TradeLens: Transportation Transformation or Quixotic Quagmire?

TradeLens is the highly publicized blockchain global trade network launched over four years ago by Danish shipping giant Maersk. Beyond the initial hype about eliminating duplicate invoices and digitizing paper workflows, little has been said about it. What was TradeLens all about then, where is it now, and what can we take away from its progress (or lack thereof) to date?

Genesis

TradeLens began as a joint project between IBM Blockchain and Maersk to digitize the exchange of commercial information and documents for global trade. It was conceived as an enterprise blockchain-based supply chain management ecosystem, designed to allow the many links on a supply chain to work together on a single, trustworthy database.

It’s a shared information network that lets clients trace their cargo containers in real time to see any snarls in the supply chain coming, letting them do things like making inventory decisions. Port authorities and trucking firms can see when ships will be delayed, or arrive early, and reschedule accordingly.

Read also: Blockchain in Action: TradeLens Connects Shipping, Customs, Trade Financing

No one at that time could have imagined that the then relatively smoothly functioning containerized supply chain would just a few short years later melt down into virtual gridlock. However, in light of the critical supply chain crisis hamstringing the system, particularly the container snarls at worldwide ports, the project has gained an exponentially greater potential value to the industry in particular — and the world economy.

In Blockchain We Trust

While not quite the proverbial “ghost in the machine,” blockchain technology does have several characteristics that have potential to engender faith in the task of integrating the disintegrated and fragmented status quo:

• Immutability. Once written onto a decentralized blockchain, transactions can’t be changed — in other words, they’re immutable — because they are viewable by anyone. The digital ledger is stored on many nodes, which all have to agree to write new transactions and are all interconnected like the links of a chain. So changing transaction data anything would require changing everything that came after it.
• Trustlessness. One of the core purposes of blockchain technology is that it enables what cryptographers call “trustless” transactions — meaning one in which two (or more) parties that don’t necessarily trust each other can transact without going through a trusted third party like a bank. It is completely transparent — everyone can see everything. Thus, it’s easy to trace one token along a convoluted and crowded path.

State of the TradeLens Union

The project is now “becoming the standard in sharing information and documents in global trade,” according to Morten Holm Christiansen, former Maersk chief information officer (CIO), who was present at inception of the project, in a recent interview with ComputerWeekly.com.

According to the TradeLens website, “The foundation of TradeLens is its global supply-chain ecosystem made up of shippers, freight forwarders, ports and terminals, ocean carriers, intermodal operators, government authorities, customs brokers and more.

“TradeLens is already handling more than 700 million events and 6 million documents a year, expediting decision making and lowering the administrative frictions in trade.”

TradeLens has connected nearly every part of the global shipping industry. The first challenge was to get the major ocean carriers to agree to work on a system created and run by a competitor. Today five of the six largest shipping firms are on TradeLens, including No. 1 MSC, No. 2 Maersk and No. 3 CMA. The 10 members account for more than half the world’s shipping containers.

In February, TradeLens claimed a milestone when Swiss agrichemical firm Syngenta and HSBC bank used a fully digital letter of credit to pay for a shipment of goods on Maersk’s Sealand ocean carrier line between South Korea and Bangladesh using an also-digital bill of lading.

See: TradeLens Marks ‘Milestone’ in Blockchain-Based Shipping

Fewer than 0.1% of such bills of lading are digitized, TradeLens said in a statement, calling it the “holy grail of shipping.” Syngenta estimated the blockchain transaction saved it 10 days of paperwork, getting the product to the client far faster. It helped that the South Korean port authorities and customs agency are also TradeLens members. “Removing paper from the process should not only increase the efficiency and velocity of trade, but also enhance the appeal of the letter of credit as a trade finance solution,” said Sanjay Tandon, HSBC’s head of product management, global trade, and receivables finance for Asia Pacific.

Limitations and Challenges

The TradeLens milestone is best categorized as a pilot project. Based on the report above, 99.9% of the business is still conducted in 20th century mode. But not every player in world trade participates in TradeLens. It is an enterprise, or permissioned, blockchain — unlike bitcoin, for instance —not just anyone can set up a node, maintain a full copy of the ledger and transact on it.

Also, it is possible to restrict who can access some information written onto the blockchain. For example, the farmers, truckers, suppliers and distributors who deliver Romaine lettuce to Walmart all put information on the IBM Food Trust blockchain that Walmart can see in real time. But the trucking companies bringing that produce can’t track competitors’ rigs. Nor can Walmart see the trucks those companies have moving produce for Dole, which is also on IBM Food Trust. But the truckers can see their whole fleet.

The container operations at ports and rail terminals are also notoriously loath to digitize their operations, a fact that has served to worsen the supply chain crisis. Unions have been particularly resistant, fearing that automation could cost jobs, and labor slowdowns have plagued the shipping industry worldwide.

In fact, as is the case with most technology, the biggest challenge is found not in the hardware or software, but in the wetware—the human element. Susan Joseph, who worked for B3i, a firm developing a similar product for the insurance industry said on a conference panel back when TradeLens was launched, “the technology is hard, but the people are harder. It is really a social question. You’re putting a bunch of competitors together, and you’ve got to trust them. Only, you never did before. That is, I think, the major problem.”

Management Changes and Refocus

In March 2022, Maersk’s TradeLens platform operator named Kim Spalding as new chief executive,  replacing veteran executive Mike White. At that time, Maersk’s Vincent Clerk said of the platform, “After a successful ramp-up where several industry leaders have joined TradeLens, the focus now shifts towards enhancing the customer experience and monetizing the platform.”

What the Future Holds

It appears that while TradeLens has made substantial technical and practical progress, success is not a foregone conclusion. The system is far from ubiquitous adaptation, and even industries with high market participation, such as shipping, are not able to utilize the network to digitize trade at scale. In fact, only a miniscule percentage of transactions are conducted on a fully digitized basis.

While the concept is eminently logical, the human factor is perhaps the greatest impediment to universal implementation. Until market participants are persuaded to trust in a trustless system — and invest in it — the dreams that drive TradeLens may remain unrealized, to the detriment of all parties involved in the global marketplace.