IBM, aka “Big Blue,” and the Danish business conglomerate A.P. Moller-Maersk Group, also known as Maersk, have announced plans to form a joint venture to provide “more efficient and secure methods” for global trade using blockchain technology. Maersk has activities spanning transportation, logistics and energy with over 80,000 employees globally
The venture, which as a new company will be headquartered in the New York metropolitan area, has named Michael J. White, former president of Maersk Line in North America, as its CEO. And, once regulatory approvals are granted, its aim will be to offer a jointly developed “global trade digitization” platform built on open standards and designed for use by the entire global shipping ecosystem.
As such, it will seek to address the need to provide greater more transparency and simplicity in the movement of goods across borders and trading zones. After the joint venture begins operations, solutions are expected to become available in a “limited capacity within a few months” according to an IBM spokesperson.
The move comes amid the cost and size of the world’s trading ecosystems continuing to grow in complexity with in excess of $4 trillion of goods shipped each year. Today more than 80% of the goods that consumers use daily are carried and transported across the oceans by the shipping industry.
Given that the maximum cost of the required trade documentation to process and administer many of these goods has been estimated to reach around a fifth of the actual physical transportation costs, addressing cost reduction in this area could yield significant cost savings.
Indeed, according to the World Economic Forum (WEF) by reducing barriers within the international supply chain, global trade could increase by nearly 15%, boosting economies and creating jobs.
It was back in 2013, Bernard Hoekman, then Director of the World Bank’s International Trade Department, in a communiqué accompanying a WEF report in collaboration with Bain & Company and the World Bank released to coincide with the Davos forum, noted: “Supply chain barriers are more significant impediments to trade than import tariffs. Lowering these barriers will reduce costs for businesses, and help generate more jobs and economic opportunities for people.”
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The attributes of blockchain technology are said to be 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.
Since 2016, IBM has worked with clients across financial services, supply chain, government, retail, digital rights management and healthcare to implement blockchain applications.
Highlighting Big Blue’s efforts, which have around 1,600 staff working in blockchain and distributed ledger technology (DLT) across all areas and sectors,
Last month they announced that together with Walmart, Nasdaq-listed Chinese retailer JD.com and Tsinghua University they would collaborate on a food safety alliance in China using blockchain for greater safety and tracking within the food supply chain.
Prior to that in October, they unveiled a cross-border payments venture in Toronto at SWIFT’s annual SIBOS event with a Silicon Valley firm to use blockchain technology initially for the South Pacific nations. And, collaborations in the space have been initiated with a number of exchanges including the London Stock Exchange Group and Memphis-based The Seam amongst others.
Blockchain & Global Trade Processes
By applying the technology to digitize global trade processes, according to the joint venture partners a “new form of command and consent” can be introduced into the flow of information, thereby empowering multiple trading partners to collaborate and establishing a “single shared view” of a transaction – without compromising details, privacy or confidentiality.
Together with Maersk, the largest container ship and supply vessel operator in the world since 1996, the parties will use blockchain technology to power the new platform.
In addition they will employ other cloud-based open source technologies including artificial intelligence (AI), Internet of Things (IoT) and analytics, delivered via IBM Services, in order to help companies move and track goods digitally across international borders.
The Partnership
Over recent years IBM and Maersk, a global leader in container logistics, have partnered on various technologies to improve the way goods travel through the global supply chain. In June 2016 began a collaboration to build new blockchain- and cloud-based technologies. The implementation of these technologies, including cloud and analytics solutions, has helped Maersk build new capabilities that has helped to enhance its operations.
It was back in June 2016 that Maersk, a global leader in container logistics, and IBM, a leading provider of blockchain, supply chain visibility and interoperability solutions for the enterprise, began a collaboration to build new blockchain- and cloud-based technologies.
Today blockchain technology opens up an entirely new set of possibilities and an innovative opportunity to engage the entire global shipping ecosystem. As such the companies will jointly bring the new platform to market with both companies providing intellectual property and supporting the commercialization of the technology.
It is understood that IBM will provide software development, technology and services support with ‘Big Blue’ to host the platform on the IBM Cloud. “Both companies will resell the technology and lend their industry expertise in supporting and on boarding customers,” an IBM spokesperson indicated.
Manufacturers, shipping lines, freight forwarders, port and terminal operators and customs authorities should all benefit from these new technologies – and ultimately consumers.
Upon receiving regulatory approvals, the joint venture will be established and Maersk and IBM will onboard new ecosystem partners for testing purposes and as offerings from the joint venture become generally available. The intent is to scale quickly to onboard new network members. The board of the venture itself will form when the joint venture becomes operational upon the regulatory clearances.
The platform is designed for the networks that make global shipping run. In terms of how the different parties be connected, the idea is that the parties that already work with one another can join together into a network that runs on the platform and more easily share information in a secure and permissioned way on the blockchain.
Vincent Clerc, chief commercial officer at Maersk and future chairman of the board of the new joint venture, commenting said: “This 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.”
He added, “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.”
IBM’s Blockchain Platform
As a recognized as the leading enterprise blockchain provider, IBM operates a number of blockchain-based networks running live and in production. It was an early member of Hyperledger, an open source collaborative effort, which was created to advance cross-industry blockchain technologies.
The cloud-based IBM Blockchain Platform, which is provided through the IBM Cloud and powered by Hyperledger Fabric 1.0, delivers the end-to-end capabilities touted to give clients the ability to quickly activate and successfully develop, operate, govern and secure their own business networks.
As a result, the platform is claimed to enable 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.
Bridget van Kralingen, senior vice president, IBM Global Industries, Solutions and Blockchain, stated: “Our joint venture with Maersk means we can now speed adoption of this exciting technology with the millions of organizations who play vital roles in one of the most complex and important networks in the world, the global supply chain.”
The executive, who and has been listed as one of Fortune Magazine’s 50 Most Powerful Women in Business and holds a Master of Commerce from the University of South Africa, posited: “We believe that blockchain will now emerge in this market as the leading way companies seize new untapped economic opportunities.”
Since mid-2016 when IBM and Maersk collaborated to build new blockchain- and cloud-based technologies, 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, and the U.S. Customs and Border Protection.
The joint venture is being described as now enabling IBM and Maersk to “commercialize 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.
Names in the frame include General Motors and Procter and Gamble to streamline the complex supply chains they operate, as well as freight forwarder and logistic company, Agility Logistics, to provide improved customer services including customs clearance brokerage.
Customs & Government Authorities
It is understood that 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, which is based in the U.S. and also operates globally, and PSA International, located in Singapore that conducts work with shipments from around the world, will use the platform in what is described as a way to “enrich port collaboration and improve terminal planning.”
With support from the Guangdong Inspection and Quarantine Bureau in China and 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.
To address 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.
Commenting in the wake of the news, Michael J. White said: “Today, a vast amount of resources are wasted due to inefficient and error-prone manual processes. The pilots [tests] 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.”
He added: “Our ambition is to apply these learnings to establish a fully open platform whereby all players in the global supply chain can participate and extract significant value.”
Initially the new company plans to commercialize two core capabilities aimed at digitizing the global supply chain from end-to-end, namely:
(1) A Shipping Information Pipeline: This provides a dashboard that allows users to securely publish and subscribe to data without using a third party system of engagement.
It also lets users search for and drill down into a specific shipment or group of shipments and allows information to be exchanged via a common connection – instead of numerous point-to-point integrations. Plug and play publish/subscribe services will be provided to all actors in a supply chain to securely and seamlessly exchange shipment events in real time.
(2) Paperless Trade: This will digitize and automate paperwork filings by enabling end-users to securely submit, validate and approve documents across organizational boundaries, thus 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.
