How Blockchain Tech can help streamline global supply chains

Navigating end-to-end supply chains is a complicated affair for any logistics stakeholder. The large number of people involved and the inherent lack of visibility in each other’s operations make supply chains difficult to distinguish, causing inefficiencies that constantly drive workflows. Much of this goes back to the physical nature of supply chain documentation, as companies tap on paper documents to validate transactions from commercial invoicing to customs verification.

The system is moving slowly, thanks to electronic trade documentation. But to make electronic documentation acceptable to all stakeholders in the chain, there must be a set of standards that govern how these documents are prepared.

Blockchain technology promises, experts told Insider, and an explosion in blockchain-based startups reflects the enthusiasm the technology is reaping. Blockchain will enable participants to have equal power over data and documents shared in the system, while ensuring that shared data cannot be edited without the express consent of all stakeholders.

How blockchain-based document transfer works

Consider a maritime shipping environment that includes shippers, banks, trade finance providers, agents, shipping operators, freight forwarders and customs agencies. Many paper documents are sent across this value chain through courier services.

“Sending paper-based documents around for trading is a hundred-year-old process,” Stefan Kukman, CEO and founder of CargoX, a blockchain logistics trading document transfer platform, told Insider. But Kukman said that in addition to the time and cost associated with the process, the documents themselves are often lost or misplaced, “and this should not be acceptable in the world we live in today.”

Electronic transmission of trade documentation can eliminate the need to manually send documents by courier. But solutions like email are not perfect – finding the primary (and true) copy of your email becomes difficult when copies can be easily created and saved.

Blockchain-based document transfer solves this problem. “On a blockchain network, electronic transmission of commercial documents will be encrypted,” said Kukman. “If the hash is not correct, it means that someone has changed something on the document. Participants in the network can easily identify who changed what and the timestamp. This makes the system faster and more reliable than any system currently available.”

Reducing barriers to entry can offset the time and money that companies invest in using blockchain technology

Although this sounds rosy in theory, some supply chain experts are still skeptical about using blockchain technology for several reasons, including the time and cost required to overhaul existing processes.

“There are conceptual benefits of data standards and blockchain, but the actual return on investment for the specific devices is less clear, as it must offset the inertia of deployment,” said Kai Timmermann, CEO of the logistics technology platform Prompt. Insider.

Switching to blockchain technology also requires employees and management to review, evaluate and internalize existing processes. “If you started with a blank sheet and had the opportunity to rebuild from scratch, there would be overwhelming benefits to a different structure,” Timmermann said. – But that’s not where we are.

Timmermann added that overcoming this dead end means reducing barriers to change. Reducing onboarding costs is crucial, such as requiring providers of blockchain solutions to introduce low-cost ramps to digitize existing processes or connect different platforms. Working with governments and pushing for favorable legislative measures is also a necessity, given that global supply chain transactions see heavy intervention from the countries involved.

It is important to develop standards that are easy to adopt. Organizations such as the Blockchain in Transport Alliance and GS1 US are pioneering open standards to enable companies to streamline blockchain activities and accelerate the adoption timeline.

Solution for cross-border transactions

Cross-border transactions moving over a blockchain network will also need legal approval from the respective countries. Kukman said that CargoX has persuaded governments to cooperate with the network.

A public-private partnership with the Egyptian government authorized CargoX to be the blockchain document transfer port for the country’s official trading platform. Since March last year, Kukman said, CargoX has transferred more than 1.1 million trading and financial documents to more than 75,000 customers.

He added that the next step is to promote interoperability. The challenge right now is for blockchain logistics companies to ensure that when a document is transferred from one system to another, it gets locked, disabled or corrupted, even when a copy is created on the target blockchain system. Although this technique is designed to maximize reliability, companies find it difficult to implement it on a commercial scale.

Resolving this will require large suppliers of blockchain solutions to come together and develop protocols that allow such transactions. Kukman said that the easiest way to implement interoperability would be to introduce a centralized authority that provides the rules for data transfer from one system to another.

Ultimately, interoperability data standards can connect different blockchain systems and help other document transfer systems use blockchain as a settlement layer, ensuring that there is one source of document ownership truth. The decentralized nature of the blockchain also helps to argue for interoperability, with standards that remain decentralized and neutral – based on a foundation of trust, a critical function in global trade that is becoming more complicated by the day.