Secure data exchange across supply chains – Blockchain and EDI

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Maritime carriers and hinterland freight forwarders have the inherent need to transfer data on the road, rail and waterways including the status of their shipments. The post discusses the barriers of EDI for intermodal supply chains and how the new Blockchain technology can help to overcome them. The article is based on a series of interviews with Dr Ralf Christian Mencl about the topic EDI data exchange in maritime transport.

Shipping portals

The implementation of innovative shipping portals, for instance, CargoSmart, GT Nexus and Inntra were an important step for the maritime shipping industry. Today thirty of the biggest maritime carriers have adopted their processes to fit the software solution. The other 250 container shipping lines worldwide remain mainly disconnected.

Shipping portals provide essential functionalities for booking, tracking and tracing, and documentation, and allow customers to communicate with their carriers. They offer “digital twin” processes which are otherwise dealt with manually. However, for many steps of the shipping journey, paper is still being pushed around the globe today.

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 train, truck or barge. INTTRA currently offers services that cover the maritime section of the supply chain. GT Nexus and CargoSmart are following the same focus. All three are trying to extend their coverage and are competing, to some degree. But they are interconnecting all legs of the intermodal transport chain.

Furthermore, Port Community Systems (PCS) play a significant role in handling port operations. This leads us to two interesting facts:

1. Most PCSs can connect to both INTTRA and GT Nexus

2. Some PCSs have managed to extend beyond port operations and provide services for additional sections of the supply chain, for example, the PCS of Valencia and Rotterdam.

Although these shipping portals and port community systems are a significant step forward towards digitalization of the supply chain, they are no more than a milestone on a long way.  We assume to see services offering “end-to-end” supply chain solutions in a couple of years from now.  This new kind of end-to-end supply chain gateways will provide a substantial and new quality with four primary aspects:

  1. Shippers have full visibility of alternative multimodal transportation solutions, procure and manage them in a single-sourced system and connect directly with carriers and other players along the entire supply chain
  2. Freight carriers gain immediate visibility of demand pattern development, drive utilisation of capacity, align service design and capacity planning as well as shipment-specific scheduling in real-time
  3. All players connect quickly to the logistics ecosystem based on a standardised industry backbone, thus transact and collaborate in a highly efficient way
  4. The emergence of dynamically self-regulating multimodal transportation networks with full back-end integration into capacity and production planning systems.

EDI standardization

For this next digital evolution to unfold, it is prerequisite to overcome the enormous challenge of finding an industry standard for a common data format to exchange information between all relevant stakeholder. For the last 20 years, the supply chain industry has been wrestling with insufficient EDI standardisation, resulting in its rather poor functioning on a global basis. Besides, freight forwarders and carriers are using different code standards for origin and destination. For example, the systems use various measures like IATA or UNLOCODE, which is quite a common source of errors.

Electronic Data Interchange (EDI) is the computer-to-computer exchange of business documents in a standard electronic format between trading 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 of having people involved slows down the handling 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 a bill of lading, customs documents, inventory records, 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 particular EDI standard and version. Companies typically use an EDI translator to translate the business document to an application that accepts EDI format.

SOLAS convention – An accelerator for EDI standardisation?

Many shipping companies expect a positive disruption of the EDI standardisation from a new container weight requirements of Verified Gross Mass (VGM) SOLAS Convention. SOLAS creates the need to communicate weight values will all stakeholders and has therefore called for the introduction of a new Electronic Data Interchange (EDI) communication protocol called VERMAS (Verification of Mass). As it involves cooperation between ocean carriers, freight forwarders, EDI providers as well as exporters there is an opportunity for a new standard to be defined. As a result of the ratification of SOLAS, VERMAS will be the first EDI message which is directly monitored by the regulatory authorities.

Take the case when a container is exported, and the gate-report is not transmitted via EDI upon leaving the manufacturing plant. The missing data does not have any immediate effect on the sender. The consequence is that the container, when it reaches the port, would appear as “unknown” and the system of the carrier would, therefore, produce a fault message, which then needs manually editing. The previously unknown container would have to be added to the booking system and booked for the ocean freighter on the terminal. If, however, VERMAS has not been transmitted or been transmitted too late, the ocean carrier could refuse the transport and thus force a disruption of the supply chain. This case shows the need for an integrated approach to digitisation and the EDI standardisation.

The inherent need for collaboration

We believe traditional EDI standard will face challenges to 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. Customers, freight forwarders and shippers need a shared view of the actual supply chain status and an automated early detection system. The shared status view would enable an efficient controlling of the entire supply chain, allowing all stakeholders to resolve identified problems collaboratively and, that way, avoid costly bottlenecks or disruptions. In many cases, there is no way to integrate the software of all involved companies. Which is why the industry has to create ways to get the people in the supply chain to interact with each other. And create a paperless documentation (bill of lading) and smart, automized communication protocols (not phone or email).

Smart contracts for global distribution systems

International standard contracts are existing in the shipping industry, published by BIMCO. There are also regional standard contracts for rail, air and road transportation. Today the traditional contracts do not prescribe the binding use of certain IT formats or IT platforms for data transmission. There are first uniform contracts for e-booking, e-shipping instructions and e-B/L, which, reproduce more or less old formats in digitised form. These standard contracts are the basis for platforms like INTTRA.

Trust is one key success factor of a well-functioning collaboration. And trust is established through transparent processes. The implementation of intelligent software significantly enhanced the facilitation, verification and enforcement of a contract. A smart contract is “a computerised 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 would be visible to all users. The supply chain industry needs smart contracts for next generation of global distribution systems like this article describes.

Decentralised transactions with blockchain

One step further is the new and revolutionary blockchain technology to provide security and integrity in distributed networks. In its first application, the technology disrupted the financial industry with a decentralised digital currency named BitCoin and it has since been finding more and more use cases in other industries like for example the energy or transport sector (Blockfreight).

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 actual 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 doesn’t need central transaction servers and databases, the users own and control their personal data. As such, the system recognises the users as the owners of the data and the services as guests with delegated permissions.

Jon-Amerin Vorabutra wrote an interesting article on how Blockchain Technology will affect the supply chain industry. Shippers benefit from the following advantages, that a decentralised database system offers:

  • Transparency and collaboration. Tamper-proof documenting product journey’s across the supply chain and sharing amongst stakeholders. The system works without a central repository or single administrator.
  • Scalability and availability. Especially Blockchain 2.0 is solving the scalability issues for writing transactions.  All people worldwide can access the decentralised redundant stored data sets via the internet.
  • Security and privacy.  A node does not have to reveal the physical identity of the individual or organisation, and the payload 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 the open source repository Github. Blockchain-as-Service solutions like Microsoft Azure make it easy to use the service for everyone in the world.

New Ways for Supply Chains

Startup SolasVGM

SolasVGM process flow story

The startup SolasVGM tries to solve the required SOLAS VGM data exchange with blockchain. Under the WebSite cryptograffiti.info, you can decode and read the library messages saved in the block chain. Here you can see the concept of Blockchain applied. SolasVGM is collaborating with BlackSwan for predictive analytics and Blockfreight as blockchain infrastructure for supply chains.

decode and read arbitrary messages saved into the block chain

Decode and read arbitrary messages saved into the block chain

 Another new decentralised platform that runs smart contracts is Ethereum. The promise is that applications exactly run as programmed without any possibility of downtime, censorship, fraud or third party interference.

Asset Tracking In Intermodal Supply Chains

This article talks about the influence of real-time data on the evolution of supply chains. Currently, the need for transparency across the supply chain processes is growing. Various sections of the supply chain have different levels of digitalization, depending on the companies involved. Maritime logistic chains deliver the gate-in, gate-out, onboard messages between 2 to 24 hours. Also, various vehicles track the position in near real-time (trucks, trains, and vessels). But often only one transport mode is covered, not the entire intermodal supply 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 behaviour of the transport vehicle. Also, sensitive 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 for new software?

All stakeholders involved in the supply chain can benefit, but not all benefit equal amounts. Hence there is a dispute about which party pays which amount for the implementation of new software. However, only if all parties in the supply chain are integrated and digitalized, the efficiency will be raised dramatically. Keep in mind the margin of the involved actors differs, for example, a sea freight shipper, hinterland port operator and road freight carrier all have different business fundamentals. So these companies cannot absorb additional costs equally well. Therefore the most important question is “Who benefits and can drive the integration?”. As this is in the interest of global trade and economic development, organisations like the United Nations Conference on Trade and Development are a good regulatory body to drive standardisation and influence national laws and regulations. But also companies have to take investment risks, connect to software platforms and start their transformation process to arrive in the digital age.

Mencl Marine Consulting

Dr Mencl is a logistics consultant with the primary focus on maritime supply chains. He has decades of hands-on experience and is developing customised shipping solutions based on maritime economics. Besides, he is assisting complex mergers and acquisitions with a particular emphasis on the integration of logistical processes and organisational restructuring.

Dr Mencl collaborates with the management consulting group Wagener&Herbst for network planning, asset management, forecast planning and steering by KPI’s.