A Blog by Jonathan Low

 

Jan 18, 2018

IBM and Maersk Joint Venture Uses Blockchain To Optimize Supply Chain Efficiency

The significance of the announcement is that this is a practical application of blockchain technology by two of the leaders in their respective fields - tech and logistics - which means their experience should create a more productive, glitch-free process for those who use it - and, potentially, a first mover advantage for themselves. JL


Richard Milne reports in The Financial Times:

The Danish shipping conglomerate and US (tech co.) estimate businesses spend a fifth of the cost to transport goods on processing documents and administration. The distributed ledger technology behind blockchain create(s) an unchangeable record of transactions along a supply chain shared in real time with whichever companies are necessary. The significance is huge for any transaction that has multiple parties. Blockchain would allow companies at different stages of the supply chain to see the information they need about each transaction. It could set a standard for the digitalisation of supply chains.
 AP Moller-Maersk and IBM are setting up a joint venture to use blockchain technology to try to help make the companies’ supply chains more efficient and safer. General Motors and Procter & Gamble are among the multinationals to express interest in the new platform, which Maersk and IBM hope can become the new digital standard for global trade. The Danish shipping conglomerate and US software group estimate that businesses spend up to a fifth of the cost to transport goods on processing documents and administration. They want to use the distributed ledger technology behind blockchain to create an unchangeable record of transactions along a supply chain that can be shared in real time with whichever companies are necessary.
 “We see this as an important stepping stone both for our industry and our strategy. The cost there is in moving data and paper currently is significant. You can get better confidentiality and security as well as better speed from this,” said Vincent Clerc, Maersk’s chief commercial officer and the proposed chairman for the joint venture. Shipping companies such as Maersk are looking to technology to help cut costs as they struggle to adapt to global trade being well below the levels from before the 2007/8 financial crisis. The Danish group teamed up with IBM last year for a pilot, which involved players such as DuPont, Dow Chemical, the ports of Houston and Rotterdam, and the US and Dutch customs authorities. Both Maersk and IBM stressed that the venture would be open to all players in global supply chains and that it would interact with any other systems rivals come up with. But they added that they hoped it could set a standard for the digitalisation of supply chains. “At a certain time, you have to place a bet on one alternative just as you had to with VHS and Betamax before,” said Mr Clerc. What we see is that the thing that is going to help the world is blockchain as a distributed ledger. The significance of that is huge for any transaction that has multiple parties. Bridget van Kralingen, head of solutions and blockchain for IBM Global IndustriesBridget van Kralingen, head of solutions and blockchain for IBM Global Industries, said the US group believed the technology had applications well beyond the cryptocurrencies it has been until now mostly associated with. “There’s a lot of write-up about blockchain. But what we see is that the thing that is going to help the world is blockchain as a distributed ledger. The significance of that is huge for any transaction that has multiple parties,” she added. Blockchain would allow companies at different stages of the supply chain to see the information they need about each transaction in one flow of information. The joint venture also hopes to automate and digitalise the filing of paperwork. Maersk was one of the biggest victims of NotPetya cyber attack last year, which cost it an estimated $250m-$300m. Mr Clerc said improving the security of its transactions was important. “With these cyber attacks, you will still continue to see the penetration of tech because the business case is so important. For us, it’s important to continue to lead the transformation of this industry,” he added.The collaboration is expected to be up and running within six months as it needs regulatory approval in some countries. It is due to be headed by Michael White, the former president of Maersk Line in North America, and be located in New York.

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