Shipping is still a black box – it is opaque. We know that folks are cutting corners, or just making uninformed mistakes, but without real visibility and accountability, there’s not much we can do, argues John Monarch, the CEO of ShipChain.
It could be months before authorities know why 281 containers washed overboard the MSC Zoe into the North Sea last week – that is, if are even able to collect enough evidence. Local media are telling us that the ship encountered particularly rough seas and high winds. Whatever the final verdict, the prospect of hundreds of containers — some containing dangerous organic peroxide and lithium-ion batteries — washing up on crowded beaches in Europe has once again brought maritime security and practices to the forefront of public awareness.
With the Dutch military now stepping in to help clear beaches where the containers are washing up, we need to ask ourselves, what can be done to prevent similar maritime disasters from happening in the future? And while this incident is cause for concern, it’s those hundreds of similar incidents that never make the headlines that should really have us worrying about the human, environmental, and economic costs imposed by a lack of accountability in global shipping.
It doesn’t have to be this way. Sure, there will always be natural occurrences that are beyond human and machine control, that’s what insurance is for. But, there’s proven technology that makes it almost impossible for actors to hide poor track records across the supply chain. Blockchain promotes higher cargo handling standards, and just as importantly, identifies precisely where a shipment was mishandled, by whom, and how.
But before we explain how blockchain can accomplish this, let’s talk about how we got to a place where it’s normal for billions of dollars of cargo shipments to be lost or destroyed every year, including washed overboard.
We landed a man on the moon half a century ago, but shipping practices remain stuck in the stone age. Sure, we’ve digitised many functions, eliminated significant waste, and increased visibility, but we’re still relying on the same self-reporting processes we did decades ago. By the time a shipment arrives at its final destination, it’s changed hands dozens of times, but nobody knows for sure when, who, how, and in what condition.
It’s circumstances like these that promote corner cutting – if nobody knows whether a shipper followed best practices, there’s less incentive for him or her to do so. Since a business’s primary goal is to make money, ‘cost cutting’ and ‘corner cutting’ start to look remarkably similar. And even when businesses are doing their best, practices that seem sound might not always result in safe and effective handling of freight.
When corners are cut, accidents happen, and those accidents can be costly.
Basically, shipping is still a black box – it is opaque. We know that folks are cutting corners, or just making uninformed mistakes, but without real visibility and accountability, there’s not much we can do.
That’s where blockchain comes in.
Blockchain’s key selling point is that it promotes transparency and immutability – and these factors, in turn, promote better practices. Here’s how. As transactions are automatically recorded to a centralized ledger, the information is readily available to all parties involved in the transaction, providing maximum transparency. For example, a container is loaded onto a ship after the inspection in Port A, at which time the cargo was in good condition, without any excursions or rough handling. Upon offload in Port B, the container’s sensors upload new information that shows extreme turbulence en-route. The container is trucked to its final destination, and sure enough, there has been some damage.
Two important factors become clear in the scenario above. First, the damage occurred while on board the ship. Second, the damage sustained corresponds to turbulence recorded by the sensors installed on the container. Was the container improperly loaded and secured, was the container improperly stored, was there a power outage? Now, we have a way to identify the problems and correct them!
It’s the immutability of data recorded onto the blockchain that makes it so trustworthy. Once the details of a transaction are logged, they can’t be deleted or altered. Thanks to the blockchain, it’s clear who is at fault, and what needs to be done to prevent it from happening again.
Blockchain promotes better, safer practices. When we apply that dynamic to shipping in general, it creates an ecosystem of accountability because once your digital signature is applied to a transaction – say the handoff of a container at a warehouse between a trucker and a receiver – details such as the time of handoff, condition, transit conditions and more are visible to everyone. Suddenly, cutting that corner looks a lot less attractive once everyone else can see you do it.
The terms, ‘process integrity’ and ‘disintermediation’ are often applied to blockchain protocols for this reason. Basically, they mean that it’s easy to set the rules and make sure that they are followed. The parties in any blockchain-contract transaction know that everything will be done in accord with agreed upon protocols. If everyone is looking at the same data, and there’s no way to falsify it, then there’s no need for intermediation by a third party.
Let’s tie up some loose ends about how blockchain promotes better practices and helps prevents mistakes such as the one that occurred aboard the MSC Zoe in the North Sea, that prompted the writing of this article.
It all comes down to eliminating errors and speeding up response times once they are identified. With this new technology, recording, tracking, verifying properties of physical products, linking and sharing can be done in real time. That’s even easier in the context of the public blockchain, where all this information can be securely aggregated, queried, and leveraged to improve practices. Tracking and tracing shipments via blockchain takes away the potential for human error in most cases while eliminating costs and time delays that plague transactions in today’s supply chains.
We’re heading into an era where load factors such as temperature, humidity, exposure to shock and other details can be agreed upon measures that are built into smart contracts. These measures can be uploaded to a common platform, and be captured automatically by sensors.
Speaking from years of experience, folks in the shipping industry aren’t ‘bad actors’. We are some of the most dedicated and hard-working people you’ll meet. When mistakes happen, it’s not because we’re trying to screw over the people who entrust us with their shipments. Instead, it’s because shipping is a complex and high-stakes business. We’re ready to embrace better practices, and thanks to the blockchain, that’s easier than ever.
When we create an ecosystem that identifies any violations of agreed-upon limits, it actually empowers shippers to respond to problems and mitigate them at the time of occurrence, and take steps to avoid them in the future. We may never know exactly why those containers washed off the deck of the MSC Zoe, but blockchain’s track and trace capabilities offer us a path towards dramatically reducing such occurrences in the future.