Blockchain-based logistics looks increasingly Chinese after the exit of Maersk, but Hong Kong’s GSBN has global ambitions

“I think for many people, the clear understanding is that this industry has digitized,” GSBN CEO Bertrand Chen told the South China Morning Post in December, shortly after TradeLens’ shutdown. “There’s just no way 10 years down the road in 2032, global trade is still using pen and paper. There’s no way post-Covid-19. It just can’t be.”

GSBN is a non-profit organization with eight shareholders, each with equal voting rights in the governance of the blockchain. Members include shipping companies Cosco, OOCL and Hapag-Lloyd, and five terminal operators – Hutchison Ports, SPG Qingdao Port, PSA International, Shanghai International Port Group and Cosco Shipping Ports.

Only Hapag-Lloyd and PSA International, which are German and Singaporean respectively, are not based in mainland China or Hong Kong. With GSBN now operating the largest blockchain platform for collaboration in the shipping industry, the Web3 future for supply chains looks largely Chinese.

Chen said in an earlier interview in November that China was taking the lead in this area because money poured into the industry, but he acknowledged that many of the solutions so far are very specific to the country, creating links between provinces or blockchains operating in one place .

“When you throw that much money into a sector because it’s a policy, you’re bound to potentially get lucky,” Chen said. He added that China’s investment in this area will benefit GSBN by creating more partners for the company to work with.

But GSBN also has global ambitions. Chen said the company is working to attract more European shipping lines and even hopes to get Maersk on board one day, although he acknowledged that “might be a bit challenging”.

While GSBN is now the biggest player, it is far from the only company trying to make blockchain happen in the industry. Some smaller data platforms, such as New Zealand-based TradeWindow, use blockchain but have played down the technology’s role in marketing materials. Several of the biggest names in logistics have presented their own blockchain solutions only to gain little traction.

DHL, Kerry Logistics, Deloitte, Kuehne + Nagel, Amazon, JD.com and Alibaba Group Holding, owner of Posten, have all used or distributed blockchain technology in the service of logistics in recent years. But while those still involved in similar projects say the Covid-19 pandemic catalyzed the adoption of the technology, many of these companies have little to say about their blockchain efforts over the past couple of years.

“If one company wants to do blockchain, it’s almost impossible,” Chen said. “Why do you need a blockchain as one company?”

Many in the industry agree that there are huge cost- and time-saving incentives to digitize documents and processes involved in moving goods across national borders. But the industry is so fragmented that agreement on new technologies and standards can be elusive.

“When we talk about trade documents, and the value of reducing the volume of paper used in paper transactions, there is certainly a cost-saving benefit,” said Goh Puay Guan, an associate professor of supply chain at the National University of Singapore Business School. “Of course, the challenge is to get all companies on board, because only when you have an integrated platform do companies actually benefit from that integration.”

For Chen and many others, the real flaw of TradeLens was not the value proposition of blockchain, but that it was seen as a product of Maersk, a potential competitor to other users of the platform.

“The fact that TradeLens was seeded by Maersk, from a business perspective, it was an impediment to growth,” Chen said. “Because some of the customers that they need in court say: ‘I don’t trust Maersk’.”

Chen added that he does not believe there was a real risk to user data, and there is no indication that Maersk used or could have used data on TradeLens for any competitive advantage. Still, many have noted that this negative perception could have hurt adoption.

Following the announcement of TradeLens’ closure, people on LinkedIn and in other professional spheres chimed in on where they believe the platform went wrong. Many agreed that the problem was not blockchain specific.

In a LinkedIn post that received wide attention, David Ziyang Fan, head of digital trade at the World Economic Forum (WEF), said that building trust is difficult, but the digitization trend is irreversible.

“[The WEF has] always taken a fairly balanced view of what blockchain can do for the industry. We are optimistic, but we are definitely not blockchain maximalists,” Fan said in a video chat in December. “I feel the pendulum has swung too far in the other direction … ‘Crypto winter’ has directly or indirectly affected people’s confidence in enterprise blockchain, especially blockchain in commerce and supply chain.”

One of the big questions that remains about blockchain is how much is really needed in many of the applications it is used for. In a LinkedIn post in December, Chen wrote that “TradeLens Core (the visibility solution) … did not require blockchain to work”.

In fact, tracking goods has been around for decades through the use of technology such as barcodes, which has been further enhanced with the use of newer chips and sensors. And transparency has increased in recent years through a number of customized cloud platforms.

Smart Warehousing, a US domestic logistics solutions provider that offers product tracking in its facilities, has so far avoided getting into blockchain because its proprietary platform Swims has proven flexible enough to solve the problems, executives say.

“There are global standards for barcodes. You need to have a global standard in place for how this information should be sent, and here are the formats it should be sent through, says Beth Ward, operations manager at Smart Warehousing.

This happened in the 1960s with shipping containers, when government agencies in the US and Europe forced the shipping giants to agree to set sizes for the massive boxes credited with accelerating globalization in the latter half of the 20th century. In the 1980s, standards bodies established electronic data interchange (EDI) document formats, a way of sharing product information that is sometimes referred to as the precursor to e-commerce.

Even when blockchain is used to track data, companies often have their own ways of sharing the data itself, which is too large to be shared directly on a distributed ledger. Some of this data may even be in an EDI format.

The one killer application that seemingly everyone in the industry can agree could be a game-changer for blockchain in logistics is an electronic bill of lading (eBL), which has recently gained traction. The bill of lading is a critical document to prove receipt of goods. It remains largely paper-based across the industry, with shippers requiring the original document in order to transport goods.

“Because of Covid-19, because you have to change the process, I think this is one of the common use cases of blockchain,” Chen said. “Probably better than NFTs of digital art. NFTs of global trade documents – this will be the real killer use case.”

GSBN facilitated the first use of a blockchain-based eBL for bulk shipping in partnership with Cosco in January. It was issued to Brazil-based pulp producer Eldorado. GSBN also signed a memorandum of understanding in late March with Saudi Basic Industries Corp (Sabic), Cosco Shipping, Hutchison Ports and PSA International, with all agreeing to use eBLs in the future.

While eBLs have existed in one form or another since 1999, legal complexity and lack of standardization have slowed adoption. With other available tools for digitization, blockchain can slowly be integrated into other processes in ways that make it less visible. This removes much of the hype surrounding the technology, but it makes its use more practical and sustainable.

“In my view, blockchain has been and remains a tool in the technology stack for digitizing commerce,” said WEF’s fan. – It has always been like this.