Changing the rules:Blockchain is dramatically improving the efficiency of shipping and logistics

Insolar Research

This presentation and its contents are proprietary to Insolar. Provided information may be disclosed, reproduced, distributed and otherwise used only under a written permission by Insolar. No implied licenses are intended.Copyright © 2019 Insolar. All rights reserved.

Maersk is leveraging blockchain to radically improve supply chain and logistics efficiency

Services offered:Supply chain design - to connect and simplify supply chains across the globe Shipping and cargo services - dry cargo, refrigerated cargo, special cargo market■ Delivered almost 80% of Maersk’s overall revenue ■ Remote container management.■ Intermodal transport■ Trade finance Freight forwarding services

The world’s largest shipping container company , est. in 1904

121 countries served

343 Ports served

630 vessels

121 countries served 343 Ports

served 630 vessels

2

moves

12 million containers annually

$35 billion in revenue (2017)

2Note: Insolar is not providing any services to Maersk

4 core challenges that supply chains face

Data visibility & consolidation

Process optimization

Demand management

Tracking, transparency & trust

The ocean freight industry accounts for 90% of goods in global trade but transport remains highly burdened by paper-based, manual documents processes

Disparate record-keeping and reporting systems leading to scattered, incomplete and unreliable manifests, bills of lading, certifications, etc.

■ High administrative costs■ Fraud ($600 billion in global

trade)■ Cargo losses■ Shipping information double /

triple processed ■ Burdened by paper based,

manual documents

The ability to adapt rapidly to events. Poor data leads to poor outcomes

Ability to track flawed parts or component failures, as well as to trace the origin and provenance of shipped goods and settle contract disputes

There is little visibility into the status of goods as they move through the supply chain. Communication between firms is complicated and expensive with high administrative costs. There are frequent delays, and the process is resource intensive.

3

Disputes arise as a result of information gaps and trust in data

Are there issues with the shipment which need remediation before billing goes out?

What were freight rates at time of shipment?

What was the mode, the service level and what extra charges were allowed?

Were service levels met?

How do weights tie off to the original contract?

Is the billing correct? How was the billing calculated?

? ? ? ?

? ? ?

4

Size of opportunity

of global trade and 5% of GDP suppressed by non-tariff trade

of actual physical transportation costs relates to trade documentation

of the time deliveries arrive late

worldwide cargo losses

10,000

15%

1/5

36%

$1.8 Tvalue of global trade annually

with potential savings of

10%from streamlining process

$55 B

containers go missing every year*barriers (difficulties in border administration and the sharing of information)

5

Document inefficiency drives compliance costs

1. Farm fills out phytosanitary certificate regarding cargo

2. Freight forwarder fills out certificate of origin

3. Courier brings them for approval to the Mombasa Port authorities

4. Courier brings them back to Nairobi for copying and archival

5. Original documents airfreighted to European Freight Forwarder

6. Courier transports them to a consulting company to prepare and package with other import related paperwork

7. Courier that transports them to Antwerp port terminal gate

8. If documents are in order, a truck driver picks up the container

9. Transports it to a Dutch customs controlled area

10. Documents in order? Container released

A true story: What it takes to get a container of avocados released from a port

Goods spent more time in ports that on the ocean

30 people or organizations to complete its journey

Over 200 separate documents generated

$2000 = cost of the movement, of which$300 is associated paperwork (estimated 15%)

6

In January 2018, Maersk announced a blockchain platform to provide more efficient and secure methods for conducting global trade

■ Bringing the industry together on an open blockchain platform that offers a suite of digital products and integration services.

■ Designed to equally serve freight forwarders, ports, shippers, customs authorities and rival shipping lines with different value propositions.

■ Designed to facilitate information and document exchange across multiple parties functioning as a “single conduit of truth”.

7

Maersk decided to build a blockchain platform because of the need for:

Collaboration: multiple parties needed to collaborate on a common problem

Shared versions: parties require filing of documents, commercially sensitive information or shipping status information

Automation: smart contracts have the ability to encode business rules and authority approvals, which can be endorsed and distributed securely

Domain control: regulatory approvals required; moderate performance needs can be tweaked and adjusted with different parameters as needs change; trust is not uniform

8

IoT is contributing to the move towards more information-driven business models

■ Quantify risk

■ Assess supply chain impact

■ Develop mitigation strategy

■ Make better decisions

■ Make more timely decisions

■ Mitigate disasters

Sensor data is helping customers

IoT-enabled remote container management is generating valuable data

eSeal

Sub CHz Asset Trackers and USDA Probes

USDA Probe Closed

Wireless Sensor CO2 / G-Force / Tilt GT Installed

Sub GHz Antennae GT Installed

Wire Conduct along side ceilings GT Installed

GT Antennae Module GT Installed

GT Communications Unit GT Installed

Sub GHz Antenna Cable GT Installed

Reefer Control Unit

9

■ Inconsistent information across organizations■ Complex, cumbersome, and costly P2P messaging■ Manual, time-consuming, paper-based processes■ Lack of information for risk assessment and dispute resolution

Hosting container data on a blockchain dramatically simplifies the information flow

Previous state Blockchain state

■ Fast, secure access to end-to-end supply chain information■ Single source of truth■ Verifiable authenticity and immutability of digital documents■ Trusted cross-organizational workflows

Authority Consignee

Exporter Authority Forwarder

Terminal CarrierAuthority Authority

Authority

Global Trade Digitization

Exporter Trucker Rail Forwarder Consignee

Terminal CarrierAuthority Authority

10

Key drivers for supply chain blockchain adoption:

89%Cost saving

81%Enhancing traceability

79%Enhancing

transparency

Source: Capgemeni Research Institute

11

Maersk’s blockchain platform is disrupting large portions of the supply chain

Not exhaustive list of Events tracking by GTD

Star

t co

nta

iner

tra

ckin

g

Em

pty

con

tain

er p

icke

d u

p

from

dep

ot

ETA

em

pty

con

tain

er a

t st

uff

ing

sit

e

ATA

Em

pty

con

tain

er a

t st

uff

ing

sit

e

Con

tain

er s

tuff

ing

com

ple

ted

at

inla

nd

loca

tion

VG

M s

ub

mit

ted

Con

tain

er s

eale

d

ATD

Pac

ked

con

tain

er fr

om

stu

ffin

g s

ite

Est

imat

ed g

ate

in fo

r p

acke

d

con

tain

er a

t te

rmin

al e

xpor

t

Gat

e in

full

at t

erm

inal

ex

por

t

ETD

pac

ked

con

tain

er fr

om

exp

ort

term

inal

Pac

ked

con

tain

er lo

aded

Exp

ort

doc

um

enta

tion

cl

eare

d

Con

tain

er r

ead

y to

load

ATD

pac

ked

con

tain

er fr

om

exp

ort

term

inal

ETA

pac

ked

con

tain

er a

t im

por

t te

rmin

al

Tem

per

atu

re u

pd

ate

Est

imat

ed d

isch

arg

e ti

me

for

pac

ket

con

tain

er a

t im

por

t te

rmin

al

Imp

ort

doc

um

enta

tion

cl

eare

d

Con

tain

er s

elec

ted

for

insp

ecti

on

ATA

pac

ked

con

tain

er a

t im

por

t te

rmin

al

Pac

ked

con

tain

er d

isch

arg

ed

at im

por

t te

rmin

al

Est

imat

e g

ate

out

of p

acke

d

con

tain

er fr

om t

erm

inal

imp

ort

Gat

e ou

t p

acke

d c

onta

iner

fr

om t

erm

inal

imp

ort

ETA

pac

ked

con

tain

er a

t st

rip

pin

g lo

cati

on

ATA

pac

ked

con

tain

er a

t st

rip

pin

g lo

cati

on

Seal

rem

oved

Pac

ked

con

tain

er s

trip

ped

at

inla

nd

loca

tion

Em

pty

con

tain

er r

ead

y fo

r p

ick-

up

Em

pty

con

tain

er p

icke

d u

p

from

str

ipp

ed lo

cati

on

ATA

em

pty

con

tain

er a

t d

epot

Con

tain

er t

rack

ing

en

ded

Shipping Information Pipeline

Global Trade Digitization

Note: representative only; not all documents require Paperless Trade nor is this an exhaustive set of documents that cloud be processed by Paperless Trade Paperless Trade Blockchain Network

Explorer / Consignor

Packing list

Export Documentation Pre-paid

Invoice

Shipping instructions

Geography specific

certificate

Cargo specific

certificate

Commercial invoice

Bill of Lading

Advance declaration

Certificate of Origin

ISF Dangerous Goods Declarations

Custom Clearance

Import documentation

3PL Services Provider

Inland Transportation

Port / Terminal Authorities

Port / Terminal Authorities 3PL Services

ProviderInland

TransportationImporter / Consignee

Export Import

12

Maersk's blockchain platform has an impact on many actors across the shipping business network

Provide information about the disposition of shipments within the boundaries of the part / terminalBenefit from pre-built connections to shipping lines and other actors? end-to-end visibility across shipping corridors? and real-time access to more information to enrich port collaboration and improve terminal planning

Provide information about the disposition of shipments across the ocean legBenefit from pre-built connections to customers and ports / terminals around the world and real-time access to and-to-end supply chain events

Provide information about the expert and import clearance status for shipment into and out of the countryBenefit from more informed risk assessments? better information sharing? less manual paperwork? and easier connections to national single window platforms

Provide the transportation plan, inland transportation events, information on intermodal handoffs, and document fillingsBenefit from pre-built connections to the ecosystem, improved tools for customs clearance brokerage function, and real-time access to the end-to-end supply chain data to improve effectiveness of track-and-trace tools

Provide information on the disposition of shipments carried on trucks, rail, barges, etc.Benefit from improved planning and utilization of assets (e.g., less queuing) given real-time access to end-to-end supply chain events for shipments

Engage with the solutions as a consumer of the shipping information events and paperless trade capabilitiesBenefit from a streamlined and improved supply chain allowing for greater predictability, early notification of issues, full transparency to validate fees and surcharges, and less safety stock inventory

Ports and Terminals

Ocean Carriers

Customs Authorities

Freight Forwarders / 3PL

Intermodal Transport

Shippers

13

The platform will address current visibility and documentation challenges:

A shipping information pipeline: end-to-end supply chain visibility that enables all actors to securely and seamlessly exchange shipment events in real time.

■ API’s allow permissioned participants to publish and subscribe data into platform

■ end users can use own tools and applications to connect tools to existing applications

■ standard dashboard to get started

2. Paperless trade: digitize and automate paperwork for goods import/export by enabling end users to securely submit, stamp and approve documents across national and organizational boundaries, creating an information backbone that removes one-to-one and enables one to many.

■ allows end users to submit authorize and exchange documents on the blockchain platform

■ API’s to connect to existing systems to connect to national single windows system

■ smart contract workflows ensure approvals are in place

■ documents stored off-chain in a secure database, transactions and events on top stored on-chain

The objective of the platform is to connect and provide benefits to the supply chain ecosystem

14

Maersk is establishing a strong keystone position in the new world of shipping and logistics

15

The impact on Maersk’s ecosystem is profound

■ Access to upstream information allows for better quality decision making (Is it delayed? Has it been damaged?)

■ Planning ahead: optimization of terminal, yard, and loading planning

■ Improved port ecosystem collaboration: much less inspection and double handling

■ Improved customer service and service reliability

■ Reduced misdeclared cargo: reduction of errors

■ Improved customs clearance: better risk assessment, better visibility, reduced threat of forgery

■ Improved asset utilization: coordinated truck loading and schedule optimisation

■ Better freight forwarding: track and trace cargo

■ Reduced financial friction: creating trade finance/ insurance products, bringing insurers and reinsurers together

16

Maersk’s is establishing itself as the key player in a new shipping world order

Marine hull insuranceConnecting participants in a secure, private network with accurate, immutable audit trail and services to execute processes, establishing a digital insurance value chain.

Data visibility and consolidationInformation securely available to sender, receiver, shipper and regulators.

Tracking, transparency and trustAbility to examine sources, investigate industry certifications, track restricted or dangerous components, discover storage-condition anomalies and more.

Increased securityMore secure than previous, paper-based, fragmented records - blockchain allows parties to see and exchange digital documents. • Identify and address

issues faster (proactive from passive)

• Reduce or eliminate fraud and errors

• Improve inventory management

• Minimize courier costs

• Reduce delays from paperwork

• Reduce waste

• Enrich port collaboration

Att

rib

ute

s

Benefits

“Marine insurance takes up considerable resources for us. Moving it to this platform is helping us automate manual processes and alleviate a range of inefficiencies and frictional costs in the way we used to trade marine insurance.”Lars Henneberg, A.P. Møller-Maersk A/S Head of Risk and Insurance

”17

Key drivers for supply chain blockchain adoption:

Factory Warehouse Logistics Provider Carrier Port of Departure Port of Arrival

Bank Insurance Company Bank Customs Rail Operator Bank

■ Inconsistent information across organizations■ Complex, cumbersome, and costly P2P messaging■ Manual, time-consuming, paper-based process■ Lack of information for risk assessment and dispute resolution■ Prone to error■ Susceptible to fraud

Barge Operator Local Truck Buyer

18

Blockchain serves as a supply chain information pipeline

Factory Warehouse Logistics Provider Carrier Port of Departure Customs Local Truck Buyer

■ Fast, secure access to end-to-end supply chain information with a single version of the truth

■ Verifiable authenticity and immutability of digital documents

■ Improved availability■ Trusted cross-organizational workflows■ Reduced costs

Provide end-to-end supply chain visibility that enables all actors involved in a global shipping transaction to securely and seamlessly exchange shipment events in real time.

Port of Arrival Rail Operator Bank

Bank Insurance Company Bank Barge

Operator

Business Network PlatformIdentity Services Document Flow Services Subcontracting Services Other Services

19

Backup

Corporate participation

■ Since 2016, DuPont, Dow Chemical, Tetra Pak, Port Houston, Rotterdam Port Community System Portbase, the Customs Administration of the Netherlands, and the US Customs and Border Protection have taken part in pilots

■ Interest from General Motors and Procter and Gamble to streamline the complex supply chains they operate, and Agility Logistics to provide improved customer services including customs clearance brokerage

■ Customs and government authorities Singapore Customs and Peruvian Customs, global terminal operators APM Terminals and PSA International, Canadian Customs

21

Jon HimoffBusiness Development DirectorEmail: jon.himoff@insolar.ioMobile: +44 7734 051075

Let’s discuss how we can generate value for your businessDrop us a note to business@insolar.io or visit insolar.io