IBM and Maersk Hit the Brakes on their Blockchain-Based Platform
Blockchain is in the news again. And this time it may just have lasting impact on the shipping and logistics sector.
Operators in the digital sphere, anyone with a personal stake in blockchain technology or supply chain innovation have endured a trying few weeks.
Hot on the heels of FTX’s implosion, last week news broke that IBM and Maersk have announced they are to discontinue their co-developed, blockchain-backed supply chain platform, Trade Lens. The reason? A lack of industry collaboration.
Looking in from the outside, the world isn’t quite ready to fully adopt blockchain-based solutions. At least for the time being. However, let’s not forget that innovation is still blossoming across the supply chain.
IBM and Maersk’s Innovation
So, what exactly happened with IBM and Maersk? The joint venture between the US technology conglomerate and Danish logistics company saw them collaborate on a blockchain-based supply chain platform, known collectively as Trade Lens. As of November 29th, 2022, operations across the platform will begin to cease, grounding to a complete halt by the end of Q1 2023. *
First introduced in August 2018 to help industry players to adopt more efficient international supply chain practices, Maersk has said of the demise of the platform that while they were able to successfully implement a ‘viable platform’, the need for full global industry collaboration ‘has not been achieved.’
Yet despite Trade Lens going the way of the dodo, Maersk is committed to continue its efforts to digitise the supply chain and increase industry innovation via other solutions with the aim of reducing trade friction and promoting an increase in global trade.
The Fate of Trade Lens
As one of the more publicised logistics platforms, Trade Lens promised to transform container logistics by freeing it from legacy systems, manual document handling and poor visibility.
Leveraging a range of powerful, collaborative and analytics tools, Trade Lens enabled supply chain operators, with the support of carriers, customs officials, banks and inland transport providers, to share data and documentation securely.
Moreover, the platform allowed operators to track and process individual shipments and their critical supply chain data in real-time, whilst creating a transparent record of events for port operators, logistics providers and shipping companies to validate.
Prior to being disbanded, Trade Lens had onboarded more than 150 companies onto its supply-chain focused blockchain. These included the world’s largest container carriers, CMA CGM and Mediterranean Shipping Company. *
News of the fate of the venture was publicised at the most inopportune time for IBM who had recently publicised that the platform saved users an estimated 20% in documentation costs and reduced time to ship goods by 40%. *
The reason for Trade Lens’ failure seems to be down to supply chain operators. Many disliked the blockchain’s unfavourable transaction costs, scalability issues, privacy concerns and lack of wholesale industry-wide adoption.
So, the big question is what does the future hold for blockchain and the global supply chain. To be honest, it’s difficult to say. However, what is for certain is the eventually technology, especially technology that improves commercial efficiency, saving time and money will always be lauded. Quite simply, there’s a few hurdles to overcome.
The Hurdles Facing Blockchain Adoption
Let’s take a look at the hurdles facing the wholesale adoption of blockchain-based technology across the supply chain.
If It Isn’t Broke, Why Fix It?
New technological innovation is only as effective as the problems it solves. Some industry insiders believe blockchain is the solution to a problem that does not exist. This means that there’s little incentive to integrate the technology.
What’s clear is that before blockchain is given the sector-wide green light is, greater understanding of its benefits is required.
The Complexities of the Industry
The logistics and shipping sectors aren’t as straightforward as you may think. There are a great many moving parts that must operate in tandem for seamless efficiency.
Depending on individual requirements, shipments may pass through one or more territories, endure more paperwork, for example between Britain and the EU, have specific requirements, such as refrigeration for perishables, even hazardous storage solutions.
The result? More paperwork, potential man-made errors and increased delays. Introduce modern technology into the equation and they’ll be a learning curve before full adoption, mistakes, even potential employee resistance – all for a technology that isn’t imperative to efficiency.
It’s Still in Its Infancy
Let’s be honest, blockchain technology is still in its infancy. Many of us in the shipping and logistics sector don’t fully understand its capabilities, let alone its benefits. Engineers who know the technology inside out are rare. It’s challenging – and expensive to integrate.
Now, of course, awareness and proficiency with blockchain is much greater than a few years ago, but that doesn’t take away from the fact that assets like lost or compromised privacy key can cause myriad problems.
Most businesses are unwilling to take the risk on a modern technology – especially given that recession is looming. Most businesses will want to streamline, simplify operations, maximising revenue when the economy contracts. Not make operations more difficult.
Data Ledgers
Blockchain algorithms store data in a shared ledger; a database that records and synchronises information in multiple places at the same time. This can then be accessed by approved parties across the supply chain.
But there’s more. Data can be linked to cryptographic algorithms. This can cause confusion because users can lose track of where data is stored. It all seems complicated. Especially when it’s sole aim is to make businesses more efficient.
So, What’s the Solution?
There’s no denying that the logistics and shipping sector is lagging behind when it comes to technological adoption. But does this mean that businesses need to start scrambling to adopt blockchain? It depends on how innovative you want to be.
Blockchain has its benefits. But as you’ve no doubt concluded, it’s complicated. Challenging for employees to master. Upskilling will be difficult. They’ll certainly be a transitional period. Businesses have to ask themselves if rocking the boat is really worth it.
And, as we’ve already mentioned, two of the biggest global conglomerates – Maersk and IBM – have already pulled the plug on the technology. And there are other technologies of great value to supply chains.
AI, Robotics and the Supply Chain
AI and robotics have grown to become increasingly prominent across the entire digital supply network. Data and information from a variety of sources are distributed across the value chain.
AI algorithms can extract insights from large data sets. This allows them to manage inventory, automate warehouse processes, optimise critical sourcing connections, enhance delivery lead times and improve customer service and satisfaction. The result? Better customer service and improved sales.
Supply chains are already leveraging AI-powered robots to help automate human-owned manual tasks, including order picking and packing processes, delivering raw material and manufactured goods, transporting storage items, scanning and boxing items.
AI technology has been welcomed, especially given the increasingly complex nature of supply chains. The market volatility, caused by Covid-19, has elevated the need for agile solutions which optimise workflows. Businesses are more focused than ever on supply chain resilience – something that AI-driven supply chain management solutions offer through their integrated end-to-end approach.
Blockchain and the Supply Chain
Given that it’s immutable, blockchain is an ideal solution to track and trace products, identify counterfeit items and fraud across the value chain and for specific requests, such as temperature when transporting perishables.
Integrated payment solutions reduce the time between order and payment processing, allowing products to be shipped quicker. Smart contracts help companies to meet compliance regulations, reduce legal costs and fines for overdue payment of taxes whilst curbing counterfeiting and fraud.
Additionally, blockchain technology verifies the individual specifications of all transactions. Therefore, customers can view the evolving chain of custody and transactions, eliminating the need for a central manager to maintain digital supply chains.
Interestingly, organisations can partner blockchain with radio-frequency identification (RFID) tags which use electromagnetic fields to identify and track product at various stages of the supply chain.
Frequently used to store product-related information and verify when ownership of product is transferred, RFID tags are yet another example of supply chain automation. A smart contract is fulfilled when an RFID tagged shipment is scanned upon reaching its destination.
The Future of the Supply Chain
Don’t let Maersk and IBM’s failure fool you. The future of the supply chain is rooted in innovation, many businesses believe maturing technology to be a major source of competitive advantage.
This should be nothing new. In the end, innovation is inevitable. It’s not too much of a leap to state that Maersk and IBM may have just been ahead of the curve.
Now, of course, blockchain technology may have faced pushback, however, technologies that improve supply chain efficiency, human decision-making and asset management are clearly in-focus across the logistics and shipping sector.
To prepare themselves for the innovations that are surely over the horizon, businesses are encouraged to update their legacy systems and unify their technology portfolio. This is how they will be able to facilitate seamlessly integration when the time comes.
The bottom line is that technology is a strategic imperative for all businesses across the supply chain. Innovation, whether AI, robotics, and potentially blockchain gives businesses a competitive advantage, by creating a more flexible, yet tailored solution across the entire organisation.
Remember, businesses that don’t innovate run the risk of being left behind.
Resources:
https://www.maersk.com/news/articles/2022/11/29/maersk-and-ibm-to-discontinue-tradelens
https://cointelegraph.com/news/blockchain-based-supply-chain-platform-canned-by-ibm-and-maersk
