Blockchain, the new ally of international trade?

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Recognized in the fields of finance and insurance, the Blockchain is also making more and more waves in the logistics and transport sectors. Its benefits in terms of traceability and process complexity are already bringing about considerable changes in the activities of all players in international trade.

In November 2020, the LSA Retail Tech Live rewarded an innovative start-up with the Transformation Award. Named Ownest, incubated within the gas pedal initiated by the shipping company CMA CGM, it uses the Blockchain to certify the transfers of responsibility between the various actors of the latter through a web-application. Created at the end of 2017, it counts among its customers Carrefour but also the SNCF, Orange, or even Cdiscount. This means that in just a few years, the myth of the Blockchain has become reality.

Historically associated with bitcoin payments and finance, the Blockchain has since entered the world of transportation and logistics in a big way. And there are still many applications to be discovered…

Blockchain: definition and main principles

The Blockchain is a technology for storing and transmitting information, transparent, secure, and operating without a central control body*. It develops the general concept of a shared register and can be open, used and visible by all, or closed, i.e. private and in which one must be invited to consult it.

Whatever its form, the Blockchain is now commonly used for asset transfers, but also in the context of “smart contracts” or traceability.

When transport is interested in the Blockchain…

In the world of transport in particular, multiple reflections and projects have been launched in recent years. With them, three specific issues have emerged: tracking of containers and products; dematerialization of the BL (bill of landing) as well as the payment of the letter of credit.

La Blockchain, un outil de tracking innovant

Luxury, food processing, aeronautics… the subject of traceability is hot. The actors who work in this field know that facilitating their collaboration and bringing an additional level of reliability to products has become essential in the supply chain.

This is undoubtedly why a number of initiatives have been launched in recent years, such as Maersk and IBM, the start-up Everledger on diamond tracking and Walmart on the food chain.

Place and date of manufacture, batch number, time and place of routing, expiration date of a product, storage temperature, delivery times… These data coupled on the Blockchain allow to guarantee a better management of traceability while ensuring a secure sharing and authentication of data.

Technology for the dematerialization of BL

International transport has always been a field in which (too) many documents have been necessary for the contractualization and transit of physical flows. Among them, the bill of landing (BL) or maritime bill of lading which concerns the shipper, the carrier, the forwarder and the shipper. In order to offer the BL a probative value towards all the actors, projects have been initiated by private operators, companies and forwarders.

This is evidenced by the birth of TradeLens, an ecosystem of shippers, freight forwarders, ports and terminals, ocean carriers, intermodal operators, government authorities, customs brokers… All are connected to the platform, which manages more than 700 million events and 6 million shipping documents per year and securely shares them across six continents to streamline international trade processes.

Blockchain vs letter of credit

The letter of credit is the preferred means of payment for international trade, yet it is still based on a manual process. In order to find a secure and sustainable alternative, several banks – including Bangkok Bank, BNP Paribas, CTBC, HSBC, ING, SEB, and Standard Chartered – have come together around the Contour project, a decentralized global trade finance network open to all, officially launched in October 2020.

Together, they intend to facilitate the exchange of existing trade finance products such as letters of credit around a global network of banks and companies connected on a decentralized platform. Control, transparency, visibility and trust are among the primary arguments put forward by these instigators.

Four challenges to overcome for Blockchain deployment

Despite its positive effects on the world of transport and international trade, a number of obstacles still need to be overcome before the technology can be made widely available on a sustainable basis. Four major challenges must be overcome:

Adopt standards and promote interoperability

For the Open Blockchain to make sense, a common adhesion of all actors is necessary. For this to happen, it must cover a certain number of standards that facilitate its interoperability.

Achieving critical mass

To demonstrate its value in the supply chain, the technology needs a significant number of players. More and more, especially in the luxury sector with the Aura Consortium blockchain project bringing together LVMH, Prada and Richemont, cooperation between competitors is emerging, encouraging the emergence of these blockchain approaches.

Technological maturity

Blockchain requires significant computing resources and has a strong environmental impact in terms of energy expenditure. Organizations must therefore be able to manage this volume of transactions and data and measure its environmental impact.

Cultural change

The last essential aspect to initiate a Blockchain project is to understand the cultural change it provokes. In the past, everyone controlled their own information and used it to build loyalty in their ecosystem; today, data sharing is the rule for it to work. A state of affairs that still raises questions about data sharing, confidentiality and ownership.

Initiating a Blockchain project: advice and implementation

The number one issue of a Blockchain project is not the technology, but the identification of needs and challenges in terms of business. It is therefore necessary to start an agile approach and once the subjects are identified, to start a prototyping phase. A POC (Proof of Concept) will identify the impacts on processes, information sharing, relations with the ecosystem, necessary intermediaries… and will allow to prepare for a form of technological appropriation. Once the technological and organizational obstacles have been overcome, a roadmap on a larger scale will have to be put in place.

A technology that combines with transport software

On a transport project, the Blockchain is particularly well suited to complementing TMS tools and collaborative platforms such as DDS Shipper and Join2Ship. Based on cryptography, the Blockchain enables the encryption and time-stamping of transactions exchanged between different players in the chain, making them unforgeable. Blockchain has enhanced the performance of transport management tools, particularly in three key applications: container and product tracking, dematerialization of the Bill of Lading, and payment.

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