Inside the mission to ship Australian goods across the world and track the process using blockchain

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Australia’s biggest bank has overseen the delivery of agricultural goods to Europe using blockchain and Internet of Things (IoT) technology that tracked a shipment in an experiment participants believe has the potential to reimagine global trade.

Working with a range of commercial partners in the supply chain, the Commonwealth Bank tracked a shipment of almonds from Victoria along its journey to Germany.

Storage conditions for the goods were monitored by sensors, and that data, along with location information and documentation, was stored on a custom-built blockchain that facilitated real time updates and could be accessed through a web based app.

The shipment was tracked through its rail and port movements in Australia, and then across the world to its destination port of Hamburg.

Among the many benefits of this platform is the ability to track the origin of the underlying goods and its condition during transport through multiple hands.

Several people involved in the project have spoken to Business Insider about their experience with the project and the promise it holds for improvements in the trade process, with inter-company collaboration being highlighted as a critical factor for success.

“It can’t just be one entity in the supply chain adopting blockchain in isolation – blockchain is a collaborative technology, so it needs cooperation between supply chain participants to fully realise its benefits of efficiency and transparency” said Sylvia Preda, Executive Director, Industrials and Logistics at the Commonwealth Bank.

“One of the key objectives in distinguishing this experiment from other work done in this space was the level of cooperation between parties. This is the only genuine multi-participant supply chain experiment that we’re aware of currently,” Preda said.

Blockchain, the shared ledger technology that powers Bitcoin and involves storing information in “blocks” on a distributed network, has some features that major companies around the world have been considering as a way of making some of the world’s most complex business processes more efficient. One of those critical features is that data added to a blockchain must be verified by consensus, and cannot simply be altered by a single participant, making for highly reliable data that can be trusted by everyone.

While blockchain technology has been used by logistics companies to track goods and by banks to process deals, the Commonwealth Bank experiment involves collaboration by an array of businesses, including the almond producer, land and sea based transport and logistics players with the potential to add shipping documentation and trade finance capability.

The stakes

Global merchandising trade was worth around $US16 trillion in 2016, according to World Trade Organisation data. The logistical challenges involved in the trade process are vast, but they include uncertainty on the location of products, high levels of paperwork, problems with the timing of payments and a lack of visibility into storage conditions during the transport of goods.

Commonwealth Bank’s blockchain experiment was designed to try and directly tackle some of these issues which can add to costs for both businesses in the supply chain and end consumers.

For example, issues in the transport process that led to damage to products can be pinpointed giving clarity on liability and reducing disputes. Integrating a banking layer means funds can be released more quickly on completion of various services and delivery requirements.

CBA’s Sophie Gilder

Sophie Gilder, Head of Blockchain, Innovation Labs at the Commonwealth Bank, said: “One thing that came up very clearly from our collaborators is the fact that customer service could be improved just through transparency. If you’ve got greater certainty as to where something is, the condition that it’s in, and when it’s likely to arrive, you can have a much happier customer. Even if there are delays, if you can explain exactly where it is and why, and this can improve their ability to plan.

“The current lack of transparency, where the buyer and seller may have doubts in terms of what is happening between origin and destination, which results in wasted time and effort trying to uncover this information, could be eliminated. Blockchain plus IoT can provide certainty about where the good has come from, where it is now, and the condition that it’s in.”

The sensors that monitored the environmental conditions of the goods through their journey were provided by LX Group, an Australian IoT solutions provider. Simon Blyth, LX founder and Director, said in addition to streamlining paperwork & automating transactions with smart contracts, one of the key benefits of tracking location and environmental conditions was the proof of the goods’ provenance.

“Unlike the way people like to go to a local market and buy directly from a producer, in huge food supply chains around the world,” Blyth said, “you’ve got produce like some meat or some almonds or some orange juice, and you don’t know exactly where it’s come from.”

For some categories of goods, proof of origin could mean the goods can then be sold at a premium, similar to how some high-end goods like wagyu beef are currently sold. It opens up a new breed of product marketing enabling an end customer to be connected with the exact history of the produce. It was all part of “enabling trades to occur in a trusted way with this efficiency that streamlines a lot of really manual [processes] that currently happen,” Blyth said.

With the increasing visibility of blockchain applications over the past year, analysts and technologists have been debating the merits of the technology compared to, for example, a normal centralised but highly secure database.

The complexity of supply chains, the vast numbers of people involved in transporting goods, and the lack of visibility inherent in shipping goods from one part of the world to another make blockchain a strong contender as a solution for global trade.

To illustrate, another of the participants was the Port of Melbourne, where the consignment was loaded onto its ship to begin its journey to Hamburg. Melissa Poon, general manager for trade development at the port, told Business Insider the experiment had shown blockchain could simplify many existing processes and drive productivity gains for the businesses involved in the supply chain.

“In the industry, we believe in one principle: seeing is believing. We’ve heard a lot about blockchain, and how it can help the logistics chain – that it’s effective and reliable,” Poon said. “One of the reasons we wanted to participate in this project was to gain an understanding of the real application of blockchain in the trade chain and to gauge its potential value disruption in logistics and the international trade flow process. My participation in this project has let me realise that blockchain is real. Why? Because blockchain has the potential to drive simplicity and efficiency.

“It really can provide a transparency in a simple method, provide visibility into the movement of goods, and improve a lot of communications and data sharing along the supply chain. It also results in a lot of players in the supply chain being able to focus on productivity gains rather than spending a lot of time on communications and sharing of documents and data. That is a lot of the benefit from this kind of platform,” she said.

Gilder said the distributed computing that carried built-in redundancy and replication of data was an important benefit of blockchain in such operations.

“Blockchain delivers benefits from a data retention and availability perspective. Usually, if a provider of a particular database has difficulties and goes down, your source of all that information goes down,” Gilder said.

She added:

What you have with a distributed network can be thought of as live disaster recovery sites, with all of the nodes running a synchronised, up to date copy of all of the information. You have a real time view of the facts, which is cloned across the network. And that is really, really powerful from a redundancy perspective. Another element of blockchain that I think is beneficial versus centralised or traditional databases is traceability: blockchains are very effective for working out who did what, and providing you with an audit trail including a digital signature of who undertook a particular transaction. You can’t just go in and update a blockchain anonymously. You can do that with a database. With blockchain, it’s recording the digital signature on everything you’ve done. This is good for information quality purposes, risk purposes, for audit purposes, and for security purposes.

Commonwealth Bank will be reviewing the experiment with key stakeholders after the safe arrival of the almonds this month in Hamburg. The potential benefits are not just limited to exporters and those involved in the supply chain, as ultimately its increasing use in various business activities will mean larger data sets that can be used to improve decision-making for firms across the economy.

Felicity Jay, a financial industry lawyer and director of trade and NewTech product at the Commonwealth Bank, said there were broader applications that could improve business efficiency for a range of industries. Where questions of provenance, process, safety and sustainability are important, these emerging technologies may potentially provide solutions and lead to different business models. In areas such as agriculture, manufacturing, retail, pharmaceuticals and government as well as in industries where there is a complex assembly of parts from all around the world, such as aviation, there may be benefits.

“Customers are demanding to know more information about the goods they’re buying and where they came from. In areas such as food, issues of origin, sustainability and safety are key areas of concern to consumers and firms that have better information about these points in the supply chain may have a competitive advantage. In manufacturing, more transparent information can assist with assigning responsibility for a particular part of the process which may lead to better information for financial and insurance providers,” Jay said.

“If you had more information about how a good was made and how it was handled, how might that affect your buying decision? Could it reduce the potential for fraud and errors and therefore costs? Could using blockchain to make data more transparent reduce financing and insurance risks? Our hypothesis is that if you have more information about a particular slice of the supply chain, based upon a trusted shared record, better data may help you make better decisions.”

Watch this shipment of almonds make its journey from Australia to Germany.


Disclaimer:
This article has been prepared by Business Insider solely for informational purposes and is not to be construed as a solicitation, an offer or a recommendation by the Commonwealth Bank of Australia. As this advice has been prepared without considering your objectives financial situation or needs, you should, before acting on this advice, consider its appropriateness to your circumstances. Commonwealth Bank of Australia ABN 48 123 123 124.

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