What is Blockchain and Why is it Useful?
With the immense and growing data transferred among businesses and consumers every day, technology that prioritizes security and efficiency is deserving of our attention. For example, when we make a purchase online, e-commerce platforms require us to input our sensitive personal details. Subsequently, organizations handle this sensitive data to fulfill customer needs. Data flows through systems of unique input formats, currencies, security restrictions, and administrative holds. While much more sophisticated than those of years past, today’s methods still suffer from high costs and bottleneck movements along the journey. The story is similar in the shipping industry, in both B2B and B2C contexts.

What if there was a way to pack every shipment with onboard intelligence, allowing it to arrive at each touch point ready to communicate and therefore expedite its arrival at the destination? That is one of the relevant applications of Blockchain. According to the Wall Street Journal citing a study from Gartner Research, blockchain is expected to help support the global movement and tracking of $2 trillion worth of goods and services annually by 2023.² Shipping at that scale heightens the need for integration and cooperation.

Blockchains are constructed much like a physical steel chain. Each transfer of ownership is logged in a digital ledger, much like a steel chain link is welded to the next. The ledger is forever associated with that data, and the history can be accessed (but not altered) by anyone with the proper permissions. According to a report by the United States Postal Service, blockchain’s application can benefit any transaction of valuable data, especially those requiring an intermediary such as a bank.⁷ For example, in a shipping network, each person has the exact information they need to move a parcel along its journey. Blockchain’s potential is to simplify, secure, and make visible, the entire process of data transfer. The power of blockchain technology stretches across industries, but we will focus on opportunities specific to the shipping industry.

Challenges
As with any form of innovation, blockchain does face challenges, several of which are outlined in the USPS report. The infrastructure required to use blockchain in the ways described above is very costly for organizations, both in terms of financial capital and potential climate effects from energy use. There is an issue of widespread access, due to both the physical access points and the computer literacy necessary to use blockchain. This, coupled with blockchain’s decentralized nature, means that the hosting organization would need to offer technical support of some depth and responsiveness. The fact that blockchain requires very few personal details exposes users to the threat of fraud, unless an organization were to offer identity verification services. International commerce would require well-defined governance and a standardized system for virtual currency exchange.⁷ As a result, organizations with international reach and influence would be best suited to take on a project of this magnitude.

Blockchain in the Shipping Industry
Blockchain’s application in the shipping industry provides numerous benefits, which is why large carriers and software providers have already begun experimenting with it. For a package to arrive on time, it is flown, driven, diverted, and handled by at least four different intermediaries in the carrier’s network, usually many more. The USPS report explained that blockchain could be used to make shipment payments, clear international duties, and forward tracking information instantaneously, saving time and money all along the value chain.⁷ And, those benefits could happen anywhere in the world. From an organizational point of view, carriers can help their systems communicate better and protect them from outside threats by removing single points of access. It can also allow devices and partners to negotiate amongst themselves for the allocation of resources and optimal routes.⁷

Exploration by Carriers
Even with its challenges, blockchain is a promising tool in the shipping industry. Several carriers are already using the technology in their operations and joining forces to develop blockchain internationally through the Blockchain in Transport Alliance (BiTA). A Wall Street Journal article by Sara Castellanos speaks further on the power of blockchain for the supply chain.²

In the article, Eugene Laney of DHL Express U.S. International and Government Affairs was quoted on the capabilities of blockchain, seeing its potential for transfer from airlines to trucks and other modes of transport.² FedEx Corporation’s Chief Information Officer also spoke about the essential and inevitable nature of blockchain for shipping, as well as the cooperation needed to successfully scale the technology. He further explained the potential of blockchain to allow an industry-wide tracking capability and improved reliability and transparency across shipment needs.² UPS has also created blockchain-focused partnerships. Per the UPS press room, its collaboration with HerdX to verify and trace beef came in response to demand for transparency and quality assurance in food production. According to UPS, no global standards currently exist to facilitate safe, quality food traceability.⁵ All three of these carriers, and many more, are trialing blockchain solutions.

Outlook
Blockchain may not command the share of shipping headlines that concepts like free delivery and peak season do, but maybe it should. Despite its shortcomings, blockchain, with the right oversight and infrastructure, could prove to be the next big thing for efficiency and customer satisfaction. JP Wiggins, Co-Founder & Vice President of Logistics at 3Gtms, was cited in a Talking Logistics blog about blockchain’s future. To look at blockchain as only Bitcoin is short-sighted, as its power for reconciling shipping information and making it visible across internal and external partner networks is unmatched.⁸ The USPS report suggests that organizations should research the technology and proposes cost-cutting solutions for high volume shippers.⁷ Those who get blockchain right will certainly open themselves up to the trust and efficiency commanded by an organization at the top of its game.

References:

1. Aguilar, D. (2019). UPS Targets B2B Sales With New Blockchain E-Commerce Platform - CoinDesk. [online] CoinDesk. Available at: https://www.coindesk.com/ups-targets-business-sales-with-new-blockchain-e-commerce-platform [Accessed 9 Dec. 2019].


2. Castellanos, S. (2019). FedEx CIO Looks to Industry Collaboration to Scale Blockchain. [online] Wall Street Journal. Available at: https://www.wsj.com/articles/fedex-cio-looks-to-industry-collaboration-to-scale-Blockchain-11556572820 [Accessed 9 Dec. 2019].


3. Cosgrove, E. (2019). UPS blockchain patent aims to route packages on multiple carriers. [online] Supply Chain Dive. Available at: https://www.supplychaindive.com/news/ups-applies-blockchain-patent-multiple-carriers/530467/ [Accessed 9 Dec. 2019].


4. United Parcel Service. United States Patent Application. August 16, 2018. Available at: http://appft.uspto.gov/netacgi/nph-Parser?Sect1=PTO1&Sect2=HITOFF&d=PG01&p=1&u=%2Fnetahtml%2FPTO%2Fsrchnum.html&r=1&f=G&l=50&s1=%2220180232693%22.PGNR.&OS=DN/20180232693&RS=DN/20180232693


5. United Parcel Service (2019). UPS And HerdX Deliver Blockchain-Verified Beef From U.S. To Japan. [online] Available at: https://www.pressroom.ups.com/pressroom/ContentDetailsViewer.page?ConceptType=PressReleases&id=1573245679338-340 [Accessed 9 Dec. 2019].


6. United Parcel Service (2019). UPS And Inxeption Collaborate To Make B2B E-Commerce Easier For Merchants. [online] Available at: https://pressroom.ups.com/pressroom/ContentDetailsViewer.page?ConceptType=PressReleases&id=1553169713635-809 [Accessed 9 Dec. 2019].


7. United States Postal Service (2016). Blockchain Technology: Possibilities for the U.S. Postal Service. RARC Report. Office of Inspector General.


8. Wiggins, J. (2019). Blockchain is Coming to Transportation – Here’s How. [online] Talking Logistics with Adrian Gonzalez. Available at: https://talkinglogistics.com/2019/04/11/blockchain-coming-transportation/ [Accessed 9 Dec. 2019].