One of the most tedious, costly, insecure and eco-harmful aspects of global e-commerce is the constant flow of documents. With millions of shipping containers in motion at any time, the number of copies exchanged between trading partners, brokers and government organizations becomes enormous. Even today, the majority of customs documents, bills of lading, contracts, manifests, etc. are written on paper.
Mistakes are expensive. If an error is discovered on a document while a container is in ocean transit, this often requires a corrected piece to be Fly in advance, as port documents must be in place prior to arrival. The cost drivers of these grotesque inefficiencies are obvious. It is therefore not surprising that the transmission of e-commerce logistics documents is becoming digital, and in particular via the blockchain.
What makes this innovation revolutionary is that outdated, manual, hard to follow but easily tampered/modified documentation systems are now completed in the blockchain. It is a platform that seeks to connect the entire end-to-end e-commerce supply chain ecosystem: ports, sea/air/rail/truck carriers, customs, freight forwarders , parcel shippers, etc. The reward is massive cost savings.
Blockchain in e-commerce logistics
How? The blockchain is a decentralized register of transactions. Only authorized parties to a transaction can access the transaction, and each step is independently verified and audited multiple times along the digital path, providing authorized participants with real-time transparency and data in a form to both instantaneous and unchangeable. Recordings cannot be secretly modified or deleted. This in turn removes the need for third-party intermediaries that were once needed to verify, coordinate and record actions.
The opportunities for substantial savings for e-merchants and SMEs via blockchain permeate the entire field of logistics. First and foremost, efficiency gains through ultra-secure real-time data and document transmission, recording, tracking and access. Inventory and location tracking. Smart contracts. Dispute settlement. Invoices and payments.
And, most importantly, it can eliminate the need for middlemen. Up to five intermediaries may be needed even for simple queries, such as the location and status of a shipping container. Another study showed that a container went through 30 different organizations with over 200 pieces of documentation with manual data entry. The risk of error is high. Each company gets a piece of the pie. It adds up, fast.
How will eliminating inefficient processes benefit logistics using blockchain? A source says up to 40%. That’s probably the best case scenario. An IBM blog entry indicates about 10%. The World Trade Organization says 17.5%, and that shipping cost savings could lead to 2% annual growth in world trade, or a cumulative growth of 31-34% over the next 15 years.
Now the penny is falling: in 2021, global maritime trade was around $28.5 trillion. E-commerce in 2021 was around $4.9 trillion.
Using WTO figures, global trade would grow by $570 billion a year, with a resulting increase in employment and GDP expansion, using blockchain. As another example, Maersk reported $26.7 billion in operating costs in 2021. A conservative estimate is that Maersk has $700 million in annual savings using blockchain.
For shippers, IBM’s blog indicates that approximately 20% of each container’s shipping costs are administration related. Maersk shipped 4.1 million TEU (twenty-foot equivalent unit) containers in 2020. China-Europe fares are around $11,500, and China-Long Beach hovers around $9,000, with an average fare of $10,250. dollars. So, if customers used blockchain, the conservative estimated savings would be $8.4 billion.
Scaling will be a deciding factor and as of 2022, the TradeLens blockchain platform is one of the largest with over 300 members, including 80 terminals and 16 customs offices. It collects data from over 600 ports and terminals, has tracked 30 million container shipments, 1.5 billion container status events and approximately 13 million documents released to date.
Around 61% of global capacity is on TradeLens, so critical mass is likely close to being reached. Very large shipping companies are on board: Maersk, MSC, CGM/CMA, Hapag-Lloyd, ONE, ZIM and PIL, as well as the CSX and Canadian Pacific railways. Additionally, government customs entities from the United States, Jordan, Thailand, Azerbaijan, Malaysia, Indonesia, Saudi Arabia and more, as well as ports and terminals around the world, are on the platform.
Implementation is an issue, but the bigger players are clearly on board with integrating IT and APIs. The competition comes from a consortium powered by Oracle, the nonprofit Global Shipping Business Network, which includes Cosco, CGM/CMA, Hapag-Lloyd, Shanghai International Port Group, Evergreen and Yang Ming. Interoperability seems to be on the table via standardization protocols.
For e-commerce and retail businesses looking to cut expenses and increase profits, where can the savings be found? It’s in blockchain logistics, and tons, of improved efficiency, speed, accuracy, and the removal of unnecessary partners in e-commerce logistics. Blockchain may be the future of logistics document flow. The money at stake is simply too powerful to ignore.
David Zartman is the Senior Director of Ecommerce Marketing at Cubework
#Blockchain #Leads #Ecommerce #Logistics #Savings #MultiChannel #Merchant
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