Blockchain technologies could reduce many of the points of friction that impede trade across borders, says Fred Smith, founder, chairman and CEO of logistics group FedEx.
Speaking at the Consensus 2018 event in New York today, Smith likened the potential of blockchain to FedEx’s origination of the track-and-trace system for packages decades ago.
“In the early ’70s the freight was delivered to a shipping company or postal service and we’d wait and hope to get it out at the other end. So we introduced the ability to track-and-trace, initially because we needed it for our own internal operations but eventually we realised that the information was extremely valuable to our customers,” he said.
Later this information was made available via the Internet, allowing customers to check the progress of their package or shipping container several times a day.
“Now here comes blockchain, which is a chain of custody system on steroids. It’s able to keep these kind of custodial records in a completely pristine unalterable fashion. This could be a very big thing in terms of supply chains and the entire transportation sector. It’s beyond massive,” he said.
The biggest issue in running global supply chains is crossing borders, he went on. First there is the problem with standards in classifications. FedEx operates in 220 countries around the world and processes 13 shipments a day, so these things add up. Each shipment must undergo dozens of checks, many duplicated, with accompanying form filling and delay. Misclassifications are a common issue.
“A coffee cup in Poland may be something completely different in Malaysia. That sounds like a small thing when you cross borders you have people doing customs ledgers, you pay duties and taxes forms, and the customs people are looking for contraband. That’s where blockchain will be able to take out a huge amount of friction, where a lot of people are doing an incredible amount of repetitive work to achieve information authentication.”
The contraband issue is particularly pertinent.
“If you got a container that says it’s full of semiconductors but in fact is full of fentanyl you got a big problem,” Smith said, adding that a blockchain solution could reduce this friction by increasing transparency.
“Blockchain for the first time ever makes information available to all the parties. Today you only get what one party wants to make available,” he said adding, “blockchain has a potential to revolutionise trade across borders.”
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