“Imagine you’re a cargo owner in the year 1450,” begins “The multi-billion-dollar paper jam: Unlocking trade by digitalizing documentation,” a McKinsey article published in October of 2022. “You hand over your goods to the ship that will carry them across the world, and are presented with a bill of lading — a piece of paper stating what you’re shipping, where it comes from, and where it’s heading. Fast forward to the year 2022: The world has changed dramatically, but the bill of lading remains relatively unchanged. Today, the bill of lading process is still reliant on the physical transfer of paper records and applies to roughly 40 percent of all containerized trade transactions.

“Current trade documentation spans many documents and processes, and is a manual, time-consuming, and resource-intensive process for all stakeholders. Documentation for a single shipment can require up to 50 sheets of paper that are exchanged with up to 30 different stakeholders. The bill of lading, issued by carriers to acknowledge receipt of cargo from the shipper, is one of the most important trade documents required for shipping.”

According to McKinsey, the bill of lading accounts for between 10 and 30 percent of total trade documentation costs; adopting an electronic bill of lading could save $6.5 billion in direct costs and enable between $30 billion and $40 billion in new global trade volume. “While the banking and aviation industries have implemented digital standards enabling automated trade systems, shipping has not matured far beyond where it was in the 1400s.”

In a recent article, “Advancing Global Trade through Open-Source Electronic Bill of Lading,” the Digital Supply Chain Institute (DSCI) explained the role of bill of lading in global supply chains. “The bill of lading (B/L) functions as an important role in global trade, providing a tangible record of cargo ownership, conditions, and delivery obligations,” according to the article. “While deeply entrenched in trade practices, the traditional paper-based bill of lading has its shortcomings: inefficiencies stemming from manual processes have led to delays, errors, and a higher susceptibility to loss and fraud.”

Last year, the Digital Container Shipping Association (DCSA) and other global trade stakeholders took a major step to address the shortcomings of relying on paper-based B/Ls by committing to a complete transition to electronic bills of lading (eBL) by 2030 across all sectors of the shipping industry. This evolution will likely encounter several barriers including concerns about data security, legal complexities in cross-border transactions, and resistance to established industry practices. Achieving universal use of eBLs requires all stakeholders to work together to develop, adopt, and promote the benefits of digitizing the bill of lading.

But, while a transition to digital eBLs is necessary, it’s not sufficient. A number of eBL systems from different vendors are already available, but they do not interoperate with each other. “Most of the eBL systems operate within a ‘walled garden’ with their own proprietary technology and terms and conditions that govern the relationships between the stakeholders involved in a transaction. What this means in practice is that parties that want to exchange an eBL must all subscribe to the same platform. It is not currently possible to exchange an eBL between different platforms due to a lack of technical and legal interoperability.”

This is reminiscent of the IT industry in the early decades of the computer industry. All computer systems were clearly digital, but in the 1980s, proprietary systems from different vendors didn’t interoperate with each other. Just sending an e-mail across two different proprietary networks and applications from different vendors was quite complicated, as was sharing information across disparate systems.

This all finally changed in the 1990s with the advent of the internet and World Wide Web. The internet’s network (e.g., TCP/IP) and e-mail protocol standards, (e.g., SMTP, MIME, POP, IMAP) were widely embraced across the marketplace along with their open-source implementations, making it possible to easily communicate with everyone regardless of vendor. Similarly, the Web’s standards and open-source implementations (e.g., HTML, HTTP, URLs) enabled any PC connected to the Internet to access information on any web server anywhere in the world.

Thus, to ensure that global trade partners are able to access eBLs regardless of eBL system, it’s necessary to embrace initiatives like Open eBL that are based on universal, open-source standards that can interoperate with eBL systems from any vendor.

The DSCI article outlines the core objectives of the Open eBL platform.

• Simple Architecture: “The platform aims to offer a straightforward architecture that is easy to understand.”
• Distributed Architecture: “Designed for robustness, the distributed nature ensures the system remains operational even in catastrophic scenarios.”
• Mature Technology: “The platform will rely on existing, mature technologies to minimize risks and shorten the development timeline.”
• Ease of Integration: “With standardized APIs and documentation, the platform will be easily integrated with existing systems and processes.”
• Maintainability: “Maintenance will be uncomplicated, thanks to clean code, comprehensive documentation, and an active community for support.”
• DCSA Standards Compliant: “The platform will adhere to the DCSA standards, ensuring it aligns with global best practices and interoperability requirements.”
• Secure Registry as a Hosted Option: “To offer flexibility and enhanced security, a secure registry will be a hosted option for companies that prefer not to manage this component in-house.”
• Common Legal Framework: “The hosted registry will come with a common legal framework to address any legal issues preemptively, thereby simplifying contractual arrangements between various parties.”
• Grow an Ecosystem Around the Platform. Make it easier for different parties to join by removing technological and financial barriers, and appeal to a broader base by expanding the platform’s utility with add-on modules like trade finance and trade insurance.

The Open eBL platform is based on four high-level architectural objectives:

• Document Schema: A “layered construction for an eBL document, encompassing its main content and various endorsements. This structured format ensures uniformity and simplifies validation.”
• Document Encryption and Signing:  A secure mechanism “to encrypt eBL documents, protecting them from unauthorized access. The endorsing parties will use cryptographic signatures to confirm their involvement, thereby ensuring only authorized entities can view the document.”
• Key Exchange: A “trust chain model based on SSL/TLS certificates to enable secure key and credential exchange between companies and organizations.”
• Document Distribution:  A set of protocols “for the secure and efficient distribution of eBL documents among different parties, leveraging existing technologies like blockchain for immutable records and quick settlements.”

In addition, Open eBL aims to integrate value-added third-party solutions, such as:

• Financials Services and Payment Platforms. “Payment platforms and financial services, such as BlueX solutions, can streamline the payment processes associated with trade, including letters of credit, trade financing, and insurance.”
• Supply Chain Management Software. “Supply chain management software can improve the efficiency of logistics operations. These systems can provide real-time tracking, inventory management, and seamless integration of eBL data across the supply chain.”
• Customs and Compliance Software. “Tools that handle customs declarations and ensure compliance with international trade regulations,” such as Rune, a solution by Azarc in partnership with BT, that automates “the process of meeting legal requirements in different jurisdictions.”
• Data Analytics Platforms. “These platforms can analyze data from Open eBL to provide actionable insights, enhance decision-making, and forecast industry trends.”
• IoT and Tracking Technologies. “Internet of Things (IoT) solutions can enhance the tracking capabilities of Open eBL. IoT devices can provide real-time updates on the location and condition of goods, further improving supply chain visibility.” And,
• API Integration Tools. “Application Programming Interface (API) tools can help Open eBL seamlessly connect with other software applications used by different stakeholders in the trade process, ensuring smooth data transfer and communication.”

“The transition from traditional paper-based bills of lading to eBLs represents a significant step forward in global trade and finance”, the DSCI paper concludes. “The strategic adoption of platforms like Open eBL is crucial, as it embodies the shift towards simplicity, robustness, security, and growth in the supply chain. The ability of Open eBL to drive substantial change points to an emerging era of enhanced trade finance and documentation — characterized by streamlined operations and eco-friendly practices. Realizing this vision needs a collective endeavor of industry leaders to ensure that the incorporation of eBLs into existing systems is as seamless as it is transformative.”

Finally, as we’ve learned throughout history, realizing the benefits of major new technologies requires that companies and industries work closely together and embrace open, universal standards to help spread productivity-enhancing innovations across economies and societies.

Original article can be found here: https://blog.irvingwb.com/blog/2024/06/advancing-global-trade-through-open-source-digital-bill-of-lading.html

Initially focused on establishing open-source standards for the electronic bill of lading (eBL), Open eBL aims to develop open-source supply chain solutions by working with a community of large supply chain players and stakeholders.

By Sean O’Malley

Open-source software can deliver substantial economic value in supply chains

For years, the global supply chain stakeholders have been talking about a digital transformation. However, the progress in this revolution has been hindered by various factors, one of the most significant being proprietary software platforms. To propel the industry forward, a new approach is necessary. Open-source, standards-based models hold enormous promise in resolving the issues exacerbated by proprietary platforms.

The Problem – Proprietary Software That Controls Customer Data

Current electronic document solutions are closed and proprietary solutions that silo customers’ data under a for-profit commercial entity. This approach has several drawbacks. Firstly, it makes it difficult for businesses to share data with each other, as all parties need to be on the same platform, leading to inefficiencies and errors. Secondly, proprietary networks being profit-oriented, can be costly, straining budgets. Thirdly, closed networks aim to lock customers in and are subject to the whims of the commercial operator which can alter terms of service or even cease operations abruptly.

Despite the drawbacks of closed network solutions, they dominate supply chains (TMS solutions are a perfect example). However, recent attempts at closed platforms have been rejected by stakeholders where data privacy and data sharing are significant concerns. One notable example is TradeLens, a blockchain-based electronic document solution developed by IBM and Maersk. Launched in 2018 with much fanfare, TradeLens has since closed due to lack of traction with its closed nature being a major reason. Businesses were reluctant to share their data with a for-profit entity, and concerns regarding high costs and ‘lock-in’ stymied adoption.

The Solution – Open Source, Standards-based Software that Gives Control of Customer Data to the Customer

To overcome the limitations of proprietary closed networks, an open-source, standards-based electronic document solution is needed. Such a solution should be available to all, respecting their privacy and security concerns. Adopting a standards-based approach would facilitate consistent platform utilization across businesses and would gain the support of business leaders, engineers, and developers by simplifying data sharing and collaboration, enabling greater interoperability and efficiency. Ultimately, establishing the open-source solution organized under a non-profit aimed at advancing global business interests should further foster industry trust.

The Benefits of an Open-Source Software Platform

Cost-effectiveness: Open-source software is typically free to download, use, and distribute. This can significantly reduce the total cost of ownership, particularly for startups and businesses seeking to minimize software expenses.

Flexibility and Customization: Open source offers the flexibility to modify and customize the software according to specific needs, enabling users to add features, fix bugs, or tailor the software to suit their requirements, often impossible with proprietary software.

Transparency: The availability of source code allows users to review it, identify security flaws, understand how the software works, and contribute to improvements.

Community Support: Active communities of developers and users often contribute to the open-source code, documentation, and support, offering valuable resources for solving problems and learning best practices.

Security: The “many eyes” theory suggests that open source can be more secure than proprietary software as the availability of source code for public review enables faster identification and resolution of vulnerabilities.

Interoperability and Standards Compliance: Open-source projects typically adhere to open standards, making it easier to integrate with other systems and migrate between different technologies without vendor lock-in.

Innovation and Speed of Development: Open-source projects benefit from contributions from a global community of developers, accelerating innovation and the introduction of new features.

Open eBL: An Industry Blueprint for Open Source-Source Software Models

Open eBL, a non-profit under the Center for Global Enterprise (CGE) and the Digital Supply Chain Institute (DSCI) focuses on open-sourcing the electronic bill of lading (eBL) within supply chains. The entity recently launched the Open eBL initiative to establish an open-source industry solution planned for trial within its member community consisting of large supply chain players and stakeholders. This group is composed of supply chain veterans and developers intent on helping the industry deliver on the promise of digitalization. It’s an ambitious project that has the potential to be a game-changer in one of the most impactful areas – Bills of Lading.

Conclusion

Open-source solutions will play a crucial role in future supply chain digitization. Open-source solutions are more efficient, effective, and affordable compared to closed networks. They are also more secure and less susceptible to fraud. As businesses increasingly adopt open-source electronic document solutions, the global supply chain will become more efficient, agile, and resilient.

Shawn O’Malley is co-founder of BlueX Trade, a founding member of Open eBL. This blog originally appeared on his LinkedIn page.