Strengthening port efficiency with blockchain
While trade through ports is responsible for delivering essential resources to billions of people, a staggering one in five crates are left unaccounted for, leaving behind one major consequence: The environment, writes Mac McGary, president of Sweetbridge
As demand rises, dated processes have caused operational inefficiencies along the supply chain, leaving many companies wondering whether increased productivity will lead to a global dissolution of environmental conservation efforts. Industry experts are calling for a change and that change starts with blockchain technology.
Blockchain, the platform behind major cryptocurrencies Ethereum and bitcoin, is a distributed ledger of information that’s housed across an entire network. It’s a permanent, yet universally accessible record detailing a product’s journey from manufacturing to retail.
Using blockchain, employees can enter information as products move to each juncture, which is then validated by a community of individuals that serve as a system of checks and balances for inaccuracies that may arise. For organisations overseeing multiple vendors in disparate jurisdictions of the world, blockchain provides an unprecedented look into the operational efficiency of a given supply chain.
It’s an innovation set to eliminate processes that have long prevented marine ports from operating at full capacity, leading to environmental conservation simply by removing bottlenecks from the system.
With increased transparency, marine port operators can extrapolate this information to ensure that companies remain in compliance with predetermined environmental standards. Using what’s known as a smart contract, which are digitised agreements made along the supply chain, companies can require vendors to meet predetermined metrics before capital is allowed to change hands.
This encourages supply chain participants to become more engaged in the environmental conservation effort by creating contingencies surrounding marine port use — a process the occurs in real time. No longer will a company ship a product, invoice it, and then have to wait 90 days in order to obtain their accounts receivable, because the capital and cash conversion cycle will happen instantaneously.
It’s a process that’s already being implemented in marine ports around the world. The Port of Rotterdam, in conjunction with TKI Dinalog Blockchain Consortium, recently implemented blockchain integrations to decrease the amount of time that products remain idle along the supply chain.
In fact, of the 40 days that shipping containers travel from Central China to Eastern Europe, they spend roughly 16 days in dormancy. That’s nearly 40% of overall supply chain. Now, picture the potential progress that could occur if the Port of Rotterdam lowered waiting times to 30%, 20%, or even 10%. Minimising this level of inefficiency would guarantee that energy used is energy needed, closing the lengthy feedback loop required to ship products to their final destination.
The Port of Rotterdam is not the only test case highlighting blockchain’s ability to support this effort. PricewaterhouseCoopers (PwC) Australia, the Australian Chamber of Commerce and the Port of Brisbane, recently used blockchain technology to create a new trade product designed to link international trade information along the supply chain.
At present, roughly nine million containers move through the nation’s five major ports (e.g., Sydney, Melbourne, Fremantle, Adelaide and Brisbane) annually — a figure projected to increase to 15 million by 2025. Using blockchain, the Port of Brisbane is looking to eliminate the roughly US$1 billion losses it amasses yearly due to marine port inefficiency, ensuring that hastening processes don’t lead to cut corners or shipping delays.
However, in the near future, I predict that manufacturers will not just feel compelled to enact such changes, they will be required to by shifting sentiments within the general public.
Consumers are just as invested in sustainability as manufacturers and will overwhelmingly elect products with a proven environmental track record over products that have been shown to be inefficient. Using blockchain technology, any interested participant with a computer will be able to view detailed information about the lifecycle of a product, allowing them to make informed decisions about which companies to support.
Imagine that there are two pairs of shoes on a retail shelf. Using blockchain, a given consumer will have immediate access to the entire history of both products along the supply chain — from manufacturing to retail. Then, they will have an opportunity to decide which product is the most environmentally conscious prior to purchasing.
In the pursuit of sustainable business practice, transparency will be the first line of defense to ensuring that consumers feel adequately informed about which companies to support and blockchain will surely be a key tool in their wheelhouse. If marine port X is determined to be violating environmental standards, for example, consumers will simply not purchase goods that originate there — leading to financial consequences.
This is a good start, but it’s not a long-term solution. What if you could not only encourage, but incentivise, environmentally-conscious behavior by tokenising metrics achieved before companies enter or exit a marine port.
For instance, benchmarking initiatives could be enacted that lower carbon emissions on an annual or semi-annual basis. If threshold goals are met, companies would be eligible for cryptocurrency stipends that could then be used later in the overall network.
According to a report by Opsiana, a consultancy based in Scandinavia, incentivising blockchain programmes like these could see global carbon dioxide emissions fall by nearly 4.6 million tonnes per annum, with nitrogen oxide emission cut by 4,900 tonnes. It’s an undeniable truth: Progress is faster and more effective when it’s incentivised and blockchain technology has the capability to bring these incentives to the world.
At Sweetbridge, we’ve worked to create a tokenised infrastructure dedicated to increasing marine port efficiency by monetizing underutilised assets. Often, products lay idle not because of a lack of transportation resources, but because companies don’t share available resources that aren’t in use.
As a result, trucks travel at half capacity and ships enter ports with a mere fraction of their overall carrying potential. However, using blockchain, companies can conduct asset sharing with available transportation resources, creating a community-driven transportation model focused on environmentally-conscious business practices.
By minimising the amount of ships required, but maximising the amount of cargo on each ship, companies can more efficiently clear the way for an environmentally-sustainable future.
As the entrance point for an estimated 27 million shipping containers, marine ports are a country’s gateway to the outside world.
Unfortunately, faced with rising demand, these once efficient processing centers are now crumbling under the weight of their own productivity, leading to inefficient business practices that are impeding sustainability. Looking to the road ahead, it’s our shared responsibility — whether company or consumer — to take environmental conservation efforts beyond “check the box” exercises. Through blockchain, we can change the world.
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