regionally, and globally including:
- A more efficient, cheaper, and transparent way of tracking shipments.
- An opportunity to track the entire shipment process on-site.
- Reducing the time for customs clearance and centralizing the data, which makes it easy to track and report on shipments.
- Increased security of information that is secure.
- Better customer experience for end-users by keeping them in the loop.
To reap these benefits, it is necessary to begin to look at how to implement blockchain at all stages of the shipping process.Shipping and Logistics companies are already implementing this all over the world to stay ahead of the competition and stay relevant.
You too need to explore how you can begin to incorporate blockchain in your organization.
