With many other industries evolving their tech for everything from engineering to payment options, much of the shipping industry is still using older methods and paper billing systems. Over the course of the last couple of years, there has been an uptick in cryptocurrency, a form of blockchain technology, and this is something that the shipping industry can tap into. Using cryptocurrency is relatively new, but easy to use once you get started.
Setting up blockchain technology is something that the shipping industry is starting to mandate, and will ultimately change how our goods get from one place to another. Let’s take a closer look at what blockchain technology is and how it works:
What is Blockchain Technology?
The basic description of blockchain technology is that it’s an immutable, decentralized ledger on which businesses can record any transaction. The technology allows information to be distributed online but not copied (otherwise, cryptocurrency could be mass-produced and lose its value). When a transaction takes place, the information goes to a network that’s external to the company and verified through complex algorithms. It’s then added to a ledger in the form of a list, like a block being added to a chain of other blocks, that can’t be tampered with. Blockchain transactions can involve cryptocurrency in the process, but it’s not required.
The Benefits of Blockchain Technology for the Shipping Industry
Setting up blockchain technology for the shipping industry could have several positive effects, such as:
Quick Processing and Real-Time Updates - Instead of mailing certain documents to all involved parties, these same documents can be exchanged instantly and procedures that usually take weeks can take mere minutes. The blockchain code basically automates steps that have been done manually in the past.
Higher Accuracy - Since the documents will be automatically filled out and processed instead of done manually, it eliminates the human error in the paper process.
Increased Security - All information in the blockchain code is encrypted. Users are not able to interfere with the system and change any stored information. This protects the market from fraudulent activities and document manipulations.
Full Transparency - The documents stored in this type of system are accessible to anyone who has the access key. This gives full transparency to anyone in the market, and the counter-party risk is easier to evaluate when anyone can have access to the documents.
Cutting Costs – The costs associated with maintaining proper old-fashioned documentation are surprisingly high, especially when you take procedural delays, discrepancies, and human errors into account.
Easier Access to the Market - Everyone in the industry will have access to the technology, lowering the barriers for entry and making the market more competitive.
Challenges of Blockchain Technology
Even though there are many positives associated with blockchain technology, there are a few challenges that the shipping industry will face as it starts to utilize it. Lets take a look at some of the challenges that the industry will face during the transition:
Global Adoption - This type of technology is not yet allowed in all parts of the world. Various governments and agencies are involved in all aspects of the trading industry, so getting everyone on board with the technology will take some time. A universal adoption would need to take place to make it easier to use worldwide, especially for the shipping industry.
Special Contractual Terms - Ship chartering, along with sales and purchases of commodities that need to travel great distances and cross borders, are complex issues. Various terms would need to be adapted to the blockchain technology. It would need to be able to chart factors such as laytime, notice of readiness, and the exact time the vessel is expected to port.
Higher Flexibility – It’s common for most parties in the shipping industry to have their own set of terms that are typically negotiable. To be able to do this in blockchain technology would require it to configure the special terms and conditions at inception of the shipment. If not, both parties involved could have a higher exposure to liability.
Automation Equals Fewer Jobs – As with any industry, the more tasks we assign to automation, the fewer jobs there are to fill with actual people. This ongoing problem will have to be dealt with on a global-scale in the upcoming decades.
All things considered, this is a positive move for the shipping industry to take. While there are still many hurdles to overcome, it will bring the shipping industry into the 21st century and make documentation much easier. The accessibility to records, travel paths, and terms will make this a more competitive industry. Costs will decrease and the information will be less susceptible to human error.
If you’re interested in the shipping container industry and want to learn more, check out Porta-Stor’s other blogs, such as this one that explains the benefits of using corrugated metal for containers!