In this Supply Chain Matters commentary, we share some perspectives regarding the announcement that Maersk and IBM are discontinuing their TradeLens blockchain enabled global trade platform efforts.

 

Background

In 2018, global container shipping carrier Maersk and enterprise technology provider IBM announced a joint venture termed TradeLens which was billed as providing more efficient and secure methods for conducting global trade by leveraging blockchain technology. The aim of the venture was stated as the ability to offer a jointly developed global trade digitization platform built on open standards and designed for use by the global shipping ecosystem.

Later that year, senior executives at shipping lines Hapag-Lloyd and CGM CMA expressed concerns that while the technical approach that Maersk and IBM was a good one, it would require industry governance rules that would insure an industry-wide platform. Translated- it implied that carriers were not comfortable with an effort that could provide a singular carrier with monetary or competitive benefits.

In the latter half of that year, five of the then largest container shipping lines reportedly joined forces to create new IT and Blockchain technology standards for the industry. That effort was described as an industry framework to adopt standards that would be openly and freely available to all third parties such as customers, ports and customs authorities. The challenge was that the three existing carrier capacity alliances had the ability to control upwards of 80 percent of global shipping thru their vessel sharing agreements, hence the majority of alliance members need to sense joint value.

In 2019, two major European shipping lines, France based CMA CGM, a member of the Ocean Alliance,  and Swiss based Mediterranean Shipping (MSC), a member of the 2M alliance with Maersk,  elected to join the TradeLens blockchain pilot efforts. However, CMA SGM being a member of the Ocean Alliance elected to also join what was termed the Global Shipping Business Network (GSBN), facilitated by technology provider service provider CargoSmart, which was to be enabled not only by blockchain, but other appropriate analytics-based technologies.

GSBN was established on a not for profit basis to ensure neutrality of its platform. The vision was similarly described as building a blockchain-enabled operating system designed to redefine global trade. GSBN’s shareholders are described as major shipping carriers and global terminal operators. They are reportedly committed to collaborate in an open and transparent manner, to bring forward the digital transformation of the entire shipping industry.

The Announcement

According to reporting by The Maritime Executive, the head of Maersk’s Business Platforms indicated that although a viable platform was developed, the need for industry wide collaboration was not achieved. Thus, TradeLens had not reached as what he described as commercial viability in the context of operating as an independent business in spite of attracting over 300 various industry members and incorporating data from more than 600 ports and terminals.

As is the usual case, industry observers point to mistrust between industry players concerning data exchange and what that implies. Yet, blockchain technology’s most prominent benefit is encryption and security of data. The technology itself remains misunderstood and its roots as being the support for the use of cryptocurrencies does not help in establishing an open mind to the potential uses of this technology.

The TradeLens platform itself is now scheduled to wind down operations by the end of Q1-2023.

According to reporting by CRN: “TradeLens spent years working with international institutions to establish data standards, submitting for clearance with regulators, and trying to sign up as many shippers, carriers, ports and customs authorities as possible in an effort to achieve success.

 

Supply Chain Matters Added Perspectives

The demise of TradeLens is yet another learning for the supply chain management technology sector and for global wide supply chain management teams.

First and foremost, it smacks of another effort of attractive technology seeking a solution to solve. Undertaking an industry wide transformation requires a good amount if education, change management and flexibility as to approaches.

The notion that Maersk elected to give up on TradeLens from a P&L lens is difficult to comprehend given both the carrier’s windfall profit haul over the past two years and the carrier’s stated goals for eventually becoming a one-stop full service logistics services provider for global businesses over time. Then again, some of Maersk’s industry competitors have that same vision, hence the likely unwillingness to cooperate with a perceived competitor.

IBM itself has not provided a stellar record thus far in its blockchain efforts directed at broad industry adoption for a number of reasons. An ongoing partnership with retailer Walmart to leverage blockchain technology to address food traceability challenges among a wide variety of food suppliers has yielded slow progress, at best. From our lens, too often these efforts are measured in recurring revenue potential and career ladder springboards for technology executives rather than fully understanding the scope of the undertaking.

Technology providers are now beginning to understand that with sophisticated technology such as blockchain, it is better to pre-configure the solution to known business process or decision-making challenges, and then seek out targeted industry or supply chain specific interest levels.

If there ever was an industry in dire need of broad based digital transformation, it is the collection of global shipping and logistics players. The history of efforts to standardize electronic movement of information and now blockchain, have each encountered the obstacles of industry stakeholder conflicts.  Least we remind our readers that global container shipping lines and their alliance networks are immune to global anti-trust regulatory efforts as well.

The founders of the Hong Kong based GSBN platform, in addition to global wide shipping lines, includes Chinese state-owned carriers and logistics services providers. Thus, from the get-go, the platform had to satisfy stakeholders and global maritime regulators on the merits and safeguards of blockchain and the managing of sensitive data. Operators have reportedly been transparent in the strengths and shortcomings of the technology, including strengths in the encryption of data, and its weaknesses in efficiency of storing data. Efforts have been targeted toward addressing rather specific industry-wide challenges that would provide the broadest stakeholder benefits.  Areas of efforts have been directed to digitized bill of lading and cargo release actions, enhancing trade financing actions in cooperation with major international banks. The platform further blends together multiple technology options that include Alibaba Cloud, Ant Group Cloud, Microsoft Cloud or Oracle Cloud, each with their own capabilities or shortcomings.

Relatively new technology efforts directed at multi-modal transport and logistics visibility from tech firms such as project44, FourKites, Tive and others are utilizing API and other integration methods to extract information from a variety of disparate systems including legacy systems, along with added tools to provide security access to that information. In turn, these tech providers understand the need for open and secure standards for exchanging information and have channeled efforts to come together in the termed Open Visibility Network for the development and adoption of such standards. The question is often whether their investors believe in the value of open standards or in owning the intellectual property rights to such standards.

Think back to the history of open and universal bar code, QR code, RFID or other industry-wide information exchange efforts and the learning points to the presence of a recognized not for profit, international standards organization that has proven experience in these efforts and was not subject to industry specific competitive interests. But such efforts take time for alignment, piloting and acceptance, and alas, there are still technology players that seek the golden prize or the majority influence in standards development.

In time, the global shipping and logistics services industry will further come to understand that adage that a rising tide lifts all boats while a low tide exposes the presence of many hazards. As the industry undertakes the challenges of what is likely to be a noteworthy global trade demand contraction in 2023, and a potentially far different configuration of global wide supply networks, there may well be motivation to collaborate on open and secure standards for exchanging key information across transport networks. Blockchain, like other advanced technologies are a technology tool kit to assess in the best means to automate the transfer of key electronic information.

 

Bob Ferrari

© Copyright 2022, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.