The imported flowers you get your mother for her birthday every year have a long, arduous history. They’ve travelled oceans, utilized hundreds of hours of manpower, and left in their wake ample chaos and confusion.
14.7 percent of the worldwide economic output in terms of GDP comes from exports. Goods go from suppliers to factories to warehouses to shipping and follow the same route again to reach your hands. With so many stakeholders and exchanges involved, keeping track of every single item on a global scale is perhaps one of the most intricate and challenging tasks taking up our time as a global society. Any innovation that helps make the process quicker and more efficient is a welcome change, and a greatly sought advantage.
Each stage a shipping container of flowers goes through, in the supply-chain and delivery process, is earmarked by paperwork. To simply say “this is a box of flowers” is not enough. Apart from simple characteristics like weight and volume, it is imperative to catalogue allergen information, storage temperature and moisture conditions, whether they could potentially be affected by radioactive or other hazardous substances they will be travelling with, as it may happen, they will travel with other substances. Apart from this, stakeholders need to have accurately catalogued and accounted for the compensation and benefits for all the workers involved in the process, straight from the supplier to the charterer, the owner, the crew, management agencies, the government and any other third party involved. The condition in which these flowers arrive to port will also impact the sentiments shared by you and your mother when she receives them.
In an experiment by shipping giant Maersk in collaboration with IBM, a container of flowers was shipped from Kenya to a port in Rotterdam. Approximately seven thousand nautical miles, that left behind a paper trail of 8200 documents. That’s a little more than one document for every mile. The key stakeholders involved were the growers, export authorities, the port of Mombasa, the port of Rotterdam, customs and importers. Shipping from Mombasa required approvals from three different authorities, and six documents that outlined the origins, chemical treatments, quality, and duties on customs. Undoubtedly, it’s a messy business.
In order to achieve a much-needed simplicity, industries around the globe are working on ways to manage these complex facets of the shipping process through a more streamlined technology – the blockchain. The simple ledger management system could be used to transparently and immutably store the right set of data for the right set of stakeholders. It would take up less space and have a smaller margin for error. In doing so, the world could obtain a tamper-proof system for digitizing trade workflow and tracking shipments end-to-end.
As financial transactions in the shipping industry are the bulk of the work, there is keen focus in digitizing this area too. These transactions, which typically involve banks and other financial intermediaries, have proven to be reliable and efficient, but are also subject to several limitations, including high costs and a lack of transparency.
One of the key advantages of blockchain-based financial transactions is the ability to create a decentralized, tamper-proof ledger of all transactions. This ledger can be used to track the movement of goods from point of origin to destination, making it easier to identify and resolve disputes. Further, because blockchain transactions are recorded in real-time, shipping companies and other stakeholders can have real-time visibility into the location and status of their goods. They can also be conducted without the need for intermediaries. This can greatly reduce the cost of transactions.
In addition, blockchain technology can be used to improve the security of financial transactions. Blockchain transactions are encrypted, making them much more difficult to hack or steal than traditional financial transactions.
Given the nascent nature of these practices in the maritime industry, it’s understandable that there are challenges to be overcome. Currently, there are many different blockchain platforms and protocols that are being used, which can make it difficult for companies to interoperate, and intimidating for financers to adopt. There is a scope for standardization in the industry. While some governments have begun to explore the use of blockchain in shipping, there is still a lack of clear guidance on how these transactions should be conducted. Different platforms have different procedures and protocols an investor would need to follow.
Overall, while traditional financial transactions in shipping have proven to be reliable and efficient, blockchain technology offers the potential to revolutionize the way financial transactions are conducted in the shipping industry. By leveraging the capabilities of blockchain, shipping companies and other stakeholders can streamline their operations, reduce costs, and improve transparency.