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David Drake

February 4, 2019 Article

Why Transport and Logistics Sectors are Taking the Lead in Adopting Blockchain 

Whenever blockchain technology is mentioned, it is highly probable that the financial sector is the first thing that comes to mind. But the distributed ledger technology is making significant headways in other sectors and one of the sectors that is reaping benefits from adopting this technology is supply chain.

As trade continues to grow, the supply chain continues to become complex. This stems from the growing number of players in the chain resulting to numerous transactions going back and forth. Such inefficiencies lead to increased time lags, overbookings and, in some instances, no-shows where communication lines become faulty. This is especially so in the busy shipping industry.

Generating Value
To increase efficiency in the supply chain space, IBM partnered with Maersk to develop a blockchain-based digital platform known as Tradelens, which major players in the transport space continue to adopt. Spanish port, Authority of the Bay of Algeciras (APBA) is the latest international port to sign an agreement to use the Tradelens platform. This development is significant as Algeciras is among the top 10 busiest ports in Europe.

In 2017, the port processed at least
100 million tonnes of cargo. In 2018, this cargo volume is expected rise to close to 109 million tonnes. With increasing activity in the port, the APBA is banking on Tradelens to efficiently and securely exchange documentation and any other relevant information between players in the chain.

But beyond documentation, Feroz Sanaulla,
LDJ Capital Managing Director for Venture Capital (MENA, Abu Dhabi, Dubai) sees blockchain aiding in congestion and turnaround time reduction.

He says, "I think the incentives for shipping lines will be clearer once terminals demonstrate that leveraging blockchain can automate the document checking process, speed up turnaround time and reduce congestion in terminals. These are key drivers of shipping line costs, so a win-win is possible."

By the close of 2018, the Tradelens platform enlisted
40 active ports and terminals worldwide and handled over 20 million cargo containers. This feat is impressive considering that the platform just began commercial activity this past August.

Seamless Integration
According to Blockchain Executive at Momentum Studios, Kenji Claudio, blockchain application in transportation sector is obvious because the distributed ledger technology seamlessly integrates into already established supply chain systems. This is contrary to instances where blockchain companies are trying to reinvent the wheel.

He says, “The supply chain solutions that blockchain possesses is one of the most obvious applications and use cases. So many tech companies are trying to reinvent the wheel with blockchain, whereas it's inherent solvency points within the ledger can seamlessly integrate into supply chain systems, from an adoption and logistics standpoint, much easier than the blockchain companies trying to invent new protocols that frankly may never see adoption.”

With the growing blockchain application in the shipping industry, we are more likely to see the transport and logistics sectors lead in the mass adoption of blockchain. Unlike the financial sector where the technology is likely to eventually have mainstream impact, there are less barriers for these sectors. This shifts their focus to increasing efficiency in the largely paper-based supply chain space.


 Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.

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