Setting up a successful blockchain pilot is a challenge. But then rolling out that blockchain into an industry-wide solution is many times more challenging. Forming the consortium needed to do so requires trust. And once a consortium is formed, other obstacles loom, such as competition law.
Dow Chemicals successfully participated in Maersk and IBM's blockchain pilot. It managed to transport a shipping container completely paperless from Houston to Rotterdam. But that is not enough for the chemical company to join TradeLens, the joint venture between Maersk and IBM that aims to build a global digital trading platform based on blockchain. "We will only join if it will benefit us. That requires a certain critical mass," Lennart Heip of Dow Chemicals told Blockchain Conference 2018.
A major concern is that TradeLens does not yet have all the parties connected that are needed to fully digitise shipping. "It is nice that Dutch customs is cooperating on paperless container transport. But as long as that Chinese customs still wants to receive paper documents, a paperless supply chain is not yet a reality," says Heip. "Another objection is that Maersk has not yet managed to get competitors to participate. Dow would like to spread the risks and not have all its containers transported by Maersk."
Classic software project
Aljosja Beije of BlockLab, an initiative of Port of Rotterdam Authority, does have an explanation for TradeLens' difficulty in getting the whole sector to join. "IBM and Maersk have taken this up too much as a classic software project. They built a solution and then try to get other partners interested in it. We are taking a different approach with BlockLab. We sit down with multiple parties from the start to build something that is of interest to the whole sector."
Beije endorses TradeLens' objectives. Transporting a sea container involves a lot of documents. Bill of Lading and Letter of Credit are terms that have been used for centuries. Sometimes documents are digitised and sent via the internet, but in practice that often means printing them out again elsewhere to still enter the data manually. "Only by digitising that whole process can we speed things up. But blockchain also makes it possible to assess risks better, eliminate intermediate links and make better use of networks."
Reversing mileage
The blockchain conference in Stadion Galgenwaard showed that IBM is involved in more blockchain pilots in the supply chain. In the automotive industry, IBM has teamed up with Koopman Logistics to set up a blockchain to improve transparency and reduce lead times. The car transport specialist not only transports new cars, but also cars just coming off lease. These often disappear across borders, e.g. to Eastern Europe: a fraud-sensitive process. "Think about odometer readings being reversed or import fraud: dealers put a dent in a car so that it can be imported cheaply as a damaged car. Across the border, they knock that dent out again," says Jon Kuiper, ceo at Koopman until 31 October. "By tracking a car's unique Vehicle Identification Number, we can stop fraud."
On 1 November, Kuiper left the logistics provider. He will try to form a blockchain consortium with other logistics providers in the automotive industry. What speaks in his favour is that unlike Maersk, Koopman does not have a dominant position in its market. The European car transport market is dominated by two major French players. The rest of the market is in the hands of local family businesses that know each other well and trust Koopman. "Two car transporters in Ireland and Sweden have already joined, with others we are in talks. Together, we want to offer transparency throughout the European supply chain," Koopman said.
Competition law
IBM is also involved as a technology partner in Food Trust, a blockchain project that aims to improve tracking and tracing and thereby reduce food waste. What facilitates the adoption of Food Trust in the sector is that several dominant parties are affiliated such as Wal-Mart, Carrefour, Nestlé and Unilever. This consortium is working not only on tracking and tracing, but also on applications that provide reliable insight into supplier certification and product freshness. Consumers should also soon be able to find out the origin of products by scanning a barcode.
Lawyer Sandra van Heukelom does have another warning for such consortia. "Within such a consortium, agreements must be made. Is an open or a closed blockchain necessary? Who is allowed to join and who is not? Participants may benefit from joining a consortium and disrupt market forces. This is subject to competition law. And don't forget to make agreements on the ownership of the data in the blockchain. After all, in legal terms, no one can own data. Someone can only own a material thing." Within Food Trust, agreements have been made about this, says IBM's Frans Kempen. "The stored data remain the participants' own. And often the blockchain does not even contain data, just pointers to sources where that data is."
