Maersk, IBM form JV to digitize supply chain using blockchain technology
December 17, 2018: A.P. Moller - Maersk and IBM have joined hands to set up a joint venture company to offer more efficient and secure methods for conducting global trade using blockchain technology.
The aim of the new company is to offer a jointly developed global trade digitization platform, built on open standards and designed for the entire global shipping ecosystem. It will address the need to provide more transparency and simplicity in the movement of goods across borders and trading zones.
The cost and size of the world's trading ecosystems continues to grow in complexity. Over $4 trillion in goods are shipped every year, and more than 80 percent of the goods used daily are carried by the ocean shipping industry.
The maximum cost of the required trade documentation to process and administer many of these goods is estimated to reach one-fifth of the actual physical transportation costs.
According to The World Economic Forum, by reducing barriers within the international supply chain, global trade could increase by nearly 15 percent, thereby boosting economies and creating jobs.
The attributes of blockchain technology are ideally suited to large networks of disparate partners. A distributed ledger technology-blockchain establishes a shared, immutable record of all the transactions that take place within a network and then enables permissioned parties access to trusted data in real time.
By applying the technology to digitize global trade processes, a new form of command and consent can be introduced into the flow of information, empowering multiple trading partners to collaborate and establishing a single shared view of a transaction without compromising details, privacy or confidentiality.
Maersk, a global leader in container logistics, and IBM, a leading provider of blockchain, supply chain visibility and interoperability solutions for the enterprise, will use blockchain technology to power the new platform, as well as employ other cloud-based open source technologies including artificial intelligence (AI), IoT and analytics, delivered via IBM Services, in order to help companies move and track goods digitally across international borders.
Manufacturers, shipping lines, freight forwarders, port and terminal operators and customs authorities can all benefit from these new technologies -and ultimately consumers.
"The new company marks a milestone in our strategic efforts to drive the digitization of global trade. The potential from offering a neutral, open digital platform for safe and easy ways of exchanging information is huge, and all players across the supply chain stand to benefit," said Vincent Clerc, chief commercial officer of Maersk, and future chairman of the board of the new joint venture.
"By joining our knowledge of trade with IBM's capabilities in blockchain and enterprise technology, we are confident this new company can make a real difference in shaping the future of global trade," said Clerc.
IBM's blockchain platform is enabling hundreds of clients and thousands of developers to build and scale active networks across complex use cases, including cross border payments, supply chains, and digital identification.
"The major advances IBM has made in blockchain have shown that the technology can foster new business models and play an important role in how the world works by building smarter businesses," said Bridget van Kralingen, senior vice president of IBM Global Industries, solutions and blockchain.
"Our joint venture with Maersk means we can now speed adoption of this exciting technology with the millions of organisations who play vital roles in one of the most complex and important networks in the world, the global supply chain. We believe blockchain will now emerge in this market as the leading way companies seize new untapped economic opportunities."
IBM and Maersk began a collaboration in June 2016 to build new blockchain and cloud-based technologies. Since then, multiple parties have piloted the platform including DuPont, Dow Chemical, Tetra Pak, Port Houston, Rotterdam Port Community System Portbase, the Customs Administration of the Netherlands, US Customs and Border Protection.
The joint venture will now enable IBM and Maersk to commercialise and scale their solutions to a broader group of global corporations, many of whom have already expressed interest in the capabilities and are exploring ways to use the new platform, including: General Motors and Procter and Gamble to streamline the complex supply chains they operate; and freight forwarder and logistic company, Agility Logistics, to provide improved customer services including customs clearance brokerage.
Additional customs and government authorities, including Singapore Customs and Peruvian Customs, will explore collaborating with the platform to facilitate trade flows and enhance supply chain security. The global terminal operators APM Terminals and PSA International will use the platform to enrich port collaboration and improve terminal planning.
With support from Guangdong Inspection and Quarantine Bureau by connecting to its Global Quality Traceability System for import and export goods, the platform can also link users to important trade corridors in and out of China.
In order to address the specific needs of the industry, Maersk and IBM are establishing an advisory board of industry experts to help further shape the platform and services, provide guidance and feedback on important industry factors, and drive open standards.
Maersk and IBM have named Michael White, former president of Maersk Line in North America, as CEO of the new company.
He said: "Today, a vast amount of resources are wasted due to inefficient and error-prone manual processes. The pilots confirmed our expectations that, across the industry, there is considerable demand for efficiency gains and opportunities coming from streamlining and standardizing information flows using digital solutions. Our ambition is to apply these learning to establish a fully open platform whereby all players in the global supply chain can participate and extract significant value. We look forward to further expanding our ecosystem of partners as we progress toward a global solution."
The new company initially plans to commercialise two core capabilities aimed at digitizing the global supply chain from end-to-end. It includes, shipping information pipeline that will provide end-to-end supply chain visibility to enable all actors involved in managing a supply chain to securely and seamlessly exchange information about shipment events in real time.
Similarly, paperless trade will digitize and automate paperwork filings by enabling end-users to securely submit, validate and approve documents across organizational boundaries, ultimately helping to reduce the time and cost for clearance and cargo movement. Blockchain-based smart contracts ensure all required approvals are in place, helping speed up approvals and reducing mistakes.
Upon regulatory clearance, solutions from the joint venture are expected to become available within six months. The new company will be headquartered in the New York metropolitan area.
The platform is built on IBM Blockchain technology, which is provided through the IBM Cloud and powered by Hyperledger Fabric 1.0 -a blockchain framework and one of the Hyperledger projects hosted by the Linux Foundation.