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Posted: February 22nd, 2024
Analyzing the Use of Blockchain, Smart Contracts and Distributed Ledger Technologies for Digitizing Vessel and Container Documentation to Improve Supply Chain Visibility, Transparency and Counter Illicit Trade
Introduction
Supply chain management has become increasingly complex as global trade has expanded in scale and scope. Effective tracking and oversight of cargo movements between multiple parties located around the world presents significant challenges. Traditional paper-based documentation systems are prone to errors, delays and lack of transparency between stakeholders. Emerging distributed ledger technologies such as blockchain, smart contracts and distributed ledgers show promise for digitizing vessel and container documentation to address these issues and improve supply chain visibility, transparency and security.
Blockchain Applications for Shipping Documentation
Blockchain acts as a shared, immutable digital ledger that can record transactions and assets in a verifiable and secure manner without the need for a central authority. When applied to shipping, all relevant documentation like bills of lading, certificates of origin and customs declarations could be recorded on a blockchain. This allows real-time visibility of cargo status updates and movements accessible to all supply chain entities. Any changes to documents would be recorded on an immutable timeline, enhancing transparency. Blockchain implementation could help address issues like shipment delays, customs fraud and counterfeiting that undermine supply chain integrity.
Smart Contracts for Automated Processes
Smart contracts, which are programs stored on the blockchain, could automate various administrative processes. For example, they could be used to automatically execute payments between parties once goods are delivered or documents are approved. This reduces paperwork and streamlines processes. Smart contracts ensure obligations are fulfilled when pre-determined terms and conditions coded into the contracts are met. Automating transactions in this way improves efficiency.
Distributed Ledger Benefits
The distributed ledger aspect means multiple copies of the blockchain are maintained simultaneously across different locations. There is no single point of failure, making the system more robust. All parties have access to consistent, real-time information without reconciliation requirements between separate databases. This distributed nature enhances oversight capabilities and makes illicit activities more difficult to conceal.
Potential Challenges and Considerations
While distributed ledger technologies show promise for transforming global trade documentation, there are also challenges to address. Integration with existing legacy systems may be complex and costly. Technical issues around scalability, standardization and governance need resolution. Data privacy and security vulnerabilities require mitigation. Further pilots and studies are still needed to prove benefits at large scale and quantify expected efficiency gains and cost savings. Regulatory acceptance must also be obtained.
Conclusion
In conclusion, distributed ledger technologies have the potential to revolutionize how vessel and container documentation is managed by digitizing records on an immutable shared ledger providing real-time visibility and automated processes. This could deliver significant benefits around supply chain transparency, oversight and security if technical and adoption challenges can be successfully addressed. As pilots and applications continue emerging, their transformative impact on global trade processes will become clearer.
Works Cited
Accenture. (2019). Blockchain for supply chain integrity. https://www.accenture.com/_acnmedia/PDF-112/Accenture-Blockchain-Supply-Chain-Integrity-POV.pdf#zoom=50
Allen, G., Berg, C., Davidson, S., & Novak, J. (2019). Shaping the future of trade and trade finance with blockchain technology. http://www3.weforum.org/docs/WEF_Shaping_the_Future_of_Trade_and_Trade_Finance_2019.pdf
Kshetri, N. (2018). Blockchain’s roles in meeting key supply chain management objectives. International Journal of Information Management, 39, 80–89. https://doi.org/10.1016/j.ijinfomgt.2017.12.005
Lacity, M. C. (2018). Addressing key challenges to making enterprise blockchain applications a reality. MIS Quarterly Executive, 17(3). https://aisel.aisnet.org/misqe/vol17/iss3/1/
Zhang, S. X., & Lee, M. K. O. (2020). Blockchain and smart contracts for supply chain management. Industrial Management & Data Systems, 120(9), 1711–1733. https://doi.org/10.1108/IMDS-03-2020-0135
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