Why the shipping industry should not fear transparency

Why the shipping industry should not fear transparency
January 27th, 2020 https://splash247.com/why-the-shipping-industry-should-not-fear-transpar...

Stefan Kukman, founder and CEO of CargoX, writes exclusively for Splash today, explaining to readers some of the intricacies of blockchain.

Transparency is often heralded as one of the chief benefits of digitalisation. Being able to root out corruption, improve the customer experience, help make decisions faster, save money, optimise processes, increase sustainability – how could it not be a good thing?

It’s an issue the shipping industry has long struggled with. As Rose George said in her book on the sector, Deep Sea and Foreign Going: Inside shipping, the Invisible Industry that Brings You 90% of Everything, “There are few industries as defiantly opaque as this one.”

It’s therefore no surprise that when we talk about digitalisation and shipping, we more often than not talk about transparency. Again, why wouldn’t it be a good thing? As a customer, being able to see where your cargo is at every step of the journey allows you to better plan your own operations. For those involved in the ocean supply chain itself, from the carriers to the forwarders, hauliers and customs officials to terminal operators, having a trusted, guaranteed view of the shipment in transit would have significant benefits to them.

Yet when we talk to players in the industry, and the word transparency comes up, the natural reaction is to close ranks. Why is that? How does that attitude impact the ability of the sector to fully digitise and grow? And why should the shipping industry not fear transparency?

Competition and commercial secrets

It’s because many people working in shipping think of competition when they think of transparency. There are two main reasons for this.

First, they are conscious of the role they must play in not breaking antitrust laws. The scrutiny that the various joint ventures between some of the major carriers have been under in the last five years is an example of how the sector, particularly carriers, must maintain a fair and competitive market.

Secondly, there’s the issue of sharing sensitive information. A prime example is a conversation we once had with an executive of a shipping line, who raised the issue with the transparency of Smart Bills of Lading. If a Smart Bill could be easily shared and accessed by all parties in the supply chain, what was to stop the forwarder, or the terminal, sharing that information with a competing shipping line to drive down rates or access more favourable terms?

While these are valid concerns about transparency as a whole, when it comes to digitalisation, and specifically the role of blockchain in digitising the shipping industry, they completely miss the point.

How blockchain controls transparency

As a business selling a blockchain-based solution, it’s inevitable that we would tout transparency as one of the chief benefits of using any service based on the technology. Yet how blockchain enables transparency can sometimes cloud what it can actually make more visible. This is where the concerns come in. Simply talking about the benefits of transparency doesn’t solve the issue – everyone understands why being more visible in general is a good thing.

The beauty of blockchain is that it is based on mistrust, and so every action is recorded. If a piece of data is altered, it creates a new block in the chain, with a clear indication of when it was created and who created it. It is this visibility that blockchain allows – accountability for the use of data.

Take a blockchain-based Smart Bill of Lading. It is created, then shared with parties that hold the relevant access key.

Everyone authorised for the workflow can see the document, but only the current holder of the document can transfer the ownership to the next party in the workflow – and they can all see when that was done. To our maritime executive’s point, any party which wished to share confidential information with a competitor could do that – they just need to save the document to their drive. But here’s the funny part – they can already photocopy any document that goes through their hands, and send it to whomever they want. That’s an issue of human honesty, not digitally-enabled transparency.

In other words, a blockchain-based service gives access to the relevant data to those who need it – and nobody else. Does a custom official need to know the rate paid for the shipment? Does the haulier or terminal operator? If not, then access to that data can be restricted.

Digital technologies such as blockchain enable better visibility and accountability – not wholesale transparency. So external entities don’t get access to any data they are not authorised to view, while at the same time, internal entities know exactly at which moment somebody transferred the ownership of the Bill of Lading (and also the goods transported) to the next designated owner.

Controlled visibility for a clear future

For a sector with a supposed history of secrecy, it is not surprising that the mention of transparency should be treated with suspicion and concern for confidential commercial information.

Yet as the shipping industry embraces digital technologies such as blockchain to optimise operations and unlock growth, enhanced visibility will be a critical part of that journey. Not just in hindsight, but also to see what is expected in the near future – documents, shipments, processes, and transactions.

What all parties must do is be honest about what they should and what they can share. Transparency promotes trust and partnership, which in turn generates greater opportunities for all involved. Remaining closed off isolates, inhibits, and ultimately leads to those that are resistant struggling to stay in business.