How Blockchain Could Be Implemented

for Exchanging Documentation

in the Shipping Industry

Christopher Loklindt, Marc-Philip Moeller, and Aseem Kinra(&)

Copenhagen Business School, Copenhagen, Denmark

christopher@loklindt.dk,
moeller.marc.philip@gmail.com, aki.om@cbs.dk

Abstract. The purpose of this study is to investigate the conditions under

which blockchain technology can be adopted and the design criteria that are
needed for exchanging shipping documentation in containerized shipping. To
alleviate the impact of current documentation exchange mechanisms on supply
chain efficiency in the maritime industry, this study aims at presenting guide-
lines for leveraging blockchain technology as a solution for exchanging docu-
mentation in the shipping industry. We conduct semi-structured interviews with
representatives from business, IT, and public institutions. This qualitative data is
analyzed through a theoretical framework comprising transaction cost eco-
nomics, diffusion of innovation and design theory. Based on the theoretical
model and stakeholder analysis, a set of eight design principles are proposed for
the successful implementation of blockchain. These are (1) Immutability,
(2) Decentralization, (3) Security, (4) Privacy, (5) Compatibility, (6) Scalability,
(7) Inclusiveness and (8) Territoriality. Furthermore, the study investigates four
potential approaches for the implementation phase affecting the likelihood of
adoption by industry stakeholders. The exploratory approach and generic
framework provides the groundwork and inspiration for further research in
supply chain management and the emerging field of blockchain technology.

Keywords: Blockchain
Distributed ledger technology
Shipping

Digitization
Supply chain management
Documentation exchange
Maritime logistics

1 Introduction

The invention of the ISO standard for shipping containers in 1960 marked the
beginning of a new era in global trade (Levinson 2006). Until then cargo had been
moved in nets as break bulk. Adopting containers as a standard unit made it possible to
increase utilization rates. Containers could be stacked efficiently on ships, and even on
trucks and trains for further intermodal transportation. It allowed all transportation
providers to focus on the transportation of ‘grey boxes’ rather than on which products
they moved. The innovation was effectively that the entire industry could agree on one
standard size and shape (Bernhofen et al. 2013). Today, the maritime industry needs to

© Springer International Publishing AG, part of Springer Nature 2018

M. Freitag et al. (Eds.): LDIC 2018, Lecture Notes in Logistics, pp. 194–198, 2018.
https://doi.org/10.1007/978-3-319-74225-0_27
 How Blockchain Could Be Implemented for Exchanging Documentation 195

undergo a similar transformation. Digitization is one of the biggest trends in the 21st
century, which opens the possibility for ‘containerization’ of documentation.
However, the majority of stakeholders in the shipping industry operate with
extensive manual handling of documents, including the Bill of Lading, Customs
declarations, and the Certificate of Origin. The physical supply chain in international
transportation has undergone a thorough process of streamlining and standardization.
However, inter-organizational information sharing systems are outdated and manual
processes still prevail in large parts of the supply chain. As authorities, often do not
have all information readily available, containers stand still almost half of the time of
their journey (Jensen et al. 2014). This way, the current modus operandi causes a
redundant built-in-slack leading to a multitude of problems that drive costs in inter-
national trade. The lack of coordination and information sharing results in little
transparency and a general lack of trust between the parties involved. For authorities,
the lack or inaccuracy of information poses a security risk and an increased workload.
Similarly, the inaccuracy of information and delays also affects operational aspects
along the supply chain. Many of these challenges point to issues of governance and
business processes for inter-firm coordination that do not properly account for the
complexity in the supply chain of international trade. The multitude of different actors
in the supply chain, their relationships, different regulations, and the cost of information
inherently contribute to supply chain barriers, which impede global trade. Therefore,
the transportation industry is in dire need cut costs by improving its inter-organizational
processes, such as achieving industry-wide digitization of documentation exchanges.
The digitization trend of the 21st century delivers the solutions but equally, poses
numerous new challenges.
One potential solution that has surged in media popularity is blockchain technol-
ogy. It has been credited for its revolutionary innovation and versatility. The tech-
nology might have profound impacts on society as a whole, but also for the field of
supply chain management. However, there is a significant level of technological
uncertainty concerning blockchain. Furthermore, nobody knows the required organi-
zational conditions for the technology to reach industry wide adoption necessary to
harness its full potential. To compensate for the identified gap, we formulate the
following research question: Under which organizational adoption conditions can
blockchain be adopted and what are the design criteria for the implementation of
blockchain in the exchange of shipping documentation?
We apply a choice of theories to shed light on the various aspects that constitute the
adoption of a blockchain based solution. For this, we seek to apply a framework
covering various conditions, which combine design, economic and strategic charac-
teristics, to arrive at a blockchain based system that may be adopted successfully by the
shipping industry. Based on the array of problems described above and the research
gap identified, we thus contribute with a new documentation-sharing paradigm by
conducting an exploratory investigation. Moreover, we contribute with an initial
understanding about how this system may have to be designed in order to be imple-
mented in the industry.
196 C. Loklindt et al.

2 Methodology: Qualitative Case Studies

The empirical evidence for our study stems from 20 interviews with 31 respondents in
seven countries. These are split into 10 Skype interviews (primarily used for other
geographies) and 10 face-to-face interviews. The geographical scope includes Denmark
and India, UK, USA, Norway, The Netherlands, and Germany. We interviewed a total
of 20 different companies, which consist of Multinational Enterprises (MNEs), Small
and Medium-sized Enterprises (SMEs), public organizations and non-governmental
organizations (NGOs). The MNEs are comprised of major carriers, IT vendors and
freight forwarders. The SMEs consist of start-ups, start-up facilitators, consultancies,
NGOs and freight forwarders. Public organizations include academics and EU project
consortia. The period of interviews started in the beginning of January 2017 to the end
of March 2017. The identities of the majority of our respondents are anonymised
according to agreements made with them.
The interviews were conducted in three stages. First, we aimed at getting an
understanding of the maritime industry and evaluate the business case of introducing a
block chain based system to tackle the lack, inaccuracy, and inefficiency of sharing
information. During this initial phase of the interviews, the scope and direction of our
research was refined. Secondly, we interviewed different supply chain actors and their
respective interests concerning information sharing along the supply chain. To evaluate
potential conflicts of interest we aimed at gaining an understanding of what drivers and
barriers to collaboration and sharing of data in the industry might be. During this phase,
it became apparent that there have been previous attempts to facilitate sharing of
information that often failed or their impact had been negligible on a wider scale. This
is believed to be caused by the complexity and geographic scope of the industry.
Moreover, interest in the technology was widely received, but a lack of understanding
prevailed. Thirdly, we focused the interviews on discerning of how such a system
would be adopted by the industry. For this, we inquired about incentivisation, business
models and the willingness to test and adopt a blockchain based solution. This was also
based on gaining an understanding of what conditions and incentives would make
different supply chain actors adopt the solution considering current market trends and
technological capabilities.

3 Findings and Conclusion

The overall goal of the paper was to assess how blockchain can be an adoptable
solution for exchanging shipping information. Until today it has remained difficult for
shipping stakeholders to ascertain that a given digital piece of information is the truth,
or the single valid version, which is important when title to shipped goods are handed
over amongst independent supply chain actors across national and judicial borders. The
finding is that blockchain technology can be adopted for exchanging shipping docu-
mentation if designed to solve the inherent challenges of transitioning to digital doc-
umentation without jeopardizing the value proposition of the stakeholders involved.
There is strong evidence that the ‘containerization’ of shipping documentation will
 How Blockchain Could Be Implemented for Exchanging Documentation 197

have a profound impact on the industry that could provide a competitive advantage to
those that can digitize this flow in a structured and simplified manner.
This paper set out to find the conditions under which a blockchain based system
would be adoptable for exchanging shipping documentation. Through our case inter-
views with the stakeholders we found that these conditions are digitization, demate-
rialization of documents, streamlining the flow, interoperability, regulation
reconcilable, cost reduction, removing reliance on central entities, increased supply
chain visibility and encryption to facilitate privacy.
Our study demonstrates that blockchain facilitates the possibility to cut costs and
advance global trade as transaction costs are reduced. The reason why blockchain is so
decisive is that it has the potential to redefine the way digital information is exchanged,
thanks to immutability which is absent in other information technology systems.
Therefore, maritime stakeholders should understand that a blockchain based system
will lead to considerable operational improvements and cost savings. Changing the
status quo would reduce transportation and lead times, resulting in a profound impact
on supply chain performance and a wide variety of performance measures within the
field. A proof of concept performed by IBM and Mærsk demonstrates a 15% cost
saving enabled by IBM’s Blockchain technology Hyperledger (Forbes 2017).
Having determined that blockchain can fulfil the prior conditions, we have set forth
eight design principles to address the conditions needed to persuade the intended
stakeholders. These are immutability, decentralisation, security, privacy, compatibility,
scalability, inclusiveness and territoriality.
Our proposed design principles for a blockchain based system are crucial for
stakeholders’ ability to reap the benefits of this transformation without risking a loss of
bargaining power. Particularly those at the centre of the supply chain, such as carriers
and forwarders, will see vast gains through digitization, whereas smaller entities further
up- and downstream need additional incentives to join. Reallocation of benefits might
thus be necessary to contemplate when introducing a blockchain based system. Most
importantly, our research finds that blockchain will have profound implications for
authorities. The proposed solution would offer compelling advantages, which could
streamline operations while making it more complex to conduct fraudulent commerce.
When it comes to the ‘containerization’ of shipping documentation and a second
revolution in maritime shipping, we argue that blockchain technology has the potential
to transform the industry for advancing international trade in the 21st century. Ulti-
mately, “No matter what the context, there’s a strong possibility that blockchain will
affect your business. The very big question is when” (Iansiti and Lakhani 2017).
Having fully applied our theoretical framework, we critically assess the degree to
which the chosen theories account for all factors influencing adoption of the system.
We argue that Everett Rogers’ (2003) model for diffusion of innovations is missing the
element that the expected approach of implementation has an impact on the likelihood
of adoption. This is supported by the argument that prior attempts have failed to reach
industry-wide adoption, despite technological brilliance and fulfilment of conditions set
by the industry at the time.
To substantiate the findings, four non-mutually exclusive approaches to imple-
mentation with varying expected effects on adoption are discussed to elaborate on this
criticism. Literature suggests that a bottom-up rather than top-down approach should be
198 C. Loklindt et al.

the most attractive for far-reaching adoption. Therefore, we hypothesize that to account
for the complexity of the industry, a public-private partnership creating an open and
collaborative ecosystem approach is a condition for achieving industry-wide adoption.
Gathering evidence to support the validation of this hypothesis requires further
investigation by academia.

Acknowledgments. We would like to thank Marine Transport International & Agility Sciences
Ltd. for helping us develop the problem area of the study.

References
Asare, A.K., Brashear-Alejandro, T.G., Kang, J.: B2B technology adoption in customer driven
supply chains. J. Bus. Ind. Mark. 31(1), 1–12 (2016). https://doi.org/10.1108/JBIM-02-2015-
0022
Bernhofen, D., Zouheir E., et al.: Estimating the effects of the container revolution on world
trade. Centre for research on Globalisation and Economic Policy (2013)
Forbes: IBM And Maersk Apply Blockchain To Container Shipping, 5 March 2017. https://
www.forbes.com/sites/tomgroenfeldt/2017/03/05/ibm-and-maersk-apply-blockchain-to-conta
iner-shipping/#2571d6b83f05
Iansiti, M., Lakhani, K.R.: The Truth about Blockchain. HBR, January-February issue 2017
(2017). https://hbr.org/2017/01/the-truth-about-blockchain
Jensen, T., Bjørn-Andersen, N., Vatrapu, R.: Avocados crossing borders: the missing common
information infrastructure for international trade. Computational Social Science Laboratory
(CSSL) (2014)
Mougayar, W.: The Business Blockchain: Promise, Practice, and Application of the Next Internet
Technology. Wiley, Hoboken (2016). ISBN 978-1-119-30031-1
Rogers, E.M.: Diffusion of Innovations, 5th edn. Simon and Schuster, New York (2003)
Swan, M.: Blockchain: Blueprint for a New Economy. O’Reilly Media, Sebastopol (2015)
Tapscott, D., Tapscott, A.: The Blockchain Revolution: How the technology behind Bitcoin is
changing money, business, and the world, Penguin UK (2016). ISBN-13 978-1-101-98013-2
Yli-Huumo, J., Ko, D., Choi, S., Park, S., Smolander, K.: Where is current research on
blockchain technology?—A systematic review. PLoS ONE 11(10), e0163477 (2016)
Zhang, Q., Vonderembse, M.A., Lim, J.-S.: Spanning flexibility: supply chain information
dissemination drives strategy development and customer satisfaction. Supply Chain Manag.
Int. J. 11(5), 390–399 (2006)