The application of blockchain in the shipping industry is a giant leap from traditional to ‘truly’ modern.
The shipping industry is one of the oldest industries, transcending global history and geography. It connects more than 150 countries and employs millions of workers. With the sea route continuing to dominate as the most penetrable channel of transportation, its not surprising that 90% of the world trade is carried out by the shipping industry. The $500 billion shipping industry is only witnessing a sharp increase in demand and scale, year after year. So why then, does the need for the application of blockchain in the shipping industry arise?
Challenges Faced by the Shipping Industry
The shipping industry, due to its traditional set up, is plagued with a multitude of challenges. Some of the glaring ones include:
- The biggest challenge faced by the shipping industry is the hopelessly large amount of paperwork involved. The exporter, the importer, the vessel owner, the clearing agents, all has their own long list of documents to keep ready. Delivery notes, charter party agreements, invoices, bills of lading, and inspection certificates - the list is endless. Now, even if one of these papers go amiss, you can only imagine the chaos that ensues.
- Various entities, individuals, and parties come together in the execution of a single shipping transaction. Importer, exporter, banks, clearing agents, vessel owners, shipping agents, port authorities, inspectors, shipment companies, and intermodal operators are a few of the many stakeholders.
- There is a general lack of accountability and trust in the shipping industry. For instance, unlike the airline industry, there are no consequences if a customer does not turn up for his or her booking.
- Insurance in the shipping industry is one of the most inefficient insurance types.
Application of Blockchain in the Shipping Industry
Blockchain can make its way through any or all of the various processes, procedures, and routines that describe the shipping industry. This technology, with its ability to add security, speed, transparency, and integrity, can rebuild the way the industry functions.
- Blockchain can make shipping industry go paperless. Using this technology, all involved entities can store and exchange information with one another, pass messages, give instructions, or make payments on this platform in a secure and transparent fashion. The time wasted in clearance of cargo decreases and the chances of cargo losing their quality, while sitting at the port for clearance, is quashed.
- Blockchain will facilitate real-time tracking of cargo. Buyers, sellers, authorities, and customers can all track the movement and current location of the cargo at any given point in time. This will eliminate the need for a complex web of IT devices that are nowhere close to blockchain’s tracking accuracy. Besides, it also lowers the cost of coordination amongst different entities. The Danish container-shipping giant, Maersk, has teamed up with IBM to leverage blockchain’s potential in this regard.
- The network of buyers, sellers, vessel owners, authorities, and customers can enter into ‘smart’ contracts, instead of the usual paper-based contracts, using blockchain. These smart contracts will make everyone involved in a shipping transaction more accountable, leaving no scope for any fraud whatsoever, and frees you of the responsibility to keep track of compliances.
- Since blockchain has been creating a buzz in the insurance industry for quite some time now, there is no way you can miss out on using the technology for marine insurance. The technology reduces the involved, makes insurance more affordable, adds does away with the risks involved. This is why Maersk and Microsoft are already testing the waters for blockchain in marine insurance.
What makes the application of blockchain particularly special in the shipping landscape is the fact that you do not need to deal with any permission to implement this technology in your business. In fact, the whole idea of using blockchain is to do away with paper work and legal formalities. All you need to ensure is that everyone involved in the business is privy to this transformation. The technology is still unfurling and will, in all possibility, revamp the shipping industry completely.