Smart Maritime Contracts

Manufacturers and Shippers often end up over committing resources, when shipping through a worldwide...

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Published
Created by Expert Advisor | December 12, 2017

Version 7 | December 12, 2017
Cost: USD 2,000,000 | Feasibility: Complex | Reproducible: Yes


Problem Statement

Manufacturers and Shippers often end up over committing resources, when shipping through a worldwide trading vessel.

Summary

Connecting the vessels with various partners throughout the value chain, has vast optimization opportunities. Blockchain with its decentralized contracts, can potentially transform the value chain, bringing in efficiencies that would be beneficial for all stakeholders.

Description

In a recent meeting with SAP, where one of our portfolio startups was making a presentation on how their latest IoT technology at the Port of Haldia, has reduced congestion and improved ship turnaround time, a valid question came up for discussions - Can this solution help manufacturers and shippers improve their efficiency? For a moment, it left us dumbfounded, as the worldwide trading vessels coordinate through their agents on their port of call and their berthing time is dependent upon their ETA and availability of the cargo and the berth. Manufacturers and shippers also liaise with the agents, but the final berthing hours are decided almost at the last moment, making it impossible to plan logistical efficiencies in advance. If you consider a large container vessel berthing to load ship load of containers, it is 100’s of truck deployed by the shippers, waiting with the cargo somewhere in the vicinity of the port for days and sometime weeks. In the evening, when I looked at the problem through the lens of a Merchant Navy Officer, I remembered the days after Sept/ 11, when US Coast Guard made it mandatory for every vessel to equip itself with a Vessel Identification System, so that information about the vessel and its cargo is made available to the Coast Guard via satellites, without the need of a third party information system or berthing of the vessel. So we already have a technology fitted on almost every ship that provides the required information about the ship, however, that information was either not available to all stakeholders, or there was little coordination on the port side due to magnitude of its operations. When we explored the problem further we realized that there were simply too many counterparties that got involved in the shipment of a cargo. The information asymmetry and inefficiency was bound to creep in due to differences in their priorities, unless we had a system that was decentralized for each stakeholder in the value chain to take the required action or pay demurrages against inaction. Given that the dynamic vessel schedule is available to all stakeholders in the value chain through the Vessel Identification System, the problem statement could be defined as “Contracting, Coordination and imposition of Penalties’” between parties. Once the problem was defined the solution was obvious - “Blockchain”- that connects interested parties through the blocks or nodes, with smart decentralized contracts, that build up the information flow. Permissions can be managed by the ports for a transaction fee to be paid by the users.


Challenges Foreseen

1. The technology is complex and is still evolving. The complexities of operation would require development from scratch with implementation and stakeholders in mind. 2. Product would require both standardization and flexibility to meet the global and local needs 3. From charter party agreements to bill of lading and discharge at the port of delivery, there are several nuances and complexities that have to be coded on the platform. 4. Some of the stakeholders will be out of business, when the industry