Blockchain systems must be based on underlying digital standards if they are to operate effectively in international shipping, believes Thomas Bagge, CEO of the Digital Container Shipping Association (DCSA), which was established earlier this month.
It has set up an office in Amsterdam and brought together A.P. Møller-Maersk, Hapag-Lloyd, MSC and Ocean Network Express. It is “in discussions with multiple other container shipping lines around the globe who are interested in joining and preparations for membership of two companies are already ongoing,” according to a statement marking the association’s establishment on 12 April.
In an exclusive interview with ShipInsight this week (24 April), Mr Bagge said that the association’s aim is to establish standards for commercial applications “to make sure there is interoperability between the various systems so you can put new technologies like blockchain on top.”
He expressed concern at the number of maritime blockchain initiatives currently being developed – at least four, with others being planned, he said – and warned that customs authorities will not want to work with a number of different blockchain systems “however smart they are” if they are not compatible with their own preferred system.
To achieve that, “you have to agree on your data architecture” and some common formats for basic parameters such as dates, commodity codes and geographic identifiers. Otherwise, “the solutions are going to suffer,” he said.
Already, regional systems are beginning to emerge. In March, a pilot project was launched at a seminar hosted by the Marseille Fos port authority, which is putting money into a blockchain technology pilot scheme “to demonstrate enhanced freight logistics on the Mediterranean-Rhone-Saone (MeRS) axis,” an announcement by the port said. A proof-of-concept prototype is due to go live in June.
One of the largest blockchain communities is TradeLens, jointly developed by Mr Bagge’s previous employer A.P. Møller-Maersk and IBM. Its website states that “over 100 diverse organisations including carriers, ports, terminal operators, 3PLs, and freight forwarders” are part of its ‘ecosystem’. So far, four carriers are using the service – Maersk, PIL, Seaboard Marine and its most recent recruit, on 17 April, ZIM Integrated Shipping Services.
Another blockchain-enabled platform was launched in November 2018 - Global Shipping Business Network – with nine participants, five of them shipping lines: CMA CGM, COSCO, OOCL, Evergreen and Yang Ming.
Blockchain consultant Blockchain Labs for Open Collaboration (BLOC) is involved in some shipping-related projects, including its first consortium, set up in March 2018 with the Lloyd’s Register Foundation. BLOC’s co-founder and CEO Deanna MacDonald told ShipInsight yesterday (25 April) that many in shipping “have quite rightly critiqued the rush to use blockchain for everything, leading to a surprising backlash towards a technology that, two years ago, few in shipping had even heard of.”
She made points that echo Mr Bagge’s, saying that BLOC makes “open calls for collaboration” and brings together industry stakeholders “to address shared friction points across entire value-chains.” To make them work calls for trust, she said, which “fundamentally runs counter to many of the competitive business models in which shipping is embedded.” Because of that, “If a single company is creating a blockchain application that only they and their customers can use, it’s unlikely to succeed.”
It is not just blockchain that would benefit from digital standards, Mr Bagge said. Monitoring and tracking devices, linked to ‘the internet of things’ (IoT) “will only give their maximum benefit to [a shipping line’s] customers if you have digital standards in place.”
For example, if two container lines have a vessel sharing agreement and do not have the same technological standards on their IoT devices, customers of one the partners whose cargo is loaded on the other partner’s ships “lose their visibility [of their shipment] and that doesn’t make any sense.”
He compared it with the airline industry, which has code-sharing agreements and alliances between airlines. “Your check-in is seamless across multiple airlines and you will still get your loyalty points and your baggage.” For airline travellers, that’s never a problem, he said, “but for our customers, it is an industry problem.”
Now, “for the first time in 20 years, the container shipping industry has come together with a common goal to move the industry into the digital era,” said André Simha, chairman of the DCSA’s supervisory board and chief information officer of MSC, in its earlier statement.
Its formal establishment followed approval from the US Federal Maritime Commission (FMC) on 14 March, which indicated that it did not consider the association to be a cartel. Once that was confirmed, work could begin on developing standards, Mr Bagge said. Until then discussions could only be about general topics but since then, “we have been able to have much more concrete discussions around specific topics,” such as IT security and IoT, he said.
These are being conducted by experts drawn from its members, along with some external support. Existing standards developed by the ISO and other bodies will be looked at, he said; “we don’t intend to reinvent everything.” There is a lot of potential “for doing things better in our industry,” he said. “Change will come.”