Big Ocean Cargo Carriers Join Blockchain Initiative
Date: Tuesday, May 28, 2019
Source: The Wall Street Journal
CMA CGM and MSC sign onto platform that is expected to boost transparency in supply chains
Two major European ship operators have joined a blockchain platform formed by A.P. Moller-Maersk A/S and International Business Machines Corp., in a significant boost for the adoption of the technology across the logistics industry.
The addition of France’s CMA CGM SA and Switzerland-based Mediterranean Shipping Company to the effort called TradeLens means the three carriers that control nearly half of all seaborne containerized cargo capacity will make the movement of freight in international supply chains more transparent and potentially generate substantial annual savings.
Maersk and IBM in 2016 kicked off the blockchain platform for container ships, which carry the vast majority of consumer goods, furniture, manufacturing parts and other basics of global commerce. Large companies such as Walmart Inc., Procter & Gamble Co andDowDuPont Inc. along with 100 ports have been testing the technology to get a better view of their supply chains, from raw materials to finished goods.
For ocean carriers, the blockchain technology allows trusted participants to share information as goods move through supply chains. The system also promises to reduce the cost of paperwork. Maersk said the maximum cost of the required documentation to process and administer many of the goods shipped each year makes up roughly one-fifth of the actual physical transportation costs.
Widespread participation across the supply chain is key to making TradeLens work, however. Many companies, including transportation operators and freight forwarders that manage the flow of goods, have been reluctant to share data on common platforms.
Global customs authorities are also skeptical about the technology.
“Customs have to process more and more transactions and their budget is not in line,” said Vincent Clerc, Maersk’s chief commercial officer. “As they see the merits of blockchain, we will see more of them developing connections this year.”
CMA CGM, the world’s fourth largest container after Maersk, MSC and No. 3 Cosco Shipping Holdings Ltd. of China, late last year joined the Global Business Network, a similar blockchain initiative anchored by Cosco and other Asian carriers.
The French carrier’s decision to join TradeLens as well is “a signal that the whole notion of blockchain tourism is over and that we are at a tipping point for scale where participants will share data in a trusted fashion,” said Marie Wieck, general manager for IBM Blockchain.
“The fact that CMA CGM is now on two platforms means blockchain solutions in shipping won’t be a winner-take-all, but there may be room for a couple of competing platforms,” said Lars Jenes, chief executive, Copenhagen-based SeaIntelligence Consulting.
The move by the two carriers came as A.P. Moller-Maersk also took a shareholder stake in Traxens, a container tracking business that includes CMA CGM and MSC as investors. Maersk also said it would order 50,000 Traxens tracking devices, mirroring orders by its two rivals.
Ingrid Uppelschoten Snelderwaard, a vice president in charge of Maersk’s equipment, said the agreement with Traxens means the carrier will be “working with key industry players to advance a leading solution within connected products and technologies for high-value cargo.”
The blockchain pact comes as Maersk and IBM are trying to reinvent themselves.
IBM has been looking to new lines of business including blockchain as sales in its legacy business of selling hardware and software slow. Maersk has been trying to transform expand its business from port-to-port shipping into more of an integrated logistics provider like FedEx Corp.