Blockchain and EDI for secure data exchange in supply chains

In the last months we had a number of interesting discussions with Dr. Ralf Christian Menclabout the EDI data exchange between the maritim carriers and the hinterland freight forwarders on rail, train and waterways. I want to discuss how the problems of EDI for intermodal supply chains can be solved with the new Blockchain technology.

Shipping Portals

The three shipping portals CargoSmart, GT Nexus and Inntra were an important step for the maritim industry, but these shipping portals only covers 30 of the biggest maritime carriers. With around 250 container shipping lines world-wide, the most carriers are left out. These shipping portals provide bookings, track and trace, and documentation, and allow customers to communicate with their carriers. The logistic industry is very old school; there’s almost no use of technology. It’s still pieces of paper being pushed around the planet to accompany all these shipments. It’s pretty much the same system that’s been in place since the age of mercantilism back to the 16th century.

But the shipping portals are mainly focused on ocean carriers whereas there is no or very limited support and functionality for the handling of pre- and on carriage by rail, truck or barge. INTTRA currently offers services that cover a small part of the supply chain. GT Nexus and CargoSmart offering services that cover other parts of the supply chain. Port Community Systems (PCS) also cover parts of the supply chain. All three are trying to extend their coverage and to a certain extent they are competing. There are two interesting facts here:

• Most PCSs are connected with both INTTRA and GT Nexus,
• Some PCSs have managed to extend beyond the port and provide services for greater parts of the supply chain. The PCS of Valencia and Rotterdam are modern examples.

Although these shipping portals and port community systems are a big step forward towards digitalization of the maritime transport they are no more than a milestone on a long way. We may safely assume that in some years from now we will see services offering “end-to-end” supply chain solutions. These new kind of end-to-end supply chain gate ways will offer a substantial and new quality of logistics service management, to enable:

1. shippers to have full visibility of alternative multimodal transportation solutions, procure and manage them single-sourced and seamlessly, and connect directly with carriers and other players along the entire supply chain
2. freight carriers to gain immediate visibility of demand pattern development, drive utilization of capacity, align service design and capacity planning as well as shipment-speci?c scheduling in real-time
3. all players to connect easily to the logistics ecosystem based on a standardized industry backbone, transact and collaborate in a highly ef?cient way
4. the emerge of dynamically self-regulating multimodal transportation networks with full back-end integration into capacity and production planning systems.

EDI Standardization

A huge challenge it’s a common data format for exchanging information between the stakeholder of such a complex intermodal supply chain. Since more then 20 years the supply chain industry fighting with the insufficient EDI standardization, results in its inadequate functioning on a global basis. Also the codes for countries The freight forwarders and carriers are using different code standards for origin and destinations. This is a quite common source of confusing and errors, because the systems using various standards like IATA or UNLOCODE.

EDI explained ...

Electronic Data Interchange (EDI) is the  computer-to-computer exchange of business documents in a standard electronic format between  business partners. EDI documents can flow straight through to the appropriate application on the receiver’s computer (e.g., the Terminal Operating System) and processing can begin immediately, instead having people involved slows down the processing of the documents and also introduces errors. The most common  business documents exchanged via EDI are purchase orders, invoices and advance ship notices. But there are many others such as bill of lading, customs documents, inventory documents, shipping status documents and payment documents. There are several  EDI standards in use today, including ANSI, EDIFACT, TRADACOMS and ebXML. And, for each standard there are many different versions. When two businesses decide to exchange EDI documents, they must agree on the specific EDI standard and version. Businesses typically use an  EDI translator to translate business document to application accepted EDI format.

Solas Convention As Accelerator For EDI Standardization

But many shipping customers expect a disruption of the EDI Standardisation from new container weight requirements of Verified Gross Mass (VGM) SOLAS Convention, because communicating weight values has called for the introduction of a new Electronic Data Interchange (EDI)communication protocol called IFTMIN, UN EDIFACT Container Messages, GS1 EDI or VERMAS(Verification of Mass), and involves cooperation between ocean carriers, Freight Forwarders like Flexport, EDI providers as well as exporters.

The Need For Collaboration

We believe EDI cannot support the complex supply chain processes of today, because the data transfer between the various ERP systems let’s open an interpretation of potentially critical situations. Customer and supplier need a shared view of the actual supply situation and an automated early detection system, efficiently controlling organizations’ supply chain, enabling them to collaboratively resolve identified problems and, that way, avoiding costly bottlenecks. In many cases there is no way to talk to the software of the transport companies. We have to create ways to get the people in the supply chain to interact with each other. We realized paper means trust (bill of ladder) and the mobile phone call is still communication tool number one.

Smart Contracts For Global Distribution Systems

International standard contracts are existing in the shipping industry, published by BIMCO. BIMCO federation is responsible for the international contracts in the shipping industry with the help of the national federations. There are also regional standard contracts for railways, air transport and freight transport. Today the traditional Contracts do not prescribe the binding used of certain IT formats or IT platforms for data transmission. There are first uniform formats of contract processing, such as e-booking, e-shipping instructions and e-B / L, which, reproduce more or less old formats in digitized form. Platforms like INTTRA is using these formats.

A key of success of global cross-organization collaboration is built on trust. Trust come with transparent processes. Smart contracts promise to facilitate, verify, or enforce the negotiation or performance of a contract, or that make a contractual clause unnecessary. A smart contract is “a computerized transaction protocol that executes the terms of a contract, it is not inherently “smart” as a separate attribute of contract type. A blockchain-based smart contract is visible to all users. A The supply chain industry needs smart contracts for next generation of global distribution systems like this article describes. In one hand the logistic industry needs one strong consortium to drive common standards for the electronic data exchange, but in the other hand digitalisation starts on a small scale using mobile phones for truck inbound management developed by Siemens Mobility on the Duisburg port or standard applications like Office 365 on Microsoft Cloud Germany for the Hamburg port authority.

Decentralized Transactions With Blockchain

One step further is the new and revolutionary Blockchain technology to provide security and integrity in distributed networks. Started as disrupting technology in the financial industry for the decentralized digital currency BitCoin it’s find more and more use cases in other industries like in the Energy or Freight sector (Blockfreight).

Blockchain explained ...

A  blockchain is the structure of data that represents a record of a  transaction. Each transaction is  digitally signed to ensure its authenticity and that no one tampers with it, so the ledger itself and the existing transactions within it are assumed to be of high integrity. The real magic comes, however, from these digital ledger entries being  distributed among a deployment or infrastructure. These additional nodes and layers in the infrastructure serve the purpose of providing a consensus about the state of a transaction at any given second; they all have  copies of the existing authenticated ledger distributed amongst them. A Blockchain system don’t need central transaction servers and databases, the user own and control their personal data. As such, the system recognizes the users as the owners of the data and the services as guests with delegated permissions.

Jon-Amerin Vorabutra wrote an interesting article how Blockchain Technology will affect the supply chain industry. Following advantages get shippers with a decentralized database system:

• Transparency and Collaboration. Tamper-proofed documenting product journey’s across the supply chain and share it with stakeholders.  The system works without a central repository or single administrator,
• Scalability and Availability. Especially Blockchain 2.0 is solving the scaleability issues for writing transactions. All people world wide can access the decentralized redundant stored data sets via internet.
• Security and Privacy.  A node does not have to reveal the physical identity of the person or organisation and the pay load can have a digital signature with private cryptographic keys.
• Innovation. The dominance of the open source models is a driver for computing innovation. IBM, Microsoft and BitCoin published their solutions in open source repository Github. Blockchain-as-Service solutions like Microsoft Azure make it easy to use the service for everyone in the world.

Asset Tracking In Intermodal Supply Chains

Currently the need of logistics companies are limited for transparent supply chain processes. The various parts of the chain has a different level of digitalization in dependence of the companies involved in the process. Maritim logistic chains delivers the gate-in, gate-out, on-board messages between 2-24 hours. Also various vehicles y track the position in near real time (trucks, trains, and vessels). But It covers one transport mode only, not the whole intermodal logistic chain. In intermodal continental supply chains very few trailers, swap bodies and ISO containers are monitored today. Cost efficient supply chains need to predict the arrival time based on historical data, current environmental information and the behavior of the transport vehicle. Also special goods need to be monitored via sensors in near real-time during the time of transport (cool chains for blood, medicine, food, theft protection, concrete mixer).

Gretchen question: Who Pays?

The benefit isn’t the raise of efficiency of one part of supply chain themselves. Only if all parties in the chain are digitalized, the efficiency will be raise dramatically. That brings us to the question who pays for the investment in the new technologies. Keep in mind the margin of the actors have a very small margin, so they also can’t put the addional cost on selling price. So this investment has to take with the hope of amortization of the cost in the future. The most important question is “Who benfits?”. So it’s in interest of the world wide economic development. Cross Country Organizations like the United Nation conference for Trade and Development need to drive the standardization influencing local laws and regulations.

Read full article on combined-transport.eu