Maersk Blockchain Use Case

In early August 2018, the IT giant IBM Corp. and global shipping company A.P. Moller-Maersk Group has announced the official launch of the platform for supply tracking and supply chain management called TradeLens (formerly known as Global Trade Digitization, or GTD). This is the first of the projects, the launch of which can dramatically improve the industry and the global economy as a whole.

In the article you will find a detailed description of this case:

1. A brief introduction to IBM and Maersk.
2. Objectives, principles of operation and advantages of TradeLens.
3. Design and test / proof of concept.
4. List of project participants and partners.
5. TradeLens market share.

Briefly about Maersk and IBM

Maersk. Danish transnational business conglomerate specializing in container shipping and energy. Since 1996, Maersk is considered the largest operator of container ships and supply vessels in the world with more than 88,000 employees and representative offices in 130 countries. In September 2016, the Maersk Group was divided into two separate and independent units: transport with logistics and energy.

After the separation, the transport and logistics department received more than 600 vessels for operation, whose gross tonnage amounted to more than 3,8 million registered tons, more than 15% of the world TEU. Such a volume is equivalent to the supply chain of the whole city: a huge volume of operations, goods and interlacing ties. And current management systems cannot cope with all this logistics:

1. Cumbersome, complex, and often unnecessarily costly informational and monetary transactions between participants of freight and supply chains.
2. Too many manual labor-intensive processes that increase costs and inevitably cause errors and cargo delays.
3. Opaque and inefficient customs processes that create opportunities for corruption and fraud.
4. Unfair information sharing between supply chain participants.
5. Lack of industry standardization, which leads to the generation of poor-quality and inconsistent data.

IBM Corp. American multinational IT giant. One of the largest manufacturers and suppliers of hardware and software in the world, as well as IT services and consulting services. Net income - $ 9 billion, staff - 350,000 employees, service area - 177 countries. For development unit in the blockchain company is responsible the division of IBM Blockchain.

Maersk and IBM announced the partnership in March 2017. Shipping and IT giants created a company to commercialize a solution based on Hyperledger Fabric (one of the Hyperledger projects developed by the Linux Foundation) that will replace outdated paper and digital processes in the management of shipping and tracking ships, containers and cargo.

What is TradeLens

TradeLens is positioned as an open and neutral platform for managing sea freight and supply chains, created on the basis of the blockchain. It enables open and largely automated exchange of information and other values between all participants in the supply chain at a fundamentally new level: interaction between participants occurs faster, generates fewer errors, does not require verification by a third party, and costs less.

Key Project Goals

Creating a single ecosystem. The platform brings together all parties involved in the supply chain: cargo owners, freight forwarders, domestic transport providers (including rail and road), sea carriers, ports and terminals, customs and other government agencies. The parties connect and interact within a common neutral network, where processes are standardized and largely automated.

The introduction of the exchange of veridical cue. Real-time TradeLens provides convenient, safe and fast exchange of useful information between all network participants: involved transport, location and cargo details, sales documents, sensor readings and much more. Interested parties can track the status of the cargo and its accompanying documentation as part of their roles: the sender, carrier, customs, consignee and final consumer.

Strengthening cooperation and trust. The project allows to digitize and automate a significant part of the end-to-end business processes that are an integral part of world trade, including import and export processing. Blockchain allows you to ensure the transparency, security, efficiency and high speed of these processes.

Stimulation of innovation. The TradeLens platform lays the foundation for improvement through an open API environment, standardization and promotion of interaction, as well as launching a sandbox and marketplace that allow third parties to create and launch applications on the TradeLens platform.

Principles of TradeLens

TradeLens is based on a fairly simple concept:

1. We attach sensors to the cargo, transport and port equipment that track the location and, if necessary, some other indicators: temperature, humidity, shaking, etc. Information from sensors in real time is recorded on the blockchain and becomes available to all interested parties. This allows you to track the cargo and its condition.
2. In the cases prescribed in advance, individual sensors can communicate with each other through smart contracts. For example, if a container's sensor gets onto a cargo ship, then it sends information about itself and that inside it to the cargo ship's sensor. Thus, the cargo ship always knows what it is carrying. When this cargo ship arrives at the port, its sensor sends the port information about the vessel and that it is transporting (containers and their cargo).
3. These data are used to automatically fill out documents and other interactions: financial calculations, payment of customs duties, audits, and the like. It is thanks to these automatic interactions that the system greatly accelerates and simplifies the workflow, makes financial calculations more reliable and secure.

The blockchain in this scheme plays the role of a database that is responsible for storing, transmitting and protecting information, and also serves as a “source of truth”. Where by “source of truth” is meant the assurance that the information entered into the system is genuine and does not contain errors and / or inaccuracies. That is, the TradeLens system is itself a validator of data.

Three components of the system

Ecosystem. The TradeLens project is based on its business network: shippers and consignees, freight forwarders, shipping carriers, ports and terminals, customs brokers, government agencies and other participants in sales chains. Each organization enters information into the ecosystem that can be stored, processed and tracked on the platform throughout the journey.

The ecosystem is divided into three levels:

1. Advisory Board. A management authority that develops an ecosystem development strategy and selects validators. Council members can become large companies, representatives of government agencies and international organizations involved in cargo transportation.
2. Validators. Network members (servers, nodes) that verify the authenticity of transactions and create new blocks of the blockchain. Usually, the status of validators receive large players. For example, in May 2019, the Mediterranean Shipping Company (MSC), the second largest after Maersk, and the carrier CMA-CGM, the fourth in terms of carrying capacity, joined TradeLens. These are very important companies, so they were accepted into the council and given the status of validators.
3. Participants. Companies, government agencies, ports, customs, non-profit and other organizations that connect to the network. Structure involved in freight and sales chains can become a member of the network TradeLens.

Platform. A software product based on Hyperledger Fabric and IBM Cloud blockchain technologies. Allows you to record, store and share information and values. The exchange takes place directly or through smart contracts.

Marketplace. An environment that allows TradeLens and third parties to develop, test and deploy applications and smart contracts. Testing takes place in the “sandbox” - a virtual environment TradeLens with the same properties and data set as a regular network, but operating with false money and does not affect the real world.

Advantages of TradeLens

Cargo Owners / Shippers. Reduced costs, increased predictability, reduced inventory, increased consumer confidence and the ability to track partner actions. In addition, the reduction in delivery times gives the opportunity to enter new markets.

Ports / terminal operators. Makes all processes more efficient, reducing vessel and equipment downtime to a minimum. Gives more data about each vessel, container and cargo, which helps to reduce the number of errors and cases of fraud.

Sea carriers. Reduces port downtime, which today is the norm due to paperwork and complex customs processes. Increases the efficiency of supply chains and increases the transparency of cargo transportation - the captain always knows that he is lucky, in what condition the cargo is and who owns it (important for combating smuggling, corruption, terrorism and money laundering).

Government agencies. Automation of processes reduces costs and increases the speed of information processing - less manual work. Standardization helps to improve the quality of information, transparency - more effective audit of goods, shippers, vehicles, ports, etc.

Land carriers. Transparency and automation improve the quality of planning and the efficiency of transport processes: fewer queues, quick execution and filling of documents, automatic financial calculations, etc.

Forwarders / 3PLs. Connecting to the system gives access to tools for more efficient and faster customs clearance, tracking of goods and their condition in real time and tracing.

Financial Service Providers (banks, investment funds, trading floors, insurers, etc.). When connected to the system, they get access to reliable and up-to-date information sources.

Testing of TradeLens

Until August 2018, the TradeLens project was in beta testing, which lasted more than a year. IBM and Maersk tested the concept as such, and then the cost-effectiveness of the platform. The chain of flower delivery from Africa to Europe was chosen as a pilot project.

First, Maersk analyzed one batch of flowers sent from Mombasa to Europe in 2014. It turned out that this single delivery generated more than 200 transit traffics between 30 different organizations, including manufacturer, logistics companies, banks and government agencies. These 200 messages created a stack of documents about 25 centimeters high.

Then, Maersk and IBM connected all the participants of this delivery to the TradeLens blockchain (at that time Global Trade Digitization, or GTD) and sent a new batch of flowers. As soon as the manufacturer sent a packing list via PC or mobile device, this action was recorded on the blockchain and, in parallel with this, a smart contract was initiated. The smart contract accompanied the cargo throughout the supply chain, automatically filling out documents, stamping and making financial calculations. All these actions were also recorded on the blockchain.

The pilot project confirmed the concept, but revealed a number of problems: the lack of uniform standards and proper communication between the parties, as well as the need to train staff of companies and government agencies involved in the process. When most of these problems were resolved, testing continued. But now other supply chains have been connected to the system, the number of which has gradually increased.

Using the TradeLens platform throughout the year showed that:

1. Reducing the cost of paperwork. For example, when sending avocados from Mombasa to Rotterdam costs make $ 300 or 15-20% of the cost of delivery. TradeLens reduced these costs by 70-90% depending on the specific supply chain and its list of participants.
2. Reduced shipping times. In the framework of the United States, the transportation of goods decreased by 40%. Mainly due to the reduction of queues and speeding up the workflow. On long supply chains, the gain in time is less.
3. Reducing the number of steps taken to answer basic operational questions, such as “where's my container,” from 5–10 to 1–2.

This is what managed to calculate. The effects of other things, such as increasing levels of trust and transparency, standardization, security, and so on, are quite difficult to track. Nevertheless, there is no doubt that they will bring benefits both to individual companies and structures, and to the industry as a whole.

Partners and participants

At the time of launch, the TradeLens ecosystem included:

1. More than 20 port and terminal operators worldwide. Including Modern Terminals in Hong Kong, Patrick Terminals, International Container Terminal Services Inc PSA Singapore. Ports of Halifax, Rotterdam, Bilbao, PortConnect (New Zealand), PortBase (Netherlands). Also, after the launch of TradeLens, the Holt Logistics operator connected to the platform (234 sea gateways worldwide).
2. Freight forwarders, transport and logistics companies are represented by such companies as PLH Trucking Company, DAMCO, WorldWide Alliance, Agility, Kotahi, CEVA Logistics, Ancotrans and others.
3. Shipping companies Pacific International Lines (PIL), Hamburg Süd and Maersk Line joined the project TradeLens as global container carriers.
4. Customs authorities in Singapore, Saudi Arabia, the Netherlands, Peru and Australia along with customs brokers Güler & Dinamik and Ransa.
5. The beneficial owners were represented by Umit Bisiklet and Torre Blanca / Camposol

In total, during the launch of the project, 92 organizations were connected to it. Basically, these are the structures that participated in the testing platform. After some time, they were joined by many other shippers, ports, terminals, freight forwarders and customs structures. The most important players in the industry include Mediterranean Shipping Co (MSC), CMA-CGM, Zim Integrated Shipping Services (ZIM), Procter & Gamble (P & G), the Russian Ministry of Transport and the Saudi National Cross-Border Trading Platform (FASAH).

TradeLens market share

As of the beginning of 2019, the share of TradeLens compared to the main competing platform of the Global Shipping Business Network (GSBN) was as follows.

The table shows that at the start TradeLens accounted for 4,862,422 TEUs. This is about 21% of the total market share. GSBN share more: 7,406,079 TEUs or 32% of the market. This is a tangible difference, but not critical, because the market at that time had not yet had time to truly evaluate either one or the other platform.

This is evidenced by the recent decision of CMA-CGM to join TradeLens without disconnecting from GSBN (with this participant, the share of TradeLens is 32.5%). Most likely, CMA-CGM want to check which platform will show itself better, and only after that the company will make the final choice. True, another option is possible: CMA-CGM will use both platforms.

It is too early to judge which platform the market participants will choose and whether it will be necessary to make such a choice. It is quite possible that all profile companies and structures will simultaneously use several blockchain solutions to maximize market coverage, even if some processes are duplicated. If the players make a choice in favor of one platform, then it will become the industry standard. And TradeLens has every chance to win this race.

Maersk Blockchain Use Case key takeaways:

1. #1. Briefly about Maersk and IBM
2. #2. What is TradeLens
3. #3. Key Project Goals
4. #4. Principles of TradeLens
5. #5. Three components of the system
6. #6. Advantages of TradeLens
7. #7. Testing of TradeLens
8. #8. Partners and participants
9. #9. TradeLens market share