{"id":21294,"date":"2017-11-12T15:56:38","date_gmt":"2017-11-12T20:56:38","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/so-what-the-use-of-blockchain-in-supply-chain\/"},"modified":"2017-11-12T15:56:38","modified_gmt":"2017-11-12T20:56:38","slug":"blockchain-for-shipping-is-it-really-revolutionary","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/blockchain-for-shipping-is-it-really-revolutionary\/","title":{"rendered":"Blockchain for Shipping -Is it Really Revolutionary?-"},"content":{"rendered":"<p><em>&#8220;I fear that we&#8217;ll build something that at the application layer looks like what Bitcoin and the Blockchain promised, but under the hood is just the same old transaction system.<\/em>&#8221; [1]<\/p>\n<p style=\"text-align: right\">Joi Ito, Director of MIT Media Lab.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Shipping Industry<\/strong><\/p>\n<p>90% of goods in global trade are transported by ships. The number of containers shipped through major routes was 184 million in 2015, and it is estimated to quadruple by 2030 [2]. It is clearly one of the most important transportation method in supply chain.<\/p>\n<p>Together with its size, another characteristic of shipping is its complexity due to the number of parties involved, such as land transporters, freight forwarders, customs brokers, port authorities and etc. The shipping industry still heavily relies on paper documents for its communication among parties. It is estimated that the cost of trade-related paperwork processing cost roughly <strong>twice<\/strong> the costs of physical transportation [3]. Increasing efficiency through digitization could significantly reduce the cost of shipping.<\/p>\n<p><strong>Maersk<\/strong> is the world&#8217;s largest container shipping company, serving <strong>59 thousand<\/strong> customers over the world and carrying <strong>12 million<\/strong> containers per year. The company has assigned its first ever Chief Digital Officer in 2017 to tackle its digital transformation. The company sees that the transport and logistics industry is still in the early stage of digitization (Figure 1) and that digitization is an important pillar for growth in the future.<\/p>\n<p style=\"text-align: center\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-21367\" src=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/digital-story-1.png\" alt=\"\" width=\"1864\" height=\"872\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/digital-story-1.png 1864w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/digital-story-1-300x140.png 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/digital-story-1-768x359.png 768w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/digital-story-1-1024x479.png 1024w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/digital-story-1-600x281.png 600w\" sizes=\"auto, (max-width: 1864px) 100vw, 1864px\" \/>Figure 1: Stages of digitization by industries [4]<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Blockchain on Supply Chain<\/strong><\/p>\n<p>As part of its digitization process, in March 2017, Maersk announced a blockchain project in collaboration with IBM. The project has the potential to vastly reduce the cost and complexity of trading by using blockchain technology [5].<\/p>\n<p style=\"text-align: center\"><a href=\"https:\/\/youtu.be\/dcddYatMCGQ\">https:\/\/youtu.be\/dcddYatMCGQ<\/a><\/p>\n<p>A resent research by Maersk shows that a shipment of flowers from Kenya to the port of Rotterdam required sign-off from <strong>30 unique organizations<\/strong> and up to <strong>200 communications\u00a0<\/strong>[6].<\/p>\n<p style=\"text-align: center\"><a href=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/image-of-the-software.png\"><br \/>\n<img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-21317\" src=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/image-of-the-software.png\" alt=\"\" width=\"1186\" height=\"688\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/image-of-the-software.png 1186w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/image-of-the-software-300x174.png 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/image-of-the-software-768x446.png 768w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/image-of-the-software-1024x594.png 1024w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/image-of-the-software-600x348.png 600w\" sizes=\"auto, (max-width: 1186px) 100vw, 1186px\" \/><\/a>Figure 2: The sample image of the blockchain solution<\/p>\n<p>In parallel to the blockchain project, in April 2017, Maersk launched another project in collaboration with Microsoft. According to Microsoft, Azure (Microsoft&#8217;s cloud platform) has been selected for the digital platform of Maersk [7]. This announcement is striking, not because it is revolutionary, but because Microsoft is a direct competitor of IBM, with whom Maersk is working on the blockchain project. This fact illustrates that Maersk is still in an experimenting phase of its digital transformation. In a short term, Maersk will be working on blockchain together with other solutions, but the company has not fully committed to blockchain for its medium-term goal.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Potentials of Blockchain<\/strong><\/p>\n<p>The application of blockchain for Maersk is not so revolutionary. It is still early to conclude its significance, but the problem here is that blockchain is used to improve the current industry practice. This inherently limits the benefit of using blockchain. One of the most important features of blockchain is its ability to increase transparency; all of the transactions happen on blockchain platform could be seen by public and validated by all stakeholder involved.<\/p>\n<p>Radical transparency could be problematic to Maersk, because the company could lose its competitive advantages by disclosing all the information. Currently, none of the actual data of the blockchain project is revealed to public. This could be the reason why blockchain technology is not fully utilized in many other industries despite its potential benefits.<\/p>\n<p>What if a supply chain company could provide all the transaction information visible to public? It will open new business opportunities. A startup, called <strong>Provenance,<\/strong> is working to produce the solution for transparency in product supply chains (mostly for food and fashion brands). Unlike Maersk, Provenance is trying to create a new business model, based on blockchain. Essentially, what Provenance platform provides is the credibility of brands by increasing transparency of product supply chain [8]. IBM has started to work with major food supply chain companies such as <strong>Walmart<\/strong>, <strong>Unilever<\/strong> and <strong>Nestle<\/strong> to advocate greater transparency in the food system [9].<\/p>\n<p style=\"text-align: center\"><a href=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/supply-chain-created-by-Provenance.png\"><br \/>\n<img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-21396\" src=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/supply-chain-created-by-Provenance.png\" alt=\"\" width=\"1637\" height=\"781\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/supply-chain-created-by-Provenance.png 1637w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/supply-chain-created-by-Provenance-300x143.png 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/supply-chain-created-by-Provenance-768x366.png 768w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/supply-chain-created-by-Provenance-1024x489.png 1024w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/supply-chain-created-by-Provenance-600x286.png 600w\" sizes=\"auto, (max-width: 1637px) 100vw, 1637px\" \/><\/a>Figure 3: Tracking tuna on Provenance&#8217;s platform [10]<\/p>\n<p>Many of the examples above are BtoC businesses, but if greater transparency becomes the industry standard, Maersk will be forced to change its current business practice. It will benefit the company if Maersk starts preparing for the future by building a new business that allows transparency through its shipping transportation. Thus, my suggestion to Maersk is to build a new business unit that focuses on building a new supply chain solution using blockchain technology. If Maersk continues to focus on a narrow scope of blockchain technology (i.e. the current blockchain project), the company could misunderstand the actual potential of blockchain.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Further discussion<\/strong><\/p>\n<p>What brands other than mentioned above could benefit from transparency of their supply chains? What are the social conditions that accelerate the demand for perfect transparency in supply chain?<\/p>\n<p>(791 words)<\/p>\n<p>&nbsp;<\/p>\n<p><strong>References<\/strong><\/p>\n<p>[1] Ito, J. (2017).\u00a0<i>My view on the current situation of Bitcoin and the Blockchain<\/i>. [online] Available at: https:\/\/joi.ito.com\/weblog\/2016\/02\/22\/my-view-on-the-.html [Accessed 11 Nov. 2017].<\/p>\n<p>[2]\u00a0Cit.com. (2017).\u00a0<i>Maritime Shipping Industry Statistics | Knowledge Center | CIT<\/i>. [online] Available at: https:\/\/www.cit.com\/thought-leadership\/maritime-shipping-industry\/ [Accessed 11 Nov. 2017].<\/p>\n<p>[3] Sadouskaya, K. (2017). Adoption of Blockchain Technology in Supply Chain and Logistics. [online] p.30. Available at: https:\/\/www.theseus.fi\/bitstream\/handle\/10024\/126096\/Adoption%20of%20Blockchain%20Technology%20in%20Supply%20Chain%20and%20Logistics.pdf?sequence=1 [Accessed 11 Nov. 2017].<\/p>\n<p>[4] Maersk. (2017).\u00a0<i>Everything will be digitised<\/i>. [online] Maersk website. Available at: https:\/\/www.maersk.com\/stories\/everything-will-be-digitised [Accessed 11 Nov. 2017].<\/p>\n<p>[5]\u00a0IBM. (2017).\u00a0<i>Maersk and IBM Unveil Supply Chain Solution on Blockchain<\/i>. [online] Available at: http:\/\/www-03.ibm.com\/press\/us\/en\/pressrelease\/51712.wss [Accessed 11 Nov. 2017].<\/p>\n<p>[6]\u00a0IBM. (2017).\u00a0<i>The Paper Trail of a Shipping Container<\/i>. [online] Available at: http:\/\/www-03.ibm.com\/press\/us\/en\/photo\/51713.wss [Accessed 11 Nov. 2017].<\/p>\n<p>[7]\u00a0Microsoft News Center. (2017).\u00a0<i>Maersk goes big in digital transformation with Microsoft | News Center<\/i>. [online] Available at: https:\/\/news.microsoft.com\/2017\/04\/26\/maersk-goes-big-digital-transformation-microsoft\/ [Accessed 12 Nov. 2017].<\/p>\n<p>[8]\u00a0Provenance. (2017).\u00a0<i>Provenance | Every product has a story<\/i>. [online] Available at: https:\/\/www.provenance.org\/ [Accessed 12 Nov. 2017].<\/p>\n<p>[9]\u00a0IBM. (2017).\u00a0<i>Blockchain for Food Safety<\/i>. [online] Available at: http:\/\/www-03.ibm.com\/press\/us\/en\/pressrelease\/53013.wss [Accessed 12 Nov. 2017].<\/p>\n<p>[10]\u00a0Provenance. (2017).\u00a0<i>Provenance | From shore to plate: Tracking tuna on the blockchain<\/i>. [online] Available at: https:\/\/www.provenance.org\/tracking-tuna-on-the-blockchain [Accessed 12 Nov. 2017].<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The world largest container shipping company has launched a blockchain project in 2017. Is it really revolutionary or is it just another old transaction system?<\/p>\n","protected":false},"author":9848,"featured_media":21304,"comment_status":"open","ping_status":"closed","template":"","categories":[2569,2608,1505,3235,1709,1062],"class_list":["post-21294","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-bitcoin","category-blockchain","category-cargo-shipping","category-digital-supply-chain","category-maersk","category-shipping","hck-taxonomy-organization-maersk","hck-taxonomy-industry-shipping","hck-taxonomy-country-denmark"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Blockchain for Shipping -Is it Really Revolutionary?- Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/blockchain-for-shipping-is-it-really-revolutionary\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Blockchain for Shipping -Is it Really Revolutionary?- Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"The world largest container shipping company has launched a blockchain project in 2017. 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