Maersk’s exit from blockchain-based logistics leaves the field open for China

GSBN is a non-profit organization with eight shareholders, each with equal voting rights in the governance of the blockchain. Members include shipping lines Cosco, OOCL and Hapag-Lloyd, as well as five terminal operators – Hutchison Ports, SPG Qingdao Port, PSA International, Shanghai International Port Group and Cosco Shipping Ports.

Only Hapag-Lloyd and PSA International, which hail from Germany and Singapore respectively, are not based in mainland China or Hong Kong. With GSBN now operating the largest blockchain platform for collaboration in the shipping industry, the Web3 future of supply chains looks largely Chinese.

Chen said in a previous interview in November that China is taking a lead in this space because it is pouring money into the industry, but he acknowledged that many of the solutions so far have been very specific to the country, establishing inter-provincial or blockchain connections operate at a single location.

“If you throw so much money into a sector because it’s a policy, you may be lucky,” Chen said. He added that China’s investment in this area would benefit GSBN by creating more partners to work with the company.

But GSBN also has global ambitions. Chen said the company is working to attract more European shipping lines and even hopes to bring Maersk on board one day, although he conceded it “might be a bit of a challenge”.

Although GSBN is now the biggest player, it is far from the only company trying to make blockchain a reality in the industry. Some smaller data platforms like New Zealand’s TradeWindow use blockchain but have downplayed the technology’s role in marketing materials. Some of the biggest names in logistics have touted their own blockchain solutions, only to find little favor.

DHL, Kerry Logistics, Deloitte, Kuehne + Nagel, Amazon, And Alibaba Group Holding, owners of the post office, have all used or are using blockchain technology in the service of logistics in recent years. Yet even if those still involved in similar projects say the technology’s adoption has been catalyzed by the Covid-19 pandemic, many of these companies have little to say about their blockchain efforts over the past several years.

“If a company wants to do blockchain, it’s almost impossible,” Chen said. “Why does a company need a blockchain?”

Many in the industry agree that there are tremendous cost and time-saving incentives to digitize documents and processes associated with cross-border freight transport. But the industry is so fragmented that agreement on new technologies and standards is elusive.

“When we talk about commercial documents and the value proposition of reducing the volume of paper used in paper transactions, there is certainly a cost savings benefit,” said Goh Puay Guan, associate professor of supply chain at Singapore Business School’s National University. “The challenge, of course, is to get all companies on board, because only when you have an integrated platform do companies actually benefit from this integration.”

For Chen and many others, the real failure of TradeLens was not blockchain’s value proposition, but that it was seen as a product of Maersk, a potential competitor for other users of the platform.

“The fact that Maersk founded TradeLens was a barrier to growth from a business perspective,” said Chen. “Because some of the customers who have to take them to court say, ‘I don’t trust Maersk’.”

Chen added that he didn’t think there was any real risk to user data, and there was no evidence that Maersk used or could have used data on TradeLens for a competitive advantage. Still, many people have found that these negative perceptions may have harmed adoption.

After the announcement of TradeLens’ closure, people on LinkedIn and other disciplines chimed in where they felt the platform went wrong. Many agreed that the problem was not blockchain specific.

In a well-publicized LinkedIn post, David Ziyang Fan, head of digital commerce at the World Economic Forum (WEF), said trust is difficult to build, but the trend towards digital is irreversible.

“(The WEF has) always taken a fairly balanced view of what blockchain can do for the industry. We’re optimistic, but we’re definitely not blockchain maximalists,” Fan said in a video chat in December. “I feel like the pendulum has swung too far the other way… The ‘crypto winter’ has directly or indirectly impacted people’s trust in the enterprise blockchain, particularly blockchain in the commerce and supply chain space.”

One of the big questions surrounding blockchain is how much it’s really needed in many of the applications it’s applied to. In a December LinkedIn post, Chen wrote that “TradeLens Core (the visibility solution)…did not require blockchain to function.”

In fact, tracking goods has existed for decades through the use of technology such as barcodes, which have been further improved through the use of newer chips and sensors. And transparency has increased in recent years through a variety of custom cloud platforms.

Smart Warehousing, a domestic logistics solutions provider in the U.S. that offers product tracking at its facilities, has so far avoided getting onto the blockchain because its proprietary platform Swims has proven flexible enough to solve its problems, executives say.

“There are global standards for barcodes. They would need to establish a global standard for this information to be shared in this way, and here are the formats in which it is shared,” said Beth Ward, chief operations officer at Smart Warehousing.

This happened to shipping containers in the 1960s, when government agencies in the US and Europe forced shipping giants to agree on fixed sizes for the massive boxes credited with accelerating globalization in the second half of the 20th century. In the 1980s, standardization bodies established formats for electronic data interchange (EDI) documents, a way of exchanging product information that is sometimes referred to as the precursor to Ecommerce.

Even when blockchain is used to track data, companies often have their own ways of sharing the data themselves that are too large to share directly in a distributed ledger. Some of this data may even be in an EDI format.

The one killer application that everyone in the industry can seem to agree on could be a game-changer for blockchain in logistics, an Electronic Bill of Lading (eBL) that has been gaining traction of late. The bill of lading is an important document to prove the receipt of goods. It remains largely paper-based across the industry, with shippers requiring the original document in order to ship goods.

“Because of Covid-19, because you need to change the process, I think this is one of the regular use cases of blockchain,” Chen said. “Probably better than NFT’s digital art. NFTs of documents for global trade – this will be the real killer use case.”

GSBN partnered with Cosco to enable the first use of a blockchain-based eBL for bulk mailing in January. It was issued to Brazilian pulp manufacturer Eldorado. GSBN also signed a MoU with Saudi Basic Industries Corp (Sabic), Cosco Shipping, Hutchison Ports and PSA International in late March, all agreeing to use eBLs going forward.

Although eBLs have existed in some form since 1999, legal complexity and a lack of standardization have slowed adoption. With other tools available for digitization, the blockchain could slowly be integrated into other processes, making it less visible. This removes much of the hype surrounding the technology, but makes it more viable and sustainable to use.

“In my view, the blockchain was and is a tool in the tech stack for digitizing trade,” said the WEF fan. “It has always been like this.”

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